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82–324 2002

PROMOTING DISEASE MANAGEMENT IN MEDICARE

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

APRIL 16, 2002

Serial No. 107–80

Printed for the use of the Committee on Ways and Means

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

AMO HOUGHTON, New York 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

JENNIFER DUNN, Washington 

MAC COLLINS, Georgia 

ROB PORTMAN, Ohio 

PHIL ENGLISH, Pennsylvania 

WES WATKINS, Oklahoma 

J.D. HAYWORTH, Arizona 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

SCOTT MCINNIS, Colorado 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

ROBERT T. MATSUI, California 

WILLIAM J. COYNE, Pennsylvania 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

KAREN L. THURMAN, Florida 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

Allison Giles, Chief of Staff 

Janice Mays, Minority Chief Counsel

SUBCOMMITTEE ON HEALTH

NANCY L. JOHNSON, Connecticut, Chairman

JIM MCCRERY, Louisiana 

PHILIP M. CRANE, Illinois 

SAM JOHNSON, Texas 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

PHIL ENGLISH, Pennsylvania 

JENNIFER DUNN, Washington 

FORTNEY PETE STARK, California 

GERALD D. KLECZKA, Wisconsin 

JOHN LEWIS, Georgia 

JIM MCDERMOTT, Washington 

KAREN L. THURMAN, Florida

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

iii

C O N T E N T S 

Page 

Advisories announcing the hearing ........................................................................ 2, 4

WITNESSES 

Centers for Medicare and Medicaid Services, Ruben King-Shaw, Jr., Deputy 

Administrator and Chief Operating Officer ....................................................... 8

Anderson, Gerard, Johns Hopkins University ...................................................... 48

Henschke, Claudia I., M.D., Weill Medical College of Cornell University .......... 58

Humana Inc., and Disease Management Association of America, Jonathan 

T. Lord, M.D ......................................................................................................... 33

Marshfield Clinic, Michael Hillman, M.D .............................................................. 38

Wennberg, John E., M.D., Dartmouth College ...................................................... 28

SUBMISSIONS FOR THE RECORD 

3M Health Information Systems, Wallingford, CT, Richard Burford, statement 

and attachment .................................................................................................... 75

Advanced Medical Technology Association, statement ......................................... 77

American Heart Association, Robert Bonow, M.D., statement ............................ 80

Burr, Hon. Richard, a Representative in Congress from the State of North 

Carolina, statement ............................................................................................. 82

Disease Management Association of America, Christobel Selecky, statement ... 84

McKesson Corporation, San Francisco, CA, Sandeep Wadhwa, M.D., statement ...................................................................................................................... 88

RMS Disease Management Inc., McGaw Park, IL, statement ............................ 91

(1)

PROMOTING DISEASE MANAGEMENT IN 

MEDICARE 

TUESDAY, APRIL 16, 2002

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:16 p.m., in room 

1100 Longworth House Office Building, Hon. Nancy L. Johnson 

(Chairman of the Subcommittee) presiding. 

[The advisory and revised advisory follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON HEALTH

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3943

March 28, 2002

No. HL–15

Johnson Announces Hearing on Promoting 

Disease Management in Medicare 

Congresswoman Nancy L. Johnson (R–CT), Chairman, Subcommittee on Health 

of the Committee on Ways and Means, today announced that the Subcommittee will 

hold a hearing on promoting disease management in the Medicare program. The 

hearing will take place on Tuesday, April 9, 2002, B–318 Rayburn House Office Building, beginning at 3:00 p.m.

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

hearing will be from invited witnesses only. Witnesses will include academics, practitioners, and health plans with expertise in disease management. However, any individual or organization not scheduled for an oral appearance may submit a written 

statement for consideration by the Committee and for inclusion in the printed 

record of the hearing.

BACKGROUND:

Approximately 12 percent of all Medicare enrollees accounted for three-quarters 

of all Medicare fee-for-service program costs. Many of these beneficiaries have 

chronic health conditions, such as diabetes, hypertension, asthma and congestive 

heart failure that require repeated and costly hospitalizations. Medicare’s costs 

could be curtailed if the program is designed to better manage health care for these 

beneficiaries.

Disease management programs assist both the physician and patient with a plan 

of care that helps evaluate and prevent complications and improve outcomes 

through evidence-based practice guidelines and patient empowerment strategies. 

Typically this is used to improve health outcomes and reduce the costs of chronic 

diseases.

Some fee-for-service providers have incorporated disease management programs, 

but only to a limited extent. But in general, health care for those in Medicare feefor-service with chronic illnesses has been poorly coordinated across sites of care 

and is often fragmented, although many providers have expressed greater interest 

in using management techniques to improve care.

Conversely, Medicare+Choice plans widely use disease management programs and 

have found preventative care and case management may ultimately save money by 

avoiding costly hospital stays. According to the 2000 Survey of Disease Management 

Practices, ‘‘virtually all’’ plans have at least one disease management program. The 

average plan has four disease management programs in place, and 95 percent of 

plans have a diabetes disease management program. Finally, at least 75 percent of 

plans have asthma and congestive heart failure disease management programs and 

almost 50 percent of plans have a disease management plan for coronary artery disease.

On February 22, 2002, the Centers for Medicare and Medicaid Services issued a 

request for proposals to conduct demonstration disease management programs in 

the fee-for-service program as required by the Benefits Improvement and Protection 

Act. The demonstration programs are for congestive heart failure, diabetes, or coronary heart disease. The proposal recognizes the value of expanding disease management to additional beneficiaries.

3

In announcing the hearing, Chairman Johnson stated, ‘‘As Congress modernizes 

and strengthens Medicare, we must recognize the significant role disease management can play in improving seniors’ lives. Unfortunately, this is yet another area 

in which Medicare significantly lags behind the private market. By encouraging 

widespread incorporation of disease management programs in Medicare, we will 

help improve patient outcomes while reducing health costs.’’

FOCUS OF THE HEARING:

Tuesday’s hearing will focus on promoting disease management programs in traditional and managed Medicare.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please note: Due to the change in House mail policy, any person or organization 

wishing to submit a written statement for the printed record of the hearing should 

send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a 

fax copy to (202) 225–2610, by the close of business, Tuesday, April 23, 2002. Those 

filing written statements who wish to have their statements distributed to the press 

and interested public at the hearing should deliver their 200 copies to the Subcommittee on Health in room 1136 Longworth House Office Building, in an open 

and searchable package 48 hours before the hearing. The U.S. Capitol Police will 

refuse sealed-packaged deliveries to all House Office Buildings. Failure to do so 

may result in the witness being denied the opportunity to testify in person.

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee.

1. Due to the change in House mail policy, all statements and any accompanying exhibits for 

printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed 

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely 

on electronic submissions for printing the official hearing record.

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

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

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

by the Committee.

3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments 

by the Committee, must include on his statement or submission a list of all clients, persons, 

or organizations on whose behalf the witness appears.

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

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

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

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

226–3411 TTD/TTY in advance of the event (four business days notice is requested). 

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

f

4

* * * NOTICE—HEARING RESCHEDULED * * *

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON HEALTH

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3943

April 2, 2002

No. HL–15–Revised

Rescheduled Hearing on

Promoting Disease Management in Medicare

Tuesday, April 16, 2002

Congresswoman Nancy L. Johnson, (R–CT), Chairman, Subcommittee on Health 

of the Committee on Ways and Means, today announced that the Subcommittee 

hearing on Promoting Disease Management in Medicare, previously scheduled for 

Tuesday, April 9, 2002, will now be held on Tuesday, April 16, 2002, at 3:00 

p.m., in the main Committee hearing room, 1100 Longworth House Office 

Building.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please note: Due to the change in House mail policy, any person or organization 

wishing to submit a written statement for the printed record of the hearing should 

send it electronically to hearingclerks.waysandmeans@mail.house.gov, along with a 

fax copy to (202) 225–2610, by the close of business, Tuesday, April 30, 2002. Those 

filing written statements who wish to have their statements distributed to the press 

and interested public at the hearing should deliver their 200 copies to the Subcommittee on Health in room 1136 Longworth House Office Building, in an open 

and searchable package 48 hours before the hearing. The U.S. Capitol Police will 

refuse sealed-packaged deliveries to all House Office Buildings.

All other details for the hearing remain the same. (See Subcommittee Advisory 

No. HL–15, dated March 28, 2002.)

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement 

or exhibit submitted for the printed record or any written comments in response to a request 

for written comments must conform to the guidelines listed below. Any statement or exhibit not 

in compliance with these guidelines will not be printed, but will be maintained in the Committee 

files for review and use by the Committee.

1. Due to the change in House mail policy, all statements and any accompanying exhibits for 

printing must be submitted electronically to hearingclerks.waysandmeans@mail.house.gov, along 

with a fax copy to (202) 225–2610, in Word Perfect or MS Word format and MUST NOT exceed 

a total of 10 pages including attachments. Witnesses are advised that the Committee will rely 

on electronic submissions for printing the official hearing record.

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

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

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

by the Committee.

3. Any statements must include a list of all clients, persons, or organizations on whose behalf 

the witness appears. A supplemental sheet must accompany each statement listing the name, 

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

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

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

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

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

5

226–3411 TTD/TTY in advance of the event (four business days notice is requested). 

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

order. Mr. Stark is near at hand, we hope, and so I would like to 

Chairman JOHNSON. Good afternoon. The hearing will come to 

f start. I consider this one of the most important hearings the Subcommittee has had. 

Seniors in traditional Medicare are literally held hostage to an 

outdated benefit package that denies them the state-of-the-art care 

that is possible under programs like disease management (DM). 

Programs designed to assist both the physician and patient to develop a plan of care can help defray rising costs while at the same 

time improving the quality of health outcomes and tremendously 

improving the quality of life of our seniors. Unless we transform 

Medicare from a sick and acute care program, the costs we face as 

the baby boomers age will be staggering, but the health needs of 

the rising number of seniors suffering from multiple chronic illnesses will not be met. 

So, as we start this hearing, I believe it lies at the heart of improving both the quality of Medicare and managing its costs. I 

would have to say that as I have gone through doctors’ offices 

where these protocols are being used, medical organizations, all 

kinds of providers, honestly, I have never seen such enthusiasm, 

such excitement by both patients and providers for the quality of 

life disease management is making possible for seniors with very 

serious and chronic illnesses, as well as the respect for the costs 

that can be avoided and the long-term cost control that is possible 

through this approach that dramatically improves quality. 

A small portion of Medicare beneficiaries, 12 percent, account for 

75 percent of all Medicare fee-for-service payments. Typically, it is 

these beneficiaries who suffer from chronic illnesses such as diabetes, asthma, or coronary heart disease. In many cases these high 

costs come from repeated hospitalizations due to poor medication 

compliance, lack of adherence to a prescribed treatment plan, and 

lack of patient self-management skills. 

In addition, there are also provider-related problems that undermine efforts to coordinate and better manage patient care: poor 

communication, and narrowly focused payment systems that result 

in inadequate and fragmented monitoring of patients. Yet, as the 

baby-boom generation retires, the number of chronically ill beneficiaries is expected to increase, causing Medicare costs to escalate. 

Disease management programs, designed to assist both physician 

and patient to develop a plan of care using evidence-based practice 

guidelines, more consistently manage illness, and will better involve the patient in their own health care. This will defray some 

of the costs while improving the health care of our senior citizens. 

While some providers have attempted to implement disease management programs in Medicare fee-for-service, health care for beneficiaries with chronic illness remains typically fragmented and 

poorly coordinated. Conversely, many managed care entities have 

developed a wide array of cost control programs that combine adVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
6

herence to evidence-based medical practices with better coordination of care across providers. 

Medicare+Choice (M+C) plans have found preventive care and 

case management saves money and avoids costly hospital stays. According to the 2000 Survey of Disease Management Practices, the 

average M+C plan has four disease management programs, with 95 

percent of plans having diabetes disease management. 

Netcare, a diabetes management program covering 7,000 diabetics in 7 managed care organizations, actually decreased hospital 

admissions by 18 percent, resulting in a 12 percent savings. Think 

of the impact on people’s lives. 

There has been some movement toward implementing disease 

management programs in fee-for-service. A coordinated care demonstration authorized by the Balanced Budget Act (BBA) resulted 

in approval of 15 programs. In addition, on February 22, Centers 

for Medicare and Medicaid Services (CMS) issued a Request for 

Proposal to conduct demonstration disease management programs 

targeted specifically toward congestive heart failure (CHF), diabetes, and coronary heart disease. The demonstration projects will operate for up to 3 years, after which a formal evaluation will be conducted by CMS. 

These proposals hold the hope that we can achieve the twin goals 

of improving care and saving money, long recognized as central tenets of managed care. I am pleased to welcome Ruben King-Shaw 

from the Centers for Medicare and Medicaid Services, who will 

comment on these exciting new opportunities. 

I will also welcome other experts: Dr. Wennberg from Dartmouth 

University will discuss regional variations in quality-of-care. Dr. 

Hillman from the Marshfield Clinic will explore their exciting work 

in incorporating disease management into fee-for-service Medicare. 

Dr. Henschke from Cornell University will present her firsthand efforts in managing lung cancer patients. Dr. Lord from Humana, 

and the President of the Disease Management Association of America, will discuss Humana’s work in M+C. Finally, Dr. Anderson of 

Johns Hopkins University will discuss his work in this field. 

I look forward to your testimony, and I specifically welcome 

Ruben King-Shaw for your first appearance before this Committee, 

but I hope not your last. As the testimony you will offer us today 

is testimony that speaks more to the future needs of our seniors 

and to the future evolution of Medicare than frankly any testimony 

we have had to date. So welcome to you, Mr. King-Shaw, and when 

Mr. Stark joins us, if he would like to make an opening statement, 

I will make room for that, and meanwhile I would like to recognize 

my colleague from Florida, Congresswoman Thurman. 

[The opening statements of Chairman Johnson and Mr. Foley follow:]

Opening Statement of the Hon. Nancy L. Johnson, a Representative in Congress from the State of Connecticut, and Chairman, Subcommittee on 

Health 

Good morning. Today’s hearing will focus on the important subject of disease 

management and its application to the Medicare program. Disease management has 

significant potential to improve health outcomes and the quality of patients’ lives, 

and may reduce health costs. 

A small number of Medicare beneficiaries—12 percent—accounted for 75 percent 

of all Medicare fee-for-service payments. Typically, these beneficiaries suffer from 

7

chronic illnesses, such as diabetes, asthma or coronary heart disease. In many cases, 

these high costs are from repeated hospitalizations as a result of poor medication 

compliance, lack of adherence to a prescribed treatment plan, and lack of patient 

self-management skills. 

In addition, there are also provider related problems, such as poor communication 

and coordination between providers, and inadequate and fragmented monitoring of 

patients that undermines patient care. 

As the baby boom generation retires, the number of chronically ill beneficiaries 

is expected to increase, causing Medicare costs to escalate. Disease management 

programs—programs designed to assist both the physician and patient to develop 

a plan of care, using evidence-based practice guidelines—should help defray some 

of these costs and improve health care outcomes. 

While there have been some attempts by providers to implement disease management programs in fee-for-service, health care for beneficiaries with chronic illness 

is typically fragmented and poorly coordinated. These shortcomings are due to multiple health care providers and multiple sites of care. 

Conversely, many managed care entities have developed a wide array of cost-control programs that combine adherence to evidence-based medical practices with better coordination of care across providers. Medicare+Choice plans have found preventative care and case management saves money and avoids costly hospital stays. 

According to the 2000 Survey of Disease Management Practices, the average 

Medicare+Choice plan has four disease management programs, with 95 percent of 

plans having a diabetes disease management program. 

Netcare, a diabetes management program comprised of 7,000 diabetics in 7 managed care organizations actually decreased hospital admissions by 18 percent—re- sulting in 12 percent savings. 

There has been some movement towards implementing disease management program in fee-for-service. A Coordinated Care Demonstration authorized by the Balanced Budget Act resulted in approval of 15 programs. In addition, on February 22, 

of this year, CMS issued a request for proposal to conduct demonstration disease 

management programs in targeted specifically towards congestive heart failure, diabetes and coronary heart disease. The demonstration projects will operate for up to 

three years, after which a formal evaluation will be conducted by CMS. 

These proposals hold the hope that we can achieve the twin goals of improving 

care and saving money—long recognized as a central tenet of managed care. 

We are pleased to welcome Ruben King-Shaw from the Centers for Medicare and 

Medicaid Services who will comment on these exciting new opportunities. 

I would like to welcome our other experts. Dr. Wennberg from Dartmouth College 

will discuss regional variation in quality of care. Dr. Hillman from Marshfield Clinic 

will explore their exciting work in incorporating disease management in fee-for-service. Dr. Henschke from Cornell University will present her first hand efforts in managing lung cancer. Dr. Lord, from Humana and the President of the Disease Management Association of America will discuss Humana’s work in Medicare+Choice. 

Finally, Dr. Anderson of Johns Hopkins University will discuss his work in this 

field. I look forward to your testimony.

Opening Statement of the Hon. Mark Foley, a Representative in Congress 

from the State of Florida 

f Madam Chairman, I want to thank you for holding this very important hearing 

today on disease management programs in Medicare. As you know, Congress created Medicare in 1965 for the purpose of providing a basic health insurance package 

for our elderly—who, in many cases, cannot make ends meet. In its current form, 

Medicare is a reactive program that generally pays only when the beneficiary gets 

ill. 

However, with health care costs rising between eight and ten percent each year 

we need to reexamine the entire health system in order to save it. Medicare must 

move from a reactive pay-as-you go system to a pro-active ‘‘wellness care’’ model. 

This shift will save the American people billions of dollars while increasing the quality of life of our elderly. The notion is simple—if we can get a patient to the doctor 

soon enough, then the overall cost of taking care of that person dramatically decreases. That is why Congressman Sander Levin and I introduced H.R. 2058, the 

Medicare Wellness Act. Our bill would be a major step in providing necessary preventive care benefits to our elderly. Specifically, the bill would establish a Healthy 

Seniors Promotion Program; expands coverage of preventive services; establishes a 

national fall prevention campaign; sets up a clinical depression screening demonstration project; and, requires a study of elderly disease prevention. 

8

Again, Madam Chairman, I commend your actions today in bringing this very important issue to our committee. I hope that as you and your committee begin work 

on a larger Medicare bill this year that you will give strong consideration to incorporating some of the provisions in our bill. 

want to thank Mr. Shaw for being here today, and for the benefit 

Thank you.

Mrs. THURMAN. Thank you, Madam Chairman, and I just also 

f of the Members of this Committee, to let them know that Mr. Shaw 

came from Florida, was a very able Administrator, and was one 

who strengthened, I think, in many ways the health programs in 

the State of Florida through his time, and then certainly coming 

into the Federal Government, in which he helped us attain some 

very valuable waivers that he had been pushing before he left Florida. So, we certainly are pleased to have him before us today and 

for the work that he has done on behalf of the United States, but 

also on behalf of our citizens in Florida. Welcome. 

Chairman JOHNSON. Thank you, Congresswoman Thurman. I 

was aware of his service in Florida. I am glad you were here to 

make some comment. I would like to recognize now my colleague 

and Ranking Member, Congressman Stark, for his comments. 

Mr. STARK. Well, thank you. I apologize for being late, Madam 

Chair, and I want to thank you for this hearing. We are going to 

hear about Medicare beneficiaries, who are more likely to have 

chronic illnesses and perhaps even more than one of them. I hope 

that we can be careful not to focus on the short-term costs of covering and caring for these individuals. Without budget rules and 

scoring rules, it is tempting to do that. In the short term, it might 

be in Medicare’s interests to curtail the costs by curtailing care, 

and that is not I think what the Chair has in mind, certainly not 

what this Ranking Member has in mind. 

There isn’t an incentive that I can determine, in the managed 

care industry as we know it, for plans to invest in the long-term 

health of their enrollees. If they keep getting adjusted each year, 

it is hard to see how they will recover major costs. 

So, I think this is a topic that is long past due, and I think that 

you are brave to venture into a complex area where I am sure you 

are going to get a lot of opinions of what is wrong with every way 

that people suggest how to do it. I hope we can get at it, and maybe 

in a couple of years we will be able to see this become a standard 

part of Medicare, and I thank you for your interest in it. 

Chairman JOHNSON. Thank you, Mr. Stark. Mr. King-Shaw? 

STATEMENT OF RUBEN KING–SHAW, JR., DEPUTY ADMINISTRATOR AND CHIEF OPERATING OFFICER, CENTERS FOR 

MEDICARE AND MEDICAID SERVICES 

Mr. KING-SHAW. Well, Madam Chairwoman, thank you very 

much for the opportunity to talk about something so important and 

so meaningful and so much a part of what I have been focused on 

for a number of years. To Congressman Stark, again, thank you, 

and Congresswoman Thurman, always good to see you again. 

It is very, very appropriate that I take time to thank all the Subcommittee Members for being here and for the great leadership you 

have shown in this area. Clearly, disease management has enormous potential for Medicare, and has proven its ability to provide 

9

great results outside of Medicare for a number of years. In fact, 

there are really millions of individual seniors included who benefit 

from the power of disease management programs in the Medicaid 

and commercial sectors. 

We in Medicare have been demonstrating various technologies— I will share them with you in a moment—but truly have some ways 

to go in harnessing the power of these disease management methodologies for the benefit of the people we serve and the mission 

that we have chosen, which is to care for poor people and old people and those who need public assistance for their daily health care 

needs. I think it is important, though you have my written statement that goes into great detail of the specifics of what we are 

doing at CMS, I think it is important to take a moment in just this 

first opening discussion about what do we mean when we say ‘‘disease management’’ in Medicare. 

I think disease management is best described as a continuum, if 

you will, that can be both very robust on one end and particularly 

light on another. So, as I walk through some of the common elements of a robust disease management program, I think we get a 

sense of what a full, comprehensive disease management program 

would look like. 

It would have elements of a clinically driven best practice or evidence-based clinical strategy. That is where it begins, with strong 

clinical leadership based on proven, effective clinical strategies. It 

would then include the integration of administrative, particularly 

data, and financial resources to support the patient-physician relationship. 

This truly is a patient-centered strategy for improving health 

care outcome, treatment, and wellness. There is an important element of patient education in disease management, and as patients 

understand the pathology of their condition, they become full participants in the help and healing process. As you can see, they actually become a partner and take ownership of the health care 

itself. 

A significant part of provider education is attributed to disease 

management, and there is the important discipline of risk assessment, truly knowing the population. You will hear a term, ‘‘population management,’’ and an important part of population management is stratifying the population according to levels of risk or understanding of disease or degree of severity in these types of 

things. 

There is an important part of disease management that focuses 

on outcomes and outcome measures. All successful disease management programs truly do have ways of identifying the objective, the 

clinical, the social, the cultural even, outcomes that are the target 

of performance. So, here are some quite rigorous, very effective 

ways of measuring those outcomes. Then clearly there are cost savings, and then the provision of comprehensive, integrated, but coordinated care across the delivery system. 

So, these are the elements of what I would describe as a very robust disease management program, and I will share with you some 

examples that we are focusing on at CMS in a moment. There are 

elements of disease management, as I have just outlined, that can 

appear in isolation. You can have two or three of these deployed 

10

very effectively, and those would end up on the lighter scale of disease management. It is within that continuum of sources, of resources, of approaches, that you will find most disease management 

programs. 

It is also a good question to ask, well, where is disease management most effective? I think Chairwoman Johnson has addressed 

those, and they are in the chronic conditions. They are most commonly found in asthma, congestive heart failure, coronary heart 

disease, Alzheimer’s, cardiovascular, and so forth, diabetes, depression, hypertension, and increasingly substance abuse and chemical 

dependency, as well as lung disease and mental health such as depression conditions. 

So, where you have in the Medicare program an increasing number of beneficiaries who are suffering from chronic diseases, it 

would be a natural progression, a natural advancement of the 

Medicare program, to begin to harness more effectively disease 

management methodologies. Where have these methodologies been 

proven to be most successful? It truly has been in the managed 

care or coordinated care or integrated care world. 

Whether that has been in Medicaid or the commercial environment, or managed indemnity before that, it has truly been in the 

managed care arena where we have developed the most promising 

models for disease management. Why would that be the case? Why 

would managed care be the place where the expertise has grown 

up in such abundance around disease management? 

Well, for one thing, these private plans have the flexibility to reconfigure resources around the patient-physician relationship. 

These private plans also have the ability to achieve greater returns 

on the continuity of care. They are more free to respond to the 

needs of the population. They can be more agile in financial models 

or contracting or partnerships. They can build coalitions with clinical and academic and pharmacological and community-based resources around the needs of a population or a patient, and they 

have the ability to maintain a platform that is conducive to further 

disease management operations. 

So, it is within the context of a delivery system which is flexible 

and agile and patient-centered that we have seen the most effective 

deployment of disease management programs. So, if we are looking 

at one of the ways that Medicare can preserve the benefits of disease management, it would clearly be to shore up the M+C program itself, in that the provision of an actuarially sound methodology of financing M+C programs will preserve for seniors in those 

programs the benefits of disease management that they currently 

enjoy. 

Clearly there is an application of disease management programs 

outside of M+C, and so the next few comments that I will share 

with you will give you some sense of what we are doing outside of 

the M+C environment. In addition to what you may have already 

read about is our preferred provider organization (PPO) demonstration solicitation that we have just announced. 

We are looking at doing some things around congestive heart 

failure that will identify clinical outcomes among congestive heart 

failure patients, either in M+C organizations or outside in the feefor-service world, that would give us the ability to direct resources, 

11

data, information, coordinated care for a better outcome in revised 

incentive payments, if you will, as a result of good clinical outcomes. 

Similar efforts are underway with the ESRD, end-stage renal disease patients, and here is an important part of disease management which is often missed. These are often extremely effective 

methodologies for addressing disparities in health care, disparities 

among men and women and among ethnic and racial groups. 

So ESRD, which is disproportionately a condition where African 

Americans suffer, effective disease management programs are 

among the ways to address that disparity by truly integrating care 

and all of the other things that I listed up front. Similar types of 

interventions can address disparities in other ways, between rural 

and urban areas, between male and female. 

There are a number of things that we are doing in coordinated 

care, like demonstrations. You heard Madam Chairwoman refer to 

those. There are some very interesting implications for direct contracting with provider sponsored organizations. 

I mentioned early on that part of disease management is building teams, communities of care, if you will, and so where you have 

community-based organizations, be they medical or cultural or social or community support, that you can build a delivery system 

around, then you can be quite effective with those. So provider 

sponsored organizations, case rate methodologies, where you truly 

are able to build a financial model around a continuum of care 

based on a diagnosis, these are areas that we are beginning to do 

some work now. 

None of this will substitute for a financially sound delivery system as whole, be it M+C or the Medicare program itself, but there 

are ways that we can begin to do a better job. 

Just a couple of other examples that kind of will lay out the 

landscape of some of the power of disease management, and I will 

go around the country a little bit. Up in Boston there is a very effective diabetes program that truly focuses on the provision of annual retinal eye exams, an important part of diabetes management, 

as well as monitoring hemoglobin and cholesterol levels. 

Down in Florida, that great Sunshine State, there is quite an effective program that is looking at cancer through disease management, and the measurement there has been acute care hospital 

days which have gone down 15 percent over a 2-year period 

through effective use of disease management, and also looking for 

admissions as a result of complications from cancers, which is already down 10 percent. 

Then I’ll stop in New York, because there is an application of a 

more interesting, perhaps, disease management program around 

the issues of mental health. 

I am very pleased to be able to share with you this opening. I 

would love to be a part of whatever question and answer or further 

discussions you would like to have. I have had the privilege of 

being a part of disease management both at private and State and 

now Federal level. I am happy to be a part of this great hearing, 

and I can spend whatever time you would like, just respond to your 

questions, continue the dialog. 

Thank you again, Madam Chairwoman. 

12

[The prepared statement of Mr. King-Shaw follows:]

Statement of Ruben King-Shaw, Jr., Deputy Administrator and Chief 

Operating Officer, Centers for Medicare and Medicaid Services 

Chairman Johnson, Congressman Stark, distinguished Subcommittee members—

first, thank you for inviting me to discuss the significant role that disease management can play in improving people’s lives. Also, I want to express my appreciation 

to you, Chairman Johnson and other Subcommittee members for your leadership on 

this issue. Analysis of disease management is an integral part of the Centers for 

Medicare & Medicaid Services’ (CMS) efforts to improve and strengthen Medicare 

and improve the health care services provided to all Medicare beneficiaries. As the 

delivery of health care has matured, we all know that individual health care providers routinely plan and coordinate services within the realm of their own specialties or types of services. However, rarely does one particular provider have the resources or the ability to meet all of the needs of a chronically ill patient. Ideally, 

as part of a disease management program, a provider or disease management organization is dedicated to coordinating all health care services to meet a patient’s 

needs fully and in the most cost-effective manner. I want to discuss with you in 

greater detail the challenges and opportunities in integrating disease management 

into Medicare. The demonstration projects we are developing can help achieve the 

President’s principles to improve and strengthen Medicare while ensuring that 

America’s seniors and disabled beneficiaries receive high quality care efficiently. 

As you may know, last July, the President proposed a framework for strengthening and improving the Medicare program that builds on many ideas developed in 

this Committee and by other Members of Congress. That framework contains eight 

principles to guide our efforts:

• All seniors should have the option of a subsidized prescription drug benefit 

as part of modernized Medicare.

• Modernized Medicare should provide better coverage for preventive care and 

serious illness.

• Today’s beneficiaries and those approaching retirement should have the option of keeping the traditional plan with no changes.

• Medicare should make available better health insurance options, like those 

available to all Federal employees.

• Medicare legislation should strengthen the program’s long-term financial security.

• The management of the government Medicare plan should be strengthened to 

improve care for seniors.

• Medicare’s regulations and administrative procedures should be updated and 

streamlined, while instances of fraud and abuse should be reduced.

• Medicare should encourage high-quality health care for all seniors.

• The President, the Secretary, the Administrator and I are determined to work 

constructively with Congress to achieve these principles. We believe disease 

management is a critical element for meeting these goals. We are currently 

undertaking a series of disease management demonstration projects to explore a variety of ways to improve beneficiary care in the traditional Medicare 

plan. These demonstrations provide beneficiaries with greater choices, enhance the quality of their care, and offer better value for the dollars spent 

on health care. The almost complete absence of disease management services 

in the traditional Medicare plan is another striking indication of how outdated Medicare’s benefit package has become. We appreciate this committee’s 

efforts to improve and strengthen the traditional Medicare plan, and we are 

pleased to be working with you on legislation that will make disease management services more widely available.

Disease management is also one of the principal reasons why the President and 

Secretary Thompson have advocated immediate action to give seniors reliable private plan options in Medicare, and to prevent further pullouts of private plans from 

the Medicare program. Disease management services have been available to millions of seniors through private plans, yet inadequate and unfair payments are 

threatening those benefits. The most important step that Congress could take right 

now to allow seniors who depend on disease management to keep these valuable 

services, and to provide rapid access to such services to many more seniors who 

need them, is to fix the problems with the payment system for private plans. 

13

BACKGROUND

A relatively small number of beneficiaries with certain chronic diseases account 

for a disproportionate share of Medicare expenditures. These chronic conditions include but are not limited to: asthma, diabetes, congestive heart failure and related 

cardiac conditions, hypertension, coronary artery disease, cardiovascular and cerebrovascular conditions, and chronic lung disease. Moreover, patients with these conditions typically receive fragmented health care from providers and multiple sites 

of care. We need to find better ways to improve and coordinate care for these patients and to do so more efficiently. Such disjointed care is confusing and can 

present difficulties for patients, including an increased risk of medical errors. Additionally, the repeated hospitalizations that frequently accompany such care are extremely costly, and are often an inefficient way to provide quality care. As the nation’s population ages, the number of chronically ill Medicare beneficiaries is expected to grow dramatically, with serious implications for Medicare program costs. 

In the private sector, managed care entities such as health maintenance organizations, as well as private insurers, commercial firms, and academic medical centers, 

have developed a wide array of cost-control programs that combine adherence to evidence-based medical practices with better coordination of care across providers. 

Several studies have suggested that case management and disease management 

programs can improve medical treatment plans, reduce avoidable hospital admissions, and promote other desirable outcomes. Coordination of care has the potential 

to improve the health status and quality of life for beneficiaries with chronic illnesses. Although there is a distinction between the two models, the case management approach is generally used to coordinate care to a patient with multiple chronic conditions, while the disease management approach tends to focuses primarily on 

the patient and one chronic condition, such as congestive heart failure. In the largest sense, both disease management and case management organizations provide 

services aimed at reaching one or more of the following goals:

• Improving access to services, including prevention services and necessary prescription drugs.

• Improving communication and coordination of services between patient, physician, disease management organization, and other providers.

• Improving physician performance through feedback and/or reports on the patient’s progress in compliance with protocols.

• Improving patient self-care through such means as patient education, monitoring, and communication.

These goals echo the President’s principles of improving the Medicare program 

through better care for serious illness, delivering higher quality health care, and 

protecting Medicare’s financial security. 

PROVIDING RELIABLE COVERAGE OPTIONS THAT INCLUDE DISEASE 

MANAGEMENT

We are already taking advantage of private sector expertise in disease management to give Medicare beneficiaries more services for their premiums, often with 

lower cost sharing and more benefits than are available under traditional Medicare. 

For example, Medicare+Choice plans provide many benefits that are valuable to 

seniors with serious and chronic health conditions, such as:

• A Medicare+Choice plan in Boston that has a comprehensive disease management program for its enrollees with diabetes. This has resulted in significant 

increases in the share of enrollees who received annual retinal eye exams and 

are monitored for diabetic nephropathy and substantial improvements in the 

management of their Hemoglobin and cholesterol levels.

• A Medicare+Choice plan in Florida that has a comprehensive disease management program to monitor, facilitate, and coordinate care for enrollees with 

cancer. As a result, the number of acute hospital days per cancer case 

dropped by about 15% over two years and the share of inpatient admissions 

for complications with cancer has declined by 10 percent.

• A Medicare+Choice plan in New York that has a case management program 

for those hospitalized for mental health disorders and nearly doubled the 

share of its enrollees who received follow-up care within 7 days of their hospital discharge. This is consistent with research that has shown that individuals who receive after-care following hospital stays for mental illness are 

more likely to be compliant with their treatment regimens and less likely to 

be readmitted to the hospital.

14

We are also undertaking several demonstration programs improve the disease 

management options available to seniors in private plans. The projects represent a 

wide range of programs and approaches, and they address a number of chronic conditions. First, we just announced yesterday a demonstration project to expand 

health plan options in Medicare+Choice. Preferred Provider Organizations (PPOs) 

have been successful in non-Medicare markets in providing disease management 

services and other valuable benefits for patients with chronic illnesses, yet they are 

almost nonexistent in Medicare. CMS is conducting the demonstration to test ways 

to provide more health plan options to people with Medicare. We hope to award 

demonstrations later this year in up to 12 geographic areas that will be available 

to enroll beneficiaries during the Fall open enrollment period and begin to serve enrollees next January. This demonstration program will test changes in methods of 

payment for Medicare services that may be more efficient and cost effective while 

improving the quality of services available to beneficiaries. The demonstration plans 

will be considered Medicare+Choice plans and must offer all of Medicare’s required 

benefits, but will also have the flexibility to offer greater access to drug benefits. 

Second, we are giving Medicare+Choice organizations that meet specific quality indicators extra payments recognizing the costs of successful outpatient management of 

congestive heart failure (CHF). 

DEMONSTRATION PROGRAMS IN FEE-FOR-SERVICE MEDICARE

The outdated benefit package in fee-for-service Medicare does not include disease 

management, and so beneficiaries in fee-for-service have not had access to these valuable services. To identify innovative ways to include coordinated disease management services in an inherently uncoordinated fee-for-service system, we have a number of demonstrations both underway and in development. This includes demonstrations that are being implemented under legislation developed with bipartisan support in this committee. In one fee-for-service project at Lovelace Health Systems in 

New Mexico, we are testing whether intensive case management services for CHF 

and diabetes mellitus can be a cost-effective means of improving the clinical outcomes, quality of life, and satisfaction with services for high-risk patients with these 

conditions. As part of the evaluation, we will be looking at mortality, hospitalization 

rates, emergency room use, satisfaction with care, and changes in health status and 

functioning. 

We also have implemented an End Stage Renal Disease (ESRD) Managed Care 

Demonstration project that began in September 1996. Among other things, the demonstration was designed to test whether: integrated acute and chronic care services, 

and case management for ESRD patients improve health outcomes; and whether additional benefits are cost-effective. Services were provided for 3 years at each site—

Kaiser Permanente in Southern California and Advanced Renal Options in 

Southern Florida. We measured outcomes such as: survival, hospitalizations, patient satisfaction, transplantation, vascular access, hematocrit and adequacy of dialysis. In general, enrollees in the demonstration exhibited comparable or better 

outcomes when compared to those in fee-for-service. This demonstration provided us 

with valuable information as we consider new ways to better serve ESRD beneficiaries, including the possibility of developing a new ESRD demonstration. 

In another demonstration, we have selected 15 sites to provide case management 

and disease management services to certain Medicare fee-for-service beneficiaries 

with complex chronic conditions. These conditions include congestive heart failure, 

heart, liver and lung diseases, diabetes, psychiatric disorders, major depressive disorders, drug or alcohol dependence, Alzheimer’s disease or other dementia, cancer, 

and HIV/AIDS. This demonstration was authorized by the Balanced Budget Act of 

1997 to examine whether private sector case management tools adopted by health 

maintenance organizations, insurers, and academic medical centers to promote the 

use of evidence-based medical practices could be applied to fee-for-service beneficiaries. This program was designed to address important implications for the future of the Medicare program as the beneficiary population ages, and the number 

of beneficiaries with chronic illnesses increases. We are testing whether coordinated 

care programs can improve medical treatment plans, reduce avoidable hospital admissions, and promote other desirable outcomes among Medicare beneficiaries with 

chronic diseases. The projects have just begun enrolling patients. The statute that 

authorizes these projects allows for the effective projects to be continued and the 

number of projects to be expanded based on positive evaluation results—if the 

projects are found to be cost-effective and that quality of care and satisfaction are 

improved. In addition, the components of the effective projects that are beneficial 

to the Medicare program may be made a permanent part of the Medicare program. 

These initial projects are varied in their scope and include both provider organizations as well as commercial companies, utilize both case and disease management 

15

approaches, are located in urban and rural areas, and provide a range of services 

from conventional case management to high-tech patient monitoring. For example:

• CorSolutions Medical, Inc. of Buffalo Grove, Illinois will implement an 

urban disease management program targeting beneficiaries in Texas and Indiana with high-risk CHF. The program will offer an extensive array of interventions including an in-home assessment, patient education, and physician 

reports.

• Carle Foundation Hospital of Urbana, Illinois will implement a rural 

case management program targeting beneficiaries in eastern Illinois with various chronic conditions. Interventions include health assessments, patient and 

physician education, medication review, and supportive services.

• Health Quality Partners of Allentown, Pennsylvania will implement an 

urban and rural disease management program targeting beneficiaries in eastern Pennsylvania with various chronic conditions. This integrated delivery 

system will provide disease-specific education, and coordination and arrangement of medical care and social services.

• Quality Oncology, Inc. of McLean, Virginia will implement an urban disease management program targeting beneficiaries in Broward County, Florida 

with cancer. This commercial vendor will match the plan of care written by 

the patient’s own oncologist with its guidelines based on the type, location 

and stage of the patient’s cancer. The program’s medical director will contact 

the patient’s oncologist to discuss any differences between the care plan and 

the guidelines. A care manager will provide patient education and counseling, 

care coordination, and service arrangement.

• Washington University of St. Louis, Missouri and StatusOne Health of 

Hopkinton, Massachusetts will implement an urban case management program targeting beneficiaries in St. Louis with various chronic conditions. In 

this joint venture, patients will receive health and self-care education, personal goal setting and health and social services.

• QMED, Inc. of Laurence Harbor, New Jersey will implement an urban 

disease management program targeting beneficiaries in Northern California 

with coronary artery disease. This commercial vendor will combine data from 

a cardiac monitoring device with its system knowledge database to assist physicians in assessing the patient’s condition and formulating treatment recommendations. In addition, cardiac medications will be provided to participants in financial need.

BUILDING FOR THE FUTURE

We are also developing future demonstration projects that will expand options for 

Medicare beneficiaries in the Medicare+Choice program and the traditional Medicare program. Recently, we announced a new and innovative demonstration, as required by the Benefits Improvement and Protection Act of 2000 (BIPA), that will 

test the combination of providing disease management services and offering outpatient prescription drugs to Medicare beneficiaries with advanced-stage congestive 

heart failure, diabetes, or coronary heart disease. The goal is to coordinate care and 

assist beneficiaries in managing their doctors’ orders and monitoring their medication, which in turn will lead to better, healthier and fuller lives. Under this demonstration, disease management organizations may be paid a monthly premium for 

coordinating the care of patients in the studies and for the cost of prescription 

drugs. We will require each organization participating in the program to measure 

improvements in health outcomes and reduce Medicare program expenditures. In 

fact, participating organizations must post a bond guaranteeing savings for the program. Also, as mandated by BIPA, we are developing a physician group practice 

demonstration encouraging coordination of Part A and Part B services, rewarding 

physicians for improving beneficiary health outcomes, and promoting efficiency. 

In addition to stabilizing the existing Medicare+Choice program, and providing 

more health plan options, like our PPO initiative, we want to develop specific health 

plan options for those beneficiaries with chronic illness. We are investigating disease management projects that would work with a diverse group of organizations, 

including Provider Sponsored Organizations (PSOs), integrated healthcare systems, 

disease management organizations, and Medicare+Choice plans. We want to enhance the clinical management of care to better serve the patients, provide for more 

effective coordination of services, and improve beneficiaries’ health clinical outcomes 

and reduce costs to the Medicare program. 

For example, we are considering demonstrations to test capitated payment arrangements with qualified organizations that will use the case management techniques to treat chronic diseases such as congestive heart failure, diabetes, and 

16

chronic obstructive pulmonary disease. This would allow a plan to specifically target 

treatment and coordination for chronic diseases. The payment models are intended 

to improve the coordination and quality of care for Medicare beneficiaries and to reduce costs to the Medicare program. The targeted populations could include beneficiaries eligible for both Medicare and Medicaid, as well as the frail elderly. 

Similar to the current BIPA demonstration project, we also are interested in applying the private sector contracting techniques that health plans use in the 

Medicare+Choice program with disease management for fee-for-service populations. 

In addition, as I mentioned, we are considering building on the positive aspects of 

our current ESRD demonstration to further explore using integrated care management systems for beneficiaries with ESRD. We want to test the effectiveness of disease management models in increasing quality of care for ESRD patients while ensuring that this care is provided both more effectively and efficiently. 

Our evaluations of all of these projects will inform our future efforts. We are evaluating health outcomes and beneficiary satisfaction, the cost-effectiveness of the 

projects for the Medicare program, provider satisfaction, and other quality and outcomes measures. We anticipate that better outpatient care and monitoring through 

the case management model will reduce avoidable hospitalizations, avoid unnecessary services, and improve outcomes. The Agency also is exploring various payment 

options, including case-rated methodologies for treating particular conditions, such 

as stroke, that may lend themselves to this type of payment system. We recognize, 

however, that costs for some individual cases, particularly those in which appropriate medical services were previously underutilized, could increase with coordination of services. Nevertheless, we expect that in the aggregate, the costs to Medicare 

will be the same or lower through the efficiencies that will result in providing appropriate care and this will more than offset the added expenses. 

While these new demonstration programs hold promise, they are not yet fully 

tested and they are no substitute for the comprehensive coverage that many beneficiaries prefer through private plans. The most important step for helping Medicare 

build for the future, in terms of providing integrated benefits that keep patients 

healthy, is to create a stable and fair payment system for Medicare+Choice plans. 

CONCLUSION

Disease management is a critical element for improving the nation’s health care 

delivery system. Yet seniors are far less likely than other Americans with reliable 

access to modern, integrated health care plans to have access to disease management services. Through changes in Medicare’s unfair payment system for private 

plans, we are working to give seniors the same access to modern disease management services that other Americans enjoy. We also are working to address the difficulties of providing effective disease management services in the fee-for-service 

plan. Our goal is to make disease management services widely available, enabling 

beneficiaries to enhance their quality of care and get better value for the dollars 

they spend on health care. We look forward to continuing to work cooperatively with 

you Chairman Johnson, this Subcommittee, and the Congress to find innovative and 

flexible ways to improve and strengthen the Medicare program while making sure 

that beneficiaries, particularly those with chronic conditions, have access to the care 

they deserve. I thank you for the opportunity to discuss this important topic today, 

and I am happy to answer your questions.

your testimony. I did have a chance to read through it, and it offers 

Chairman JOHNSON. Thank you very much, Mr. King-Shaw, for 

f us a lot of very good information. 

I want to focus for just a minute—and I have several questions, 

so I want to just hit on these things lightly—but you stress in your 

testimony that the M+C programs and eventually the PPO programs are the only access Medicare has right now for patient-centered systems of care, and I think that is true. You talk about in 

the fee-for-service area building teams of care, but that team approach is only sort of automatically available to us through the 

more integrated care plans. 

It has struck me, as I have worked in this area, that as important as any one factor in the ability of those plans to offer disease 

management is their information management technology. They acVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00020 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
17

tually can follow their patients more easily. They can communicate 

among their providers more easily. They can track and incentivize 

their patients to participate in their own care in a way that feefor-service Medicare from Washington can’t do. 

Do you want to comment a little further on the information technology aspect of an integrated care system and, how that means 

that we really have to look at alternatives to fee-for-service medicine if we are going to accomplish these goals in the near term? 

Mr. KING-SHAW. Well, that is clearly, clearly a powerful point, 

and one of the advantages that private plans and M+C organizations bring is that they typically have front end pieces that they 

can attach to their claims system to integrate all types of claims, 

and increasingly the types of interactions or encounters that happen outside of the regular claims operation. 

So, as we do a better job at collecting lab results and lab values, 

not just the financial but the actual values, as these organizations 

have access to other types of qualitative data, they can array it and 

display that to identify progress, to measure the effectiveness of 

the interventions, to actually look at the risk. I mean, in every disease management program you have got those that have a condition and know it, those who have it and don’t know it, those who 

don’t have it but are about to get it or are at risk for getting it. 

This kind of data that M+C organizations can integrate throughout the continuum of care makes them particularly qualified to 

maintain that kind of risk and outcome and performance data. It 

also enables them to do something with reimbursement and contracting and pricing of those relationships. 

On the fee-for-service side, we have a long way to go. There are 

ways to do it. We have several people who pay claims in the Medicare program, A and B and DMERC, Durable Medical Equipment 

Regional Carrier, and all of that. So, integrating the data will be 

a challenge on the fee-for-service side, but there are organizations, 

disease management organizations, that bring that expertise. 

There are system integrators that would like to be able to bring 

that value to us on the fee-for-service side. There are some contractors that do have large pieces of the care continuum that can bring 

us that value, or team up with other organizations to integrate that 

data. 

So, it does present challenges on the fee-for-service side, but it 

is without question where 84 percent of the population is, where 

we can do the most work. 

Chairman JOHNSON. All right, thank you. In my opening statement I mentioned that 12 percent of our Medicare beneficiaries account for 75 percent of the spending, and in his testimony later on 

Dr. Wennberg will suggest a disease management approach to 

some of the end-of-life use issues. He notes the enormous variation 

across the country in the number of seniors that pass away in intensive care units (ICUs) in some areas and very uncommonly in 

ICUs in other areas; the disparate use in physician visits. You 

know, is that going to be a focus of one of your demonstrations, to 

really look at the management of end-of-life illness and the efficacy 

of one approach versus another? 

Mr. KING-SHAW. It certainly could be, and I think it should be. 

When we issue solicitations or invitations, either in writing 

18

through the official means or through the conversations that Tom 

Scully, the Administrator, the Secretary, and I have around the 

country, we are always interested in ideas that people bring us, initiatives that we can support and work through. 

This is one area that makes a lot of sense. The closest we have 

come—I mean, actually it’s not commonly thought of as a disease 

management program, but in many ways it is—is the Program of 

All-Inclusive Care for the Elderly (PACE program) itself. Our 

PACE program is, you know, an all-inclusive program for frail elders, and in there is a great deal of knowledge and value and opportunity to strengthen disease management technologies and 

methodologies around people late in life. 

So, the answer would be yes. How we do it, where we do it, 

would be a function of someone bringing to us that expertise that 

we can connect with and support and develop. 

Chairman JOHNSON. We have known for such a long time that 

so much of our money is spent in the waning months of one’s life, 

I do hope that we will think about how much the private sector 

does know in this area. I think they know less than they know in 

the area of diabetes and some other areas, so I appreciate that, but 

I think this does need to be a focus of our thinking as we develop 

approaches to managing the costs of care and improving the quality 

of life. 

Lastly, let me just ask you if you—I noticed with your comments 

about the end-stage renal disease management care demonstration 

project that began in September 1999, you comment that it did improve outcomes. You don’t comment on whether it cost money or 

saved money. You don’t comment on why, with this project completed now and under our belts, we aren’t thinking about rolling 

this out through Medicare across all of our ESRD providers, when 

clearly it did improve at least quality-of-care. So, if you would, comment on the cost aspect and why we aren’t ready to move that out. 

I would ask the same question in terms of diabetes. I have stood 

in doctors’ offices. I have seen what fantastic, simple programs we 

have available that can help physicians monitor patients much 

more easily, can get patients involved in their care ever much more 

easily. When you look at what it would do to prevent blindness and 

all kinds of complications as people age, it does seem to me that 

there are areas in here where we might even use the national coverage process to change the way we—you know, what care it is we 

are willing to pay for. 

Mr. KING-SHAW. Thank you very much for that, Madam Chairman. Actually, we are working on at least two different ESRD disease management initiatives. There is one in the variety of looking 

at a true capitated model that would enable, at a fixed rate per enrollee, ESRD providers to provide the basket of services that patients need. We are also looking at some more of the disease management coordinated, noncapitated models. We are looking at different ways, as I mentioned, you know, case rate methodology. 

So, there are a number of different initiatives that we have underway, organized toward ESRD, so you will be hearing about 

them more. We are engaged with partners and interested parties 

to help us do that. So, as they cook a little bit more and become 

19

more structured, there will be ways for us to present those to you 

and anybody else who is interested. 

There is actually quite a lot of work we are doing in the area of 

diabetes, both in the 15 BBA-sponsored diabetes—I am sorry—disease management programs, there is work being done in diabetes, 

and of course the Beneficiary Improvement Protection Act (BIPA) 

provided an opportunity for types of disease management. In that 

second group, we are actually including the cost of prescription 

drug coverage——

Should I wait? 

Chairman JOHNSON. Go ahead. 

Mr. KING-SHAW. The cost of prescription drug coverage. 

As far as the cost goes, in these past examples, they have proved 

to be at least cost-neutral. There is some spike in cost as you bring 

services to people who have under-utilized the system, and there 

is an investment cost, so you will very commonly see a spike early 

on in the treatment process. That levels out and actually reduces 

over time as you stabilize and provide all the basket of services, so 

it is our view that they actually are quite cost-effective, and over 

the life of the program actually at least a break-even, most likely 

even as a small benefit to the Medicare program. 

Chairman JOHNSON. Thank you very much. Mr. Stark? 

Mr. STARK. Thank you, Mr. King-Shaw, for your testimony. Is 

there any reason now that providers shouldn’t be required to put 

in place practice guidelines and patient safety plans as a condition 

of participating in Medicare? 

Mr. KING-SHAW. Well, we actually have a new policy forthcoming, a new regulation forthcoming on conditions of participation. There are several guidelines that are sponsored by the various 

medical societies, and those best practices and guideline are freely 

available to physicians. 

The Medicare program has traditionally not prescribed a way of 

practicing, or at least tries not to do that, and so by identifying any 

particular protocol or guideline or best practice, we would be stepping way outside of where the traditional role of Medicare has 

been, though we can work in a consultive way with quality organizations to identify best practices and be a part of research in evidence-based methodologies and that kind of thing. 

Now, our carriers do have local medical guidelines that are developed in a very consultive way or consultative way with physician 

groups, and there is a Carrier Advisory Committee of medical professionals who help them do that. So there is considered effort 

going on at the carrier level, regional level, to embrace best practices and good medical decision making. 

Now, the actual issue of proscribing them and mandating them, 

that is a different issue than Medicare has dealt with before from 

a clinical, physician point of view. 

Mr. STARK. It is fair to say that—I believe at this point you basically completed one ESRD demonstration, and you have 17 other 

demonstrations currently working. If that is all you have got, does 

CMS really have enough information to make a determination as 

to whether disease management and case management has value 

for Medicare beneficiaries, either in terms of quality or in cost savVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
20

ings to the taxpayers? Do you know enough now to make that decision? 

Mr. KING-SHAW. Yes, I believe that we have enough experience 

to know that there is great value in disease management methodologies when done well and when done in partnership with organizations who do it well. I believe like anything else a poorly designed, poorly supported effort, be it a study or a protocol or a 

project, is not going to derive the kind of results that a well 

thought out, well financed, well put together, clinically led program 

is. 

So, I think what we have learned is that there are some best 

practices in disease management that we have imported from other 

organizations, that we have learned in partnering with other organizations, and there are some not so best practices. So, I think that 

that is sound and that is credible. 

As we move forward, I think the objective would be to take from 

demonstration to operation, to mainstream, if you will, those models, those best practices that have worked well, while not shutting 

the door to the ever-evolving methodologies that are being generated in the private sector, that Medicare can be a part of. So, I 

think we have enough information to move forward appropriately, 

cautiously, with the right kind of responsible decision making, but 

we clearly, clearly can see greater benefit from disease management than what we are seeing today. 

Mr. STARK. Well, we don’t have any today. Is that correct? 

Mr. KING-SHAW. We have some. What I have described in the 

testimony are some disease management initiatives that have been 

launched. There are 15 of them that are being launched now as a 

result of BBA. There were others that preceded it in ESRD and a 

few other areas that have given us meaningful results. Even if we 

want to do it differently going forward, the results were meaningful 

in helping us guide that decision. 

We have a number of others that are under development right 

now, and there actually are a number of disease management organizations that are operating within the M+C world that continue 

to bring good value to Medicare beneficiaries in M+C environments. 

Mr. STARK. When you say ‘‘good value,’’ do you suggest then 

that the M+C plans save money by using disease management? 

Mr. KING-SHAW. When effective, yes. I mean, having spent 

some time outside of the Federal government, I can tell you that 

yes, when effectively done, again with all the elements that I identified in my oral comments, they clearly produce cost savings to the 

program, both the insurer itself and the program that they operate 

under, either Medicaid or Medicare or commercial. They also can 

do a great deal in terms of reduced costs on the part of the beneficiary, of the patient, by better managing their condition or their 

disease. 

Just as an example, to the extent that there is any out-of-pocket 

cost sharing on the commercial side—I come from hospital admissions—effectively reducing hospital admissions is a cost saver to 

the patient’s out-of-pocket expense. To the extent that there is not 

a prescription drug benefit in the Medicare program outside of 

M+C, disease management that brings prescription drug coverage, 

21

as this new BIPA package would, or by helping people manage 

their diseases and manage their medications, so that they are not 

over utilizing or having contraindications or drug-to-drug interactions that would lead to other types of complications, there is 

cost saving on the part of the patient there, as well as the program 

overall. 

So, I would say yes, most definitely, when effectively done, disease management is a cost saver to the program, to the patient, 

with quite, quite substantial benefits in clinical outcome, satisfaction, and performance. It has to be done well. You can’t do a bad 

job with it and expect those kinds of results. 

Mr. STARK. Thank you. 

Mr. KING-SHAW. Thank you, sir. 

Chairman JOHNSON. Mr. McDermott? 

Mr. MCDERMOTT. No questions. 

Chairman JOHNSON. Mrs. Thurman? I am going to recognize 

him after you, but since you are on the Subcommittee. 

Mrs. THURMAN. Thank you, Madam Chairman. 

Mr. Shaw, I guess the problem—and I don’t disagree with disease management at all. You and I know of a very good health plan 

that—AvMed, which is all over the State of Florida, but even in our 

Fifth District, we know what they have done with the congestive 

heart failure program, and what they have saved and what they 

have done. 

Quite frankly, we talk about the fact that the M+C programs 

have had an excellent way of handling this, but all indications are, 

M+C programs are leaving. It would seem to me that it would be 

nice to think in a real true world, and everything was great, that 

that would happen. 

My concern is that we are not seeing that happen, but it also 

seems to me that the M+C programs are no different than Medicare fee-for-service in many ways. They are both with doctors. They 

both have an insurer. From what I can gather with M+C, the insurer is the one somewhat that makes some of these decisions to 

and for the patient, and that drives what doctors might do. 

So, why is this so hard, or why do we think this is going to be 

so hard to implement under fee-for-service Medicare? What are the 

components that we are missing in Medicare that would make this 

transition happen? 

Mr. KING-SHAW. One of the elements of success in the fee-forservice world, where it has been successful—I am not going to represent to you that all M+C programs or all managed care programs 

do a great job at disease management and save a lot of money. 

There is, as I say, there are robust, there are all right, there are 

best practices, and less than best practices, but where they have 

been successful, wherever they have been applied, they have had 

some common elements. 

One is an organized delivery system where you truly have a community of care, where there are a number of primary care physicians and specialists who truly have organized their efforts around 

the effective treatment of a disease, who know the population. They 

know the other Members of the community of care. There are conversations, there is information sharing, there are feedback reports 

that give the providers and the care givers and the patient and evVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
22

erybody else around that community, if you will, information about 

the patient’s progress. The M+C organizations have that platform 

established, and many of them actually have networks that are especially carved out because they are effective at diabetes or hypertension or congestive heart failure. 

So, in the fee-for-service world our delivery system is not so well 

organized. It is quite a disparate system, and so you need to have 

an organizer, you need to have a partnership with a disease management entity, which doesn’t have to be M+C—it could be somebody else—and the patient, to assemble that community of care 

around the needs of the individual. It is not a given. Then to integrate data which is actually captured in many different parts of the 

system, to bring them together. That can be identified by diagnosis 

or by patient or by substance or by the DM community. 

All are doable. I mean, there is technology. There are people who 

know how to do it. You know, there are resources to do those 

things. It is all doable. It is just not a ready-made platform, the 

way it is outside of the fee-for-service sector. 

Mrs. THURMAN. In Medicare, it sounds to me like there needs 

to be some kind of a benefit payment structure within our Medicare fee-for-service to provide for that. Is that what we are kind of 

saying? I know we talked about primary care, talked about the 

gatekeeper. Those were kind of some of the buzz words at the time. 

Is there anything in our Medicare payment services now that 

would allow us to do that? For example, we have struggled with 

the issue of whether or not we should pay for every year an exam. 

Right now I can’t remember if Medicare—I don’t think we ever offered that once-a-year exam, so that at the beginning, the person 

comes in at the beginning of the year, you have an opportunity— what are some benefit issues that we could be doing under Medicare fee-for-service, that would help in fact organize as you are suggesting? 

If we can find out and we can put them in the right direction, 

we are in better shape, and then you have somebody that also can 

organize this to some—are we doing anything in the benefit plan 

to help to do that? 

Mr. KING-SHAW. Excellent question. The principal piece on the 

benefit side is preventive care services, and that is by no coincidence a part of the President’s principles for reforming and 

strengthening and modernizing Medicare. It is with that preventive 

piece, the screening piece, that you do a lot of your risk measurement up front and your monitoring that is such an important part 

of disease management. 

So, for example, we have very specific screening tests that are 

covered under Medicare but they are specific. General health care 

screening is not included. That would be one. 

Clearly, prescription drugs. When you have many of these conditions, the prescription drug cost for wellness and prevention and 

maintenance is an integral, important part. I think that the power, 

the potential power of the new round of BIPA demonstrations does 

include prescription drugs in the community of care, if you will. 

Without a prescription drug benefit on the fee-for-service side or 

any clinical trial as something to attach to, you have left a huge 

hole out there. 

23

Then the last piece, again, is you have to have an integrator, a 

care manager, somebody who is truly organizing all of this on behalf of the patient-physician relationship. There we are testing 

methodologies that would have physicians actually empowered 

through primary care case management type of things and financial resources brought to bear, to enable him or her to perform that 

integrating function. 

Mrs. THURMAN. In the M+C programs we actually provide 

them those incentives to do that through the payment structure 

and/or whatever, so——

Mr. KING-SHAW. Yes, yes. 

Mrs. THURMAN. Okay. Thank you very much. 

Mr. KING-SHAW. Thank you. 

Chairman JOHNSON. Mr. Houghton? 

Mr. HOUGHTON. Madam Chairman, first of all, thank you very 

much for letting an alumnus come back to this Subcommittee, an 

outsider, and I really applaud you for having this hearing. It is just 

under so many things that we need to talk about and discuss. 

Mr. King-Shaw, thank you so much. We are honored to have you 

here, and you are doing just a wonderful job. I would like to ask 

you a question. You mentioned in your testimony the disease management for lung cancer, and I know Dr. Henschke is going to be 

talking about this a little later, but in terms of just the human part 

here, cancer, lung cancer kills so many people and is often so expensive to treat, particularly in the final stages. How can your 

agency really take steps to help those patients get good care, but 

care that won’t break the bank? That is really the only question I 

have. 

Mr. KING-SHAW. Well, again I would say it begins with the 

screening piece. I am familiar with some of the work being done 

up at my alma mater, Cornell University, around this area, and in 

fact the kind of screening, that computerized tomography (CT) 

scanner screening for lung cancer, is a proven, effective way of risk 

assessment which is a part of the overall package. So not having 

the ability to do that for lung cancer specifically is an issue, and 

so we would look to be able to do a better job at screening as a part 

of disease management, in order to be more successful at it. That 

is one. 

I would also say that as we partner with community-based organizations, again, one of my comments was, partnering with academic medical institutions, community-based care providers and 

those types of things, there are folks out there who know very well 

how to manage and treat this condition. It is expensive, and so 

when we talk about making things less so or moving the care earlier in the development of the condition, so that your interventions 

can be more effective and the downstream costs can be minimized, 

but there is a certain amount of financial commitment that, you 

are going to have to make to effectively manage or treat lung cancer patients. 

So, I think the short answer is, we would partner with those 

folks who know how to do this, again until we can build more infrastructure inside. We would have to look at our ability to provide 

some of the important screening up front, the capabilities, and you 

24

know there is the case that, as I said, Medicare law does not specifically allow us to do this. 

There is always the opportunity to look at our overall benefit 

structure it and modify it, in this case for lung cancer but I would 

suggest for many other conditions as well, through the national 

coverage decision process. Where we have a need to look at technology or methodologies and go through evidence-based review of 

its potential to contribute to life and wellness in the Medicare program, we have a mechanism to do that. We need to have a law that 

says it is covered, first, but once we have that, there is a process 

that we have already established that can help us bring to the 

Medicare program technologies and strategies such as this one, for 

lung cancer patients or for anybody else. 

Mr. HOUGHTON. Just to follow up on that just a bit, since it 

is not quite a third but almost a third of all the cancer deaths really are from lung cancer, this is such an important area, break down 

a little bit what you mean by partnering. 

Mr. KING-SHAW. Well, for example, if we were to do a provider 

sponsored, in this case demonstration for disease management 

around lung cancer, one of the places I would look to is Cornell, 

who is doing this. There are other types of academic or provider organizations that are doing this. 

So to partner, it would mean bringing them in as either a care 

manager, or we would develop a patient population we would place 

under their management. They would develop a proposal that 

would look at what resources they would have to bring, educators, 

care managers, and so forth; a system for providing some of the related care needs of lung cancer patients. 

We would work out a financial mechanism, whether that would 

be a case rate or a capitation, or that would be some type of bundled rate or fee-for-service or some administrative reimbursement 

that covers the cost of integrating these things. There is no risk involved. There are many different financial relationships you can 

build. 

Mr. HOUGHTON. These are things that could be done, not are 

being done now. Is that right? 

Mr. KING-SHAW. Yes, that is correct. These are things that 

could be done. We are doing them, applying those technologies, 

those methods, to things other than lung cancer. A lot of what I 

have talked about in diabetes or hypertension and congestive heart 

failure are those very same types of applications. We are not doing 

it currently for lung cancer. We could. 

Mr. HOUGHTON. Thank you. Thank you, Madam Chairman. 

Mr. KING-SHAW. Well, thank you. 

Chairman JOHNSON. Thank you, Mr. King-Shaw. I just did 

want to ask one final question. I know you have got a proposal out 

there for a number of disease management demonstration projects. 

I wondered if you could just give us a quick run-down of how many 

Medicare beneficiaries you are going to target for each demonstration, whether they will be distributed across the regions of the 

country, across minority populations, urban/rural, and what incentive will there be for physicians to participate? 

Mr. KING-SHAW. I can maybe give you some sense by picking 

a few at a time. The PPO demonstrations, we anticipate there 

25

being 12 geographic markets spread throughout the country, because every market has a different nuance. Twelve geographic 

areas, twelve markets should give us, I think, a well-rounded comprehensive, and we would look at large and small towns and big 

cities. There are some rural methodologies out there that people 

would want to bring, so I would hope to have some rural participation as well in those 12. 

A number of the, it is the BBA, what is currently the 15 demonstrations, have been everywhere from—we have some in Virginia, you have some in the Midwest and in New England, you 

have got those down—we understand that there is about, I think, 

6,700 Medicare beneficiaries that we would anticipate being a part 

of those. 

Under the new BIPA ones, there is a cap of 30,000 beneficiaries. 

I can get you all of this information in writing with a much more 

detailed spreadsheet that would give you the number of lives and 

markets and locations once the contracts are awarded, sometime 

after July. 

In the testimony, if you don’t have it, I can provide it, too, there 

is a grid that gives you the geographic location and the disease 

class of the current 15 BBA demonstrations. I can also give you 

some more of the history of the lives that were involved in some 

of the past demonstrations. 

[The information follows:]

Medicare Coordinated Care Demonstration 

Project Site Rural/

Urban 

Beneficiary

Location 

Projected

Beneficiaries

To Be

Served 

Targeted

Diseases 

Avera McKennan 

Hospital Sioux 

Falls, SD 

Rural SD, IA, MN 634 Congestive heart failure and related cardiac diseases

Carle Foundation 

Hospital Urbana, 

IL 

Rural Eastern IL 1,518 Various chronic conditions

CenVaNet Richmond, VA Urban Richmond 614 Various chronic conditions

CorSolutions, Medical, Inc. Buffalo 

Grove, IL 

Urban Houston 1,963 High-risk congestive 

heart failure

Erickson Retirement Communities 

Baltimore, MD 

Urban Baltimore 

County, MD 

396 Various chronic conditions

Georgetown U. 

Medical Center 

Washington, DC 

Urban DC, MD suburbs 1,025 Congestive heart failure

26

Medicare Coordinated Care Demonstration—Continued

Project Site Rural/

Urban 

Beneficiary

Location 

Projected

Beneficiaries

To Be

Served 

Targeted

Diseases 

Health Quality 

Partners 

Plumsteadville, 

PA 

Both Eastern PA 1,070 Various chronic conditions

Hospice of the Valley Phoenix, AZ 

Urban Maricopa 

County, AZ 

1,092 Various chronic conditions [Note: Demo 

not limited to end-oflife care]

Jewish Home and 

Hospital New 

York, NY 

Urban New York City 365 Various chronic conditions

Mercy Medical 

Center Mason 

City, IA 

Rural Northern IA 607 Various chronic conditions

Medical Care Developments Augusta, ME 

Rural ME 1,218 Congestive heart failure or post-acute 

myocardial infarction

Quality Oncology, 

Inc. McLean, VA 

Urban Broward 

County, FL 

1,426 Cancer

QMED, Inc. Laurence Harbor, NJ Urban Northern CA 571 Coronary artery disease

University of Maryland Baltimore, 

MD 

Urban Baltimore, MD 339 Congestive heart failure

Washington University St. Louis, 

MO/StatusOne 

Health 

Hopkinton, MA 

Urban St. Louis, MO 5,422 Various chronic conditions 

tion in response to my colleague from Florida

Chairman JOHNSON. Well, thank you very much. You did menf ’s comment, that 

under the fee-for-service system there would have to be some compensation for this management capability that the managed care 

systems are able to provide. I assume in your demonstration 

project, you will get a better handle on what it will require for physicians to add the extra time it takes to spend on patient education 

and to coordinate care, or a non-physician assistant. So, I think 

those costs that are currently being absorbed by the Choice plans 

will be isolated in these demos and will get a better handle on that. 

Mr. KING-SHAW. Yes. In fact, in some of these demos there is 

an administrative fee which is a part of the demonstration to the 

best of our understanding right now to cover those costs. You are 

absolutely correct, as these demonstrations unfold, we will get a 

much better handle of what the financial resources that are reVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
27

quired on the part of physicians and other clinicians to be effective 

disease managers. We can then build a model that would incorporate that. 

Mr. MCDERMOTT. Madam Chairman, may I ask a question? 

Chairman JOHNSON. Yes. 

Mr. MCDERMOTT. We had sporadic reports recently in Seattle 

of patients having difficulty finding physicians who would take 

payment for Medicare. What I am interested in understanding is, 

do you think that in the face of our attempt to cut reimbursement 

in this session of the Congress that we can expect that there will 

in fact be more patients who have access to the kind of health care 

you are trying to deliver? Do you think you are going to get more 

doctors involved in that kind of chronic management if we cut our 

rates by 51⁄4 percent? 

Mr. KING-SHAW. Well, I mean, the sustainable growth rate that 

Congress gives us to work with resulted in those negative updates, 

the physician fee schedule that you are referring to. Absent a 

change in that formula or corrective action then that’s what we 

have to live with. So, I think that we need to recognize that there 

is a threat to the integrity of a provider network in Medicare with 

the financing and the financial pressures under—on top of the system right now. So, should we be concerned about that threat? Yes. 

One of the things that we are doing at CMS through our 10 regional offices and out of the outreach, is we are seeking to obtain 

very quantifiable specific data about participation rates in Medicare, either as a result of the current numbers or as anticipation 

of more oblique numbers going forward. As we collect that very 

specific about those who are just saying they are going to leave, but 

actually leave, actually disenroll, we can provide that information 

to leadership for consideration. 

Beyond just looking at the number of physicians who leave Medicare or not is the important question of is there a restriction of 

panels? Do you see physicians reserving less and less time in their 

weekly schedules for Medicare patients? Are they closing their 

practices to any additional Medicare patients? The conversation 

seems to have remained at, are we going to lose doctors through 

Medicare? Perhaps we may not lose a doctor through Medicare—

from Medicare. We may have that very same physician restrict the 

ability of Medicare patients to get their attention, and that is as 

much of a concern to us. 

Is that a threat? Absolutely. Are we going to try to articulate 

that in clearer objective ways? Absolutely. 

Mr. MCDERMOTT. What is the administration’s proposal to deal 

with the 5.4-percent reduction? 

Mr. KING-SHAW. Work with Congress to figure it out. 

Mr. MCDERMOTT. Thank you for that clarifying answer. 

[Laughter.] 

Mr. MCDERMOTT. Thank you, Madam Chairman. 

Chairman JOHNSON. Thank you very much for your testimony. 

I did discuss before the hearing started, the things that the Virginia hospitals are doing, and I will look forward to hearing from 

you as to how that fits in, and the other reports that are coming 

out now, the one from Ernst & Young and Cap Gemini on disease 

management and fee-for-service beneficiaries. So, we look forward 

28

to working with you on these issues in the months to come, and 

hopefully making some significant progress. Thank you very much 

for your testimony this morning. 

Mr. KING-SHAW. Thank you, Madam Chair. 

Chairman JOHNSON. I would invite the final panel up, Dr. John 

Wennberg, the Director of the Center for Evaluative Clinical 

Sciences, Dartmouth University; Mike Hillman, Dr. Hillman, the 

Medical Director of the Business and Community Health, 

Marshfield Clinic, Marshfield, Wisconsin; Dr. Claudia Henschke, 

Professor of Radiology, Director of the Division of Chest Imaging, 

and Director of the Division of Health Policy and Technology Assessment at Cornell University; Dr. Gerard Anderson, Professor of 

Health Policy and Management, International Health, Johns Hopkins University; and Dr. Jonathan Lord, Senior Vice President and 

Chief Clinical Strategy and Innovation Officer of Humana. 

We welcome you all to this important hearing and look forward 

to your comments. We will move right through. We have that 

roughly 5-minute rule, and then we will follow that by questions. 

Dr. Wennberg, welcome. 

STATEMENT OF JOHN E. WENNBERG, M.D., M.P.H., DIRECTOR, 

CENTER FOR THE EVALUATIVE CLINICAL SCIENCES, DARTMOUTH COLLEGE, HANOVER, NEW HAMPSHIRE 

Dr. WENNBERG. Thank you, Chairman Johnson, Congressman 

Stark. I am glad to be here today. I have been asked to comment 

on geographic variations in traditional Medicare and their implications for the design of chronic disease management programs. 

In my written testimony, I document extensive unwarranted regional variations in the patterns of practice. The amount of care 

patients receive depends as much on where they live as it does on 

the disease they have. 

First, there is extensive under use of effective care. That is, care 

that works and all patients should get. Second, there is extensive 

misuse of discretionary care such as elective surgery, care that 

should depend on what patients want, but seems to depend too 

much on what providers prescribe. Third, there is extensive over 

use of physician visits, testing, imaging, hospitalizations, and stays 

in intensive care. The frequency of use in a given region has to 

basis in medical science and is determined by the supply of resources rather than medical need. 

Finally, Medicare spending varies extensively. In 1996, per capita spending in Miami was nearly 21⁄2 times that of Minneapolis, 

but greater spending does not buy higher quality-of-care. These regions score equally poorly on such measures of quality as the percent of diabetics who get needed eye exams or heart patients who 

get needed drugs. Greater spending is not associated with greater 

rates of elective surgery. Rates are about the same in high-cost regions such as Orange County, California, as in low-cost regions 

such as Portland, Oregon. 

What then does greater spending buy? It buys more visits, more 

tests, more stays in hospitals, and more stays in intensive care. In 

some regions Medicare enrollees average more than 20 visits to 

medical specialists during the last 6 months of their lives. In other 

regions the average is less than three. In some regions nearly 30 

29

percent of Medicare deaths occur in ICUs; in others, fewer than 7 

percent do. This all adds up to a lot of money. If the pattern of conservative practice observed in regions with low spending were the 

norm for the Nation, we have estimated a savings of over $40 billion in 1996. The implications seem quite clear. If disease management programs in traditional Medicare are to have system-wide impact on overall qualify and costs, they will need to provide remedy 

for each category of unwarranted variation. 

The causes and remedies for variation are different according to 

the category. Disease management programs organized by health 

maintenance organizations (HMOs) have been quite successful in 

reducing under service of such things as diabetic eye exams and 

beta blockers. They should well work in traditional Medicare, particularly if the claims data can be mobilized and patient registries 

can be mobilized to assist in that process. Variations in discretionary surgery and other preference sensitive treatments pose a 

greater problem. In some regions virtually no patients with breast 

cancer receive a lumpectomy, while another region’s almost have 

to. Such variation occurs because patients aren’t involved in a 

meaningful way in the choice of treatment. Patients need to understand their options. 

A basic problem is that Medicare fee structure rewards procedures, not counseling. Disease management demonstration projects 

should be given flexibility to deal with these flaws that perversely 

interfere with informed patient choice. 

The principal cause of geographic variation in visits, testing, and 

hospitalizations of the chronically ill is variations in the supply of 

resources relative to the size of the population saved. More physicians means more frequent visits. More hospital beds means more 

hospitalizations. Greater use of care means more Medicare spending. We interpret these patterns as evidence for inefficiency in the 

use of resources, not health care rationing. Medical science provides no guidelines regarding appropriate use and studies conducted at the population level show no gains in life expectancy associated with a twofold variation in spending across the United 

States for Medicare. For these reasons, we believe there is widespread overuse of such services. 

Dealing with the overuse of what we call supply sensitive services poses a great challenge. The problem is finding the appropriate 

level of resources. Only staff model HMOs have dealt effectively 

with this problem. Staff model HMOs practice what Alan Enthoven 

has called ‘‘private sector health planning.’’ That is, they regulate 

the capacity of their organizations. Since their benchmarks for resource inputs are consistently lower than the prevailing rates in 

their regions, the cost of their care has been correspondingly lower 

than fee-for-service medicine. For the Nation to achieve such efficiency, health care organizations serving fee-for-service populations 

would need to become accountable for their own capacity. 

While the task of comprehensive reform of the management of 

chronic disease is formidable, we need to get on with it. I applaud 

the Subcommittee’s willingness to address the complexity of this 

task. I applaud the efforts by CMS to invite chronic disease management companies to undertake demonstration projects in fee-forservice Medicare. We need to learn how well the network model 

30

can improve the quality-of-care in each category of service, but the 

complexity of the task warrants additional demonstration projects 

carried out by provider organizations serving traditional Medicare 

populations. In my written testimony, my colleagues and I have 

recommended that such a demonstration project be undertaken. 

I want to thank you for the opportunity to testify, and also to 

thank you personally for the kind comment that you made on our 

paper in health affairs. 

[The prepared statement of Dr. Wennberg follows:]

Statement of John E. Wennberg, M.D., M.P.H., Director, Center for the 

Evaluative Clinical Sciences, Dartmouth College, Hanover, New Hampshire 

My name is John Wennberg. I am a member of the faculty of Dartmouth Medical 

School. I have been asked to comment on variations in Medicare spending and quality, and on the implications of these variations for the design of chronic disease 

management programs. It is now well known that spending for traditional, fee-forservice, Medicare varies extensively. For example, in 1996, age, sex and race adjusted spending for non-HMO Medicare services in the Miami hospital referral region was nearly two and a half times higher than in the Minneapolis hospital referral region. In a recent Health Affairs article (attached), my colleagues and I described some of the variations in quality of care among hospital referral regions, as 

well as the association between quality and spending. We looked at three categories 

of medical services: ‘‘effective care,’’ ‘‘preference-sensitive care’’ and ‘‘supply-sensitive 

care.’’

It is important to make distinctions among effective care, preferencesensitive care and supply-sensitive care because the causes of the variation and the remedies are different for each category. Moreover, variation in per capita Medicare spending is associated with only one of 

these categories—supply-sensitive care. If disease management programs are to have an important impact on the overall quality and cost 

of care for the chronically ill, the programs will have to address variations in each category.

I will summarize very briefly what we mean by the terms effective, preferencesensitive, and supply-sensitive care. Each of these categories of care raises a different challenge to the design and implementation of disease management programs. 

Effective care is evidence-based care—care that we know works and we know all 

eligible patients should get. Our studies show extensive underuse of effective 

care among fee-for-service Medicare enrollees in virtually every part of the country. 

For example, in some regions of the United States, less than 20% of post-heart attack patients who were classified as ‘‘ideal’’ candidates for a particular medication 

actually received the medication. There are similar patterns of underuse of effective 

treatments for Medicare enrollees with diabetes, and evidence that there is poor 

compliance with guidelines for cancer screening and immunizations. The principal 

cause of variation in the delivery of effective care is a lack of infrastructure—systems that make sure that appropriate care is provided in a timely way. 

Correcting the underuse of effective care will demand improvement in the infrastructure of the everyday practice of medicine. Staff model HMOs provide exemplary 

models of how this can be done and a number of network HMOs (and their disease 

management company subcontractors) have had success in promoting provider compliance. Health insurance claims provide the information databases that can identify patients who need services, so that both patients and providers can be reminded 

to seek and administer appropriate care in a timely way. The processes of care can 

be monitored with these claims databases, at the level of individual practitioners 

or physician groups. We have shown that this monitoring is possible using the Medicare claims data; and many health systems already have the information available, 

but have not put it to use.

Underuse of effective care can be reduced by collecting and monitoring 

the processes of care at the hospital and physician group levels. Medicare claims data can serve as the basis for establishing disease management registries to identify patients in need and document health care 

quality. Medicare claims should be made available in ‘‘real time’’ for 

31

use in disease management demonstration projects in traditional Medicare.

Preference-sensitive care pertains to conditions where at least two valid treatment 

strategies are available, each with its own risks and benefits. Since the choice of 

treatment involves tradeoffs that ought to depend on patients’ preferences—such as 

the choice between surgical or pharmaceutical treatment—the patient’s choice of 

treatment should determine what is done. There are wide variations in the use of 

discretionary surgery and other preference-sensitive treatments. For example, the 

rates of lumpectomy for breast cancer and prostatectomy for prostate cancer vary 

by a factor of five among hospital referral regions in the United States. In some 

cases, the principal cause of variation is that there is substantial uncertainty about 

the risks and benefits of the treatment options because there have been no clinical 

trials to determine the facts. The fundamental problem, however, is the failure to 

involve the patient in a meaningful way in the choice of treatment. Decisions should 

belong to the patient, but provider opinion tends to dominate. For this reason, we 

believe there is widespread misuse of preference—sensitive care. 

Dealing with the misuse of preference-sensitive care requires that patients become actively involved in the choice of treatment in those clinical situations where 

options exist. Shared decision making or ‘‘informed patient choice’’ is gaining recognition as the remedy for unwarranted variations in this category, but implementation is just beginning. Staff model HMOs and a few IPA HMOs provide examples 

of implementation, but the results are spotty. A basic problem facing IPA and traditional Medicare is that the fee structure doesn’t reward providers who implement 

shared decision making; in other words, reimbursements reward activity, rather 

than careful consideration of all the options. The most important goal of this effort 

should be to make sure that people with chronic illnesses know what the options 

are (including costs, risks, and benefits). The current system does not reward or encourage physicians to engage in this effort. It should, because it is the right thing 

to do. It could also save money. Several studies have shown that informed patients 

tend to want less surgery than surgeons are inclined to recommend under the current system of rewarding procedures rather than counseling.

Misuse of discretionary surgery and other forms of preference-sensitive 

care can be reduced by actively involving patients in the choice of care. 

We must make sure that chronically ill patients understand their options and are aware of the benefits and risks of treatment. Disease 

management demonstration projects should be given flexibility to deal 

with the current flaws in the traditional Medicare fee structure that 

perversely interfere with informed patient choice.

Supply-sensitive services are those in which the frequency of use is not determined by well-articulated medical theory, much less by scientific evidence. Supplysensitive services include physician visits, diagnostic tests, hospitalizations, and admissions to intensive care among patients with chronic illnesses. The variations are 

particularly striking among the most seriously ill Medicare enrollees. In some regions, Medicare enrollees average more than 20 visits to medical specialists during 

the last six months of their lives; in other regions, the average number of such visits 

is fewer than three. In some regions, nearly 30% of Medicare deaths occur in ICUs; 

in other regions, fewer than 7% do. 

The principal cause of variation in utilization of services is the regional and local 

variation in resources. More hospital beds per capita mean more hospitalizations per 

capita among those who have chronic diseases such as congestive heart failure, diabetes and chronic pulmonary disease. More cardiologists per capita mean more visits 

with cardiologists per person with heart disease. Yet there is little medical theory—

and no evidence—about the appropriate frequency of such services—that is, what 

rate of physician visits, for example, results in the best health outcomes. Moreover, 

studies conducted at the population level have demonstrated that there are no gains 

in life expectancy associated with higher frequency of intervention. For these reasons, we believe there is widespread overuse of supply-sensitive services. 

Dealing with the overuse of supply-sensitive services poses the greatest challenge 

to the implementation of a comprehensive program in disease management. Most 

of the care given to patients with chronic disease belongs in this category. Those 

who live in areas with more resources are likely to have more visits with doctors, 

more tests, and more admissions to hospitals and to intensive care, particularly at 

the end of life. This is the category of care that ‘‘explains’’ higher per capita spending, but it is not associated with better quality of care or extension of life expectancy. Medicare enrollees living in regions where per capita spending is higher than 

average don’t receive more effective care—and the differences in spending are also 

32

not explained by higher rates of major (non-elective) surgery. (See Exhibit 2 in the 

attached article.) 

The role of supply-sensitive services in both spending and outcomes has received 

little attention from academic researchers. The topic barely makes it onto the research agenda, and there are few studies that could provide a basis for constructing 

guidelines that might tell us how many physicians are actually needed in a given 

region, what rate of visits to physicians results in the best outcomes for those with 

chronic diseases, or whether the use of expensive diagnostic technology actually improves accurate diagnosis, health, or survival. Recent research on the redesign of 

clinical practice to introduce group visits and open appointment schedules is encouraging because it breaks the cycle of supplier-induced demand and could serve as the 

basis for redesign of chronic disease management. 

Except for staff-model HMOs, insurers and providers have not responded to the 

challenge of determining what works and how much is enough. Much of the intellectual leadership in the research on redesign of clinical practice comes from these organizations, which are able to control their own per capita resources (eg. doctors 

hired, hospital beds constructed or contracted for, patterns of practice). But the efficiency of staff-model HMOs in the use of supply-sensitive care is probably more a 

byproduct of a corporate strategy of remaining competitive with fee-for-service medicine than a conscious attempt to manage chronic disease. As Alain Enthoven has 

pointed out, such HMOs practice ‘‘private sector health planning.’’ That is, they regulate the capacity of their organizations. Since the staff-model HMO standards for 

resources are consistently lower than the prevailing rates of resources in the regions 

where they compete, the cost of HMO care has been correspondingly lower than the 

cost of fee-for-service medicine. For the nation to achieve HMO-like reductions in 

spending, health care organizations would need to become accountable for capacity. 

This is a formidable task and one that in the absence of reform of payment systems 

is probably impossible. 

Addressing the overuse of supply-sensitive care is made even more challenging by 

the cultural assumption that more health care is better. There might be hope in the 

growing public awareness that for many patients with advanced chronic illness, 

high-technology interventions such as admissions to intensive care are both futile 

and unpleasant, degrading the quality of life in its closing months and years. The 

chronic disease management movement might find natural allies among the growing 

numbers of Americans who are trying to reform of end of life care.

Reducing the overuse of hospitals, intensive care, physician visits and 

testing among chronically ill Americans should be a national priority. 

This must be done if we want to reduce unwarranted Medicare spending and improve heath care quality. Disease management programs 

must address this priority. However, the scientific basis for defining 

optimal care is weak and, with the exception of staff model HMOs, the 

tools available for dealing with the causes of variation are also weak. 

Demonstration projects are needed to establish benchmarks for effective clinical practice for supply-sensitive care and to identify ‘‘best 

practice’’ models for efficient care.

While the task of comprehensive reform of the management of chronic disease is 

a formidable challenge, we have a moral obligation to take it on. I applaud the committee’s willingness to address the complexity of the task and confront the difficulty 

of finding workable solutions. Progress often begins with debate, which I hope these 

hearings will spark. I also applaud the efforts by CMS to invite chronic disease 

management companies to implement experimental chronic disease management in 

fee-for-service Medicare. We need to learn how well the IPA model can improve the 

quality of care in each category of service. The complexity of the task, however, warrants additional demonstration projects, and some should be carried out by provider 

organizations serving traditional Medicare populations. In our Health Affairs article, my colleagues and I recommend a demonstration project that could prove that 

the federal government and responsible health care organizations can establish a 

partnership to fruitfully address each category of unwarranted variation. The results could, I believe, improve the quality and efficiency of services provided for all 

fee-for-service Medicare beneficiaries. And it is only the first step in improving the 

quality of care for all chronically ill Americans while we demonstrate that doing 

medicine right does not mean doing it the most expensive way.

Chairman JOHNSON. Thank you. Dr. Lord. 

f

33

STATEMENT OF JONATHAN T. LORD, M.D., CHIEF CLINICAL 

STRATEGY AND INNOVATION OFFICER, HUMANA INC., LOUISVILLE, KENTUCKY, AND PRESIDENT, DISEASE MANAGEMENT ASSOCIATION OF AMERICA 

Dr. LORD. Good afternoon. My name is Jack Lord, and I am the 

Chief Innovation Officer for Humana. I am also the President of 

Disease Management Association of America. 

Health benefits companies like Humana have turned toward disease management programs to help Members get appropriate and 

effective care. Humana, like many other health plans, has changed 

its approach to medical management after years of understanding 

that the real needs that people have is to have supported self management. That approach emphasizes Members’ control of their own 

care and help to make better decisions. 

Dr. Wennberg and I have collaborated for the last decade at the 

American Hospital Association and an organization called Health 

Dialog to produce tools that help people make better decisions. 

Disease management programs also provide for personalized support for the people who are sick so they can get more effective care, 

and certainly self-care opportunities for the well. The availability 

of technology, e-health and the Web make those systems far more 

effective. 

Disease management was evolved to help deal with some of the 

symptoms of a systemless world. Fragmentation, variation, lack of 

adherence to clinically proven practices, lack of patient involvement 

and the absence of predictive tools, where we had to rely on data 

from our rear view mirror as opposed to looking forward, characterized the way health care has been practiced in this country in 

many regions. 

Disease management does support self management of individuals, focuses on what Dr. Wennberg calls effective care, uses evidence-based treatment protocols to provide information to both patients and practitioners, emphasizes the coordination of care, and 

uses advanced sciences to help track patients and look at outcomes. 

That science could be used to help predict future needs of people. 

The impacts of disease management programs include better care 

planning, both at the individual level as well as at a population 

level, healthier behaviors on the parts of individuals and their families, better clinical outcomes, physical function and quality of life, 

better access in care coordination, and ultimately lower cost, reduced hospitalizations, surgery and invasive procedures. 

Research shows that disease management is effective. Humana 

has been an industry leader in this effort, and we have put our effort and resource behind that. Whether it is in specialized diabetic 

care for Hispanics in San Antonio or in the under served areas of 

this country in terms of rural health care, we have seen results. Diabetes programs show that patients who are managed through disease management programs have increased frequency of hemoglobin A1c testing, foot exams, eye exams, and cholesterol exams, 

and demonstrate reduced hospitalization. Congestive heart failure 

programs show significant reductions in inpatient stays, admissions, emergency room visits, as well as the reduction of diseasespecific claims and co-morbidities. These are outlined in our written testimony. 

34

Humana’s own experience reflects the research. Congestive heart 

failure, 90 percent of patients show improvements or stabilization 

of their disease, and a 60-percent reduction in hospitalization. Coronary artery disease patients show significant reductions in cholesterol levels, and patients who have chronic renal disease show 

greater percentages achieving dialysis targets when people are in 

disease management programs than outside of those programs. 

The bottom line is, what is right for patients and what is right 

for you and me? People are more engaged in their own care. They 

get effective care. That is, care that has been proven to be right. 

They avoid unnecessary or harmful care, and they have an opportunity to have improved compliance both in their drug regimens as 

well as the medical regimens that are prescribed by their physicians. The net result is improvement in self-reported health and 

real functional status for individuals. 

We have outlined some stories in the written testimony, stories 

that reflect our sensitivity around the privacy of our Members, but 

also give you a glimpse of the kinds of care and the kinds of outcomes that are achievable. 

One quick example. Mrs. V. We have an example here of a patient who had successful behavior modification when enrolled in a 

disease management program for congestive heart failure. 

The key to success is targeting the right patients and being sure 

they are connected to the right care. The M+C programs have had 

advantages because of the data and the integration of services. We 

can use claims to target that information, and we can use outreach 

programs like our Personal Nurse program, where we provide essentially a concierge for those people who have complex significant 

chronic disease. 

The bottom line to all of this is disease management has demonstrated advantages for the chronically ill Medicare beneficiary. 

Most M+C programs have offered some form of disease management programs, and those efforts should be continued. There is a 

tremendous opportunity to extent disease management programs 

beyond the M+C program to a fee-for-service program, and have an 

impact on getting the right care to people and lowering the cost of 

the care that is provided to Medicare beneficiaries across the country. 

Thank you, Madam Chair. 

[The prepared statement of Dr. Lord follows:]

Statement of Jonathan T. Lord, M.D., Chief Clinical Strategy and Innovation Officer, Humana Inc., Louisville, Kentucky, and President, Disease 

Management Association of America 

Good Afternoon. My name is Jack Lord, and I am Chief Clinical Strategy and Innovation Officer for Humana Inc., one of the nation’s largest health benefits companies. Humana provides health benefits to nearly 6 million commercial, military, and 

Medicare beneficiaries. I have also spent time as Director of Quality for the Naval 

Medical Command, Executive Vice-President for a large health system in Maryland, 

as Chief Operating Officer of the American Hospital Association, and as President 

of Health Dialog, a company providing tools and services to enhance consumer medical decision making. Additionally, I am president of the Disease Management Association of America. I am pleased to be here to tell you about how health benefits 

companies like Humana have turned to disease management programs to help our 

members—especially those members most in need of care—to obtain appropriate 

and effective care. 

35

Over the past six or seven years, the offering of health benefits has significantly 

changed to address what consumers want. Many of those changes are already bearing fruit. So not only do we have a great chance to exceed the expectations of our 

customers—they couldn’t be lower—but by the time everybody becomes aware of the 

great changes that have taken place in our business practices, we will already have 

results to prove that the new approaches work—not just for us and for employers 

but for patients, too. I’m happy to be here to share some of these results and, more 

importantly, some of these success stories, with you today. 

First, I’d like to tell you a little bit about how health plans have begun to focus 

on disease management as a core strategy for addressing medical management. 

Then, I’ll share with you some information about disease management programs—

what they are, how effective they are, and what we do at Humana, as a health plan, 

to better target, recruit, and triage our members, and to provide better continuity 

and integration of care. Finally, I’d like to talk a little bit about how disease management can be extended to all Medicare beneficiaries, and note some practical obstacles that may stand in the way. 

New Approaches to Medical Management

Consumers in the market place have made health plans to look in the mirror and 

rethink how they approach medical management. Humana, like many other plans, 

has made extensive changes in its approach. We are trying to focus our effort on 

providing personalized support to the sick so they can get appropriate care and provide opportunity for the healthy to manage their own health with the help of advanced information technology. We take seriously our relationship with our members and our responsibility to help them get more control and make better decisions 

about their health and their care. 

Our data show that a relatively small percentage of members consume the health 

care services that account for 90 percent of health care costs each year. Medicare 

knows this phenomenon well. In the Medicare population these tend to be very sick 

people with chronic conditions that require ongoing attention if they are not going 

to enter a cycle of costly acute episodes, or beneficiaries at the end of their lives. 

Think, for a moment, about the people you know with serious chronic diseases—

people with diabetes, heart disease, or kidney disease. These people need to receive 

routine care for their conditions, adhere to treatment protocols, comply with medication regimens. And if they do, their conditions can be maintained and their health 

functioning significantly improved. For many of the most common and costly conditions, programs have been developed to operationalize the clinical knowledge that 

will keep these chronically ill people feeling relatively healthy, keep them out of the 

hospital and reduce their health care needs and costs. 

These sorts of programs are increasingly prevalent in health plans. A survey last 

year by the American Association of Health Plans found that the average plan had 

at least five disease management programs, usually focusing on diabetes, coronary 

artery disease, congestive heart failure, asthma, high risk pregnancy, and depression. 

What is disease management?

Disease management provides disciplined, evidence-based, expert-approved support for individuals with chronic conditions to help them become more aware of 

their condition and of their treatment choices, to change their behavior to reduce 

their health risk, and to bridge their relationships with their physicians. They do 

this by educating the patient and encouraging adherence to a personalized treatment plan based on the body of clinical expertise we call ‘‘evidence-based medicine.’’

Disease management evolved over the last twenty years out of the recognition 

that our health care system does not behave like a system at all. DM is an approach 

to patient care that is designed to compensate for the fragmentation in service delivery, the unwanted variation in care, the lack of adherence to clinically proven practices, the lack of adequate patient education and decision support, and the inadequate involvement of patients in making decisions about their care. 

Disease management is a multi-disciplinary set of services that generally involves 

identifying the population at risk and eligible for disease management services, and 

matching interventions with need; educating patients for self-management, including primary prevention, behavior modification, and support for compliance with the 

treatment plan; ongoing, structured assessment and the use of evidence-based practice guidelines to establish personalized treatment goals and to standardize treatment plans; ongoing communication with the patient and her family, with routine 

reporting and feedback to her physicians and support-service providers; measuring, 

evaluating, and managing outcomes; and periodic reassessment and feedback to capVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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1 Robert J. Rubin et al., Clinical and Economic Impact of Implementing a Comprehensive Diabetes Management Program in Managed Care, 83 J. Clin. Endocrinol. and Metab. 2635, 2640 

(1998) (Attachment B). 2 Am Heart J 1999;138: 633–40. 

ture problems as early as possible and to make adjustments to treatment goals and 

care plans before the problems become more severe. 

For many patients the need for health care is ongoing and the required patient 

effort is significant. Intensifying the support provided to those patients and their 

practitioners can improve the process and outcomes of care. Disease management 

supports the patient’s self-management and uses evidence-based treatment information as a basis for coaching the patient and providing timely information to the 

practitioner. Since most physicians practice alone or in small, single-specialty 

groups without an infrastructure or team to support the systematic management of 

patients with chronic disease, DM programs emphasize the coordination of services 

between the treating physician and nurse case managers, educators, pharmacists 

and other health care professionals. Because of the need for daily monitoring of 

measures of health or adequacy of medication, such as blood sugar in diabetes or 

body weight in congestive heart failure, patients with chronic illness need to take 

an active role in the management of their disease. Advanced information technology 

is frequently used to monitor patients, such as Interactive Voice Response (IVR) systems that allow patients to make daily reports of their vital signs and symptoms 

using a touch-tone telephone, facilitating regular reporting of process and outcome 

indicators. 

By maximizing patient adherence to prescribed treatments and to health-promoting behaviors, patients with chronic diseases should experience better clinical 

outcomes, better functional capacity and quality of life, better access to care, better 

coordinated care, and lower health care costs through a reduction in hospitalization, 

surgery or other invasive care. 

Effectiveness of Disease Management

So what does the research say? How effective are these programs? 

A study of a diabetes program implemented in several plans concluded that the 

program generated substantial cost savings and resulted in substantial improvement in all clinical measures. According to the study, ‘‘members were more likely 

to receive HbA1c tests, foot exams, eye exams, and cholesterol screenings while enrolled in the program . . . [and h]ospital utilization decreased dramatically for each 

plan’s diabetic population.’’ 1 Another study that followed a group of patients with 

congestive heart failure showed significant improvements a year after enrollment, 

including a 48 percent reduction in inpatient (acute) days, a 36 percent reduction 

in inpatient admissions, a 31 percent decrease in ER visits, and a 20 percent decline 

of average length of stay, yielding an average reduction in disease-specific claims 

of 54 percent and total claims of 42 percent.2 Health status improved, too—surveys 

revealed a 16 percent improvement in functional status and quality of life, as reported by patients themselves. 

Our own experience mirrors these results. We have found significant savings related to the investment in time and support to help the sickest of our members. But 

more importantly, we have seen significantly improved health results for the members. Ninety percent of participants in our CHF program show stabilized or improved disease status, with a 60 percent reduction in hospitalization. Participants 

in our coronary artery disease program show improved cholesterol control. And a recently published study of our End Stage Renal Disease program, comparing its results against the U.S. Renal Data System, a national registry of 300,000 ESRD patients coordinated by CMS, found significantly higher percentages of Humana members met their dialysis adequacy targets than the national average. Hospital bed 

days were 45 percent lower than the USRDS average and ER visits dropped 75 percent over the two year study period. Mortality for the Humana population was 80 

percent of the expected mortality compared to the USRDS standard. 

Of course, financial results tell only a small part of the tale. The financial results 

improve because patients become more engaged in managing their own health care, 

take better care of themselves, get care that experts say they should be getting, 

avoid care that does them little good, improve their compliance with drug regimens, 

and generally experience improved health and functional status. Let me tell you a 

few of these stories. 

Mrs. V. is an obese diabetic female enrolled in the CHF program. At the time of 

admission, she exhibited moderate fatigue and shortness of breath with exertion. 

Her treatment plan focused on weight control, exercise, and maintenance of a lowsodium diet. Mrs. V. eventually came to exercise four times a day at 45 minutes 

37

per day, moderated her salt intake, and lost 60 lbs. She is very satisfied with the 

program and looks forward to the regularly scheduled calls. Mrs. B is a woman with 

coronary artery disease enrolled after an angioplasty. She required consistent reinforcement with routine exercise and stress management. At enrollment, she couldn’t 

walk a one block without complaining of fatigue, but after one month she is able 

to walk a mile without fatigue, feels less stress and is more motivated to manage 

her health. 

One of the keys to a successful program is targeting the interventions to the right 

patients so that services are matched to needs. At Humana, we use our extensive 

claims information, including daily feeds of pharmacy data, to identify and link 

members with relevant information and services. To improve enrollment in our DM 

programs, we used pharmacy and claims data to identify those members who were 

likely to have a diagnosis of a chronic disease for which we had an established disease management program. We were then able to compare program enrollment with 

disease incidence so we could improve the targeting of our efforts to recruit people 

into the programs. We subsequently broadened our eligibility criteria and initiated 

new procedures for the identification and recruitment of individuals who would most 

benefit from DM services. 

In addition, Humana has implemented a ‘‘Personal Nurse’’ program that reaches 

out to members during acute episodes of illness. The personal nurse provides pre— and post-hospital care coordination, coaching and navigational support to help members make their treatment choices, referral into appropriate disease management 

programs, consultations with a pharmacist for drug-related issues, and access to 

interactive, on-line personal health tools. 

In this regard, the Medicare+Choice plans have capabilities that Medicare simply 

does not have. We have procedures that enable us to identify members as soon as 

they enter a hospital, which, in Humana’s case, triggers an outbound contact from 

a Personal Nurse who can assess the member’s suitability for a disease management 

program and recruit the member directly into an appropriate program. In addition, 

the freshness of our pharmacy reports provide a rich source of information about 

the member’s condition, compliance, complications, and comorbidities, which we can 

use to identify members for intervention, track guideline compliance, and enable our 

pharmacy consultants to evaluate possible drug treatment problems. 

Extending Disease Management to the FFS Population

At the moment, these great advantages for the care planning and support for 

chronically ill beneficiaries are available only to Medicare+Choice members. However, these represent a relatively small percentage of Medicare beneficiaries. Most 

beneficiaries continue to receive their care in the fragmented, uncoordinated fee-for 

service world. We continue to believe that the ‘‘system-ness’’ offered through 

Medicare+Choice plans creates distinct advantages for the prompt identification and 

recruitment of beneficiaries into appropriate disease management programs. 

However, we commend the efforts of the Medicare program to experiment with 

the use of disease management and care management programs in the FFS environment and encourage further demonstrations of its effectiveness. With appropriate 

targeting and recruitment, free-standing disease management programs can produce 

savings for the Medicare program and, through the systematization, care coordination, and access to best-practice medicine that is at the core of DM programs, improve the care experience of Medicare beneficiaries. CMS Administrator Sculley has 

signaled his intention to conduct more demonstration projects to use private disease 

management services to bring some of the benefits of managed care to the fee-forservice beneficiaries still struggling to navigate the fragmented, uncoordinated 

health care ‘‘system.’’ We think these demonstrations are worth expanding. In the 

coming years, with the advancing age of the baby boomers and the increased ability 

of our health system to keep them alive with chronic illnesses, the number of Medicare beneficiaries having to manage chronic health conditions is likely to rise. There 

are clearly some obstacles to the implementation of DM in the Medicare FFS population that will require some creative solutions. The most important of these is the 

identification and recruitment of the most suitable beneficiaries during their moments of acute need—mechanisms that exist within M+C plans to identify people 

when they are first entering an episode of acute illness do not currently exist. In 

addition, Medicare cannot rely on claims information for the identification of eligible 

beneficiaries unless it is very timely. These problems are not insurmountable, but 

they do need to be addressed. 

Conclusion

Disease Management offers significant advantages for the chronically ill Medicare 

beneficiary. Most Medicare+Choice plans will offer DM services and should be supVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00041 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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ported for doing so. But for the many beneficiaries who are not able to obtain coverage in a M+C plan, further extending the demonstrations to make private sector 

DM services available would be very desirable.

Hillman. 

Chairman JOHNSON. Thank you very much, Dr. Lord. Dr. 

f STATEMENT OF MICHAEL HILLMAN, M.D., MBA, MEDICAL DIRECTOR, BUSINESS AND COMMUNITY HEALTH SERVICES, 

MARSHFIELD CLINIC, MARSHFIELD, WISCONSIN 

Dr. HILLMAN. Representative Johnson, Mr. Stark, on behalf of 

Marshfield Clinic, thank you for conducting this hearing. My name 

is Mike Hillman. I am the Medical Director for Business and Community Health Services at Marshfield Clinic. 

The hallmark of the Medicare population is age. In our society, 

an almost constant companion to age is chronic disease. Our current health care system, largely shaped by the health care reimbursement market, is not designed to prevent or meet the needs of 

those who are chronically ill. It is a fundamentally reactive system. 

It emphasizes response to acute problems instead of prevention, diagnosis of disease instead of early screening, symptom relief instead of health behavior change. 

The behavior of our health care system as a whole is exactly the 

behavior that the CMS reimbursement system rewards, and not 

just for the Medicare population. Make no mistake about it, CMS 

reimbursement policy is mirrored by most commercial insurance 

carriers. 

In addition, leveraging Medicare resources by selectively denying 

medical services or reducing reimbursement along faulty geographical assumptions is unfair and does not work. Dr. Wennberg 

has elegantly debunked the faulty logic behind these assumptions. 

However, an even greater problem is the Resource Based Relative Value Scale, RBRVS fee schedule, which is based on a model 

of medical practice centered on traditional patient/physician encounters, instead of the value of care that is actually provided. This 

model is terribly outdated. 

When you think about it, physicians are the second most expensive resource in a patient’s health care team. The patient is the 

most expensive. Therefore, the use of patient/physician encounters 

as the primary vehicle for delivering health care is shamefully 

wasteful. 

The Anticoagulation Service described in my testimony, illustrates a population health intervention that is 100-percent telephonic, yet delivers superior quality with dramatic savings to CMS. 

Patients with chronic conditions are best served by a systematic 

multi-disciplinary approach in which the patient plays an active 

role. This approach requires a large front-end investment in information systems and process change: process change that defines 

roles and expectations of patients, physicians, nurses, and others in 

accordance with what each is most qualified to do in the most 

value-added way. 

I have submitted testimony to you that describes some of the information and population health tools and strategies used at 

Marshfield Clinic, including a detailed account of our 

39

Anticoagulation Program, a program that has dramatic and positive effects on both health care quality and cost. I detailed this program for three reasons. 

First, if we look at disease management separate from population health management, we would never have chosen to engage 

in this effort. Anticoagulation is not a disease. The process of managing anticoagulation has a profound quality-of-care and cost-benefit effect that extends across the boundaries of many diseases. Isolated disease management interventions are not optimal. However, 

disease- or condition-specific population health interventions, when 

provided in a coordinated manner, make a lot of sense. 

Second, the effectiveness of any population health intervention is 

synergistically enhanced if it is part of an integrated and coordinated system of care, the record of which should be immediately 

available electronically and can be accessed 24–7–365 by an ‘‘actionably’’ qualified health care provider; that is, someone who can 

understand the information and act on it, such as a registered 

nurse. 

Third, it is essential to measure the value, the quality, and quantity per unit cost of a population health intervention. Cost should 

be a part of any quality or process improvement platform. It certainly is in other industries, but in other industries there is a market that rewards companies for providing services or products of 

superior value. That is not the case with the current CMS reimbursement policies. 

One final thought. I believe that a reimbursement system that 

stakes its financial solvency on the currency of patient provider encounters is at risk. At the same time, a care system that devalues 

the currency of patient provider relationships is at perilous risk. 

Thank you. It is truly an honor and privilege to be here. 

[The prepared statement of Dr. Hillman follows:]

Statement of Michael Hillman, M.D., MBA, Medical Director, Business and 

Community Health Services, Marshfield Clinic, Marshfield, Wisconsin 

On behalf of the physicians and staff of Marshfield Clinic, I want to thank you 

for conducting this hearing and for the opportunity to comment on Disease State 

Management in the Medicare program. 

This document will summarize the following: (1) why it is important to view ‘disease management’ as a carve-out of ‘population health management’; (2) Marshfield 

Clinic’s approach to disease management, particularly as it relates to the Medicare 

population; (3) how the current reimbursement system influences (or may influence) 

population health strategies to reduce the cost of health care, while improving the 

health, of the Medicare population. 

Marshfield Clinic is the largest private group medical practice in Wisconsin and 

one of the largest in the United States, with 678 physicians, 5158 additional staff, 

and 1.6 million annual patient encounters. The Marshfield Clinic system includes 

a major diagnostic treatment center, a research facility, a reference laboratory and 

39 regional centers located in northern, central and western Wisconsin. The largest 

concentration of physicians is in the city of Marshfield (population ∼19,000). The facility houses almost half of the physicians at the Clinic. The facility is attached to 

a 534-bed hospital, St. Josephs, which is owned by a separate company, Ministry 

Health Care. Marshfield Clinic serves a disproportionately large socio-economically 

challenged population. As a 501(c)(3) non-profit organization, Marshfield Clinic is a 

public trust, and thus obligated to serve all who seek care, regardless of their ability 

to pay. The Clinic serves several federally designated Health Provider Shortage 

Areas (HPSAs). These communities are typically geographically remote, older, and 

educationally-challenged. Logging, mining, and agriculture are the economic mainstays. The Clinic also provides services in partnership with a federally funded Community Health Center at 13 locations in Wisconsin providing comprehensive inteVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
40

grated care to un- and under-insured residents of the community with incomes at 

or below 200% of the federal poverty level. Security Health Plan of Wisconsin, a taxexempt health maintenance organization, is a wholly owned subsidiary of 

Marshfield Clinic and provides financing for health care services for almost 120,000 

members throughout northern, central and western Wisconsin. 

Marshfield Clinic has developed and acquired sophisticated tools, technology, and 

other resources that complement and support the population health management 

strategy of the Clinic. These include an electronic medical record, a data warehouse, 

an immunization registry, and an epidemiological database that enable enhanced 

definitions of disease states, diagnoses or conditions, and activity-based cost analysis 

of CPT level interventions. These tools have enormous scientific, clinical and social 

policy potential that has only been partially tapped. 

During the last three decades, Marshfield Clinic funded and installed, and fully 

implemented a sophisticated electronic medical record (EMR) which now contains 

years of historical data, including diagnoses, procedures, test results, medications, 

immunizations, alert events, outcome measurements, and demographics. Marshfield 

Clinic’s 39 regional centers are linked by common information systems. The EMR 

provides instant portability across our system facilitating communication between 

providers in different departments and at different centers. For instance, easy access to previous diagnostic test results avoids duplicate ordering of lab and radiology 

tests. We presently put 2.5% of revenue into the operation and maintenance of the 

Clinic’s information system, a cost for FY 2001 that amounted to $22,073 per physician. 

Marshfield Enhanced Charting & Code Acquisition (MECCA) is an integral part 

of the EMR. It allows us to collect high quality data for health care, research and 

education. It is a point-of-care application, acting as an electronic medical assistant 

that requires providers to document and/or review data from lists of items, such as 

visit types, providers, vital signs, diagnoses, procedures, medications, and alerts. 

MECCA plays an important role in patient safety because it tracks drug allergies 

and other diagnoses including past medical history, family history, food alerts, latex 

allergies, and allergic reactions. Because MECCA is required for all scheduled patient encounters in Marshfield Clinic (including ambulatory surgery, unscheduled 

encounters, and hospital procedures), it helps us track the resources needed for 

medical care and is the foundation of an order-entry system for providers. MECCA 

will also be used to capture data from Hospital Discharge Summaries. Patient identifying information is only available to providers who have previously taken care of 

the patient. 

Marshfield Clinic has developed innovative preventative health care measures 

such as an immunization registry (Regional Early Childhood Immunization Network 

or ‘‘RECIN’’). RECIN is a computer program that allows the sharing of immunization information between and among providers and public health departments. 

RECIN allows providers to have electronic access to a child’s immunization history, 

including any alerts or reactions to immunizations. Such access minimizes the possibility of over-immunization and potentially severe allergic reactions. Equally important, access to this information allows public health personnel to target children 

who have not been immunized. As a consequence of this program, Marshfield Clinic 

and concerned public agencies have been able to increase childhood immunization 

rates from 67% to 92% in Wood County alone. The RECIN platform can be applied 

to many other population health care problems affecting Medicare. Examples include anticoagulation, lipid, and diabetes management, as well as preventive services including flu and pneumovax vaccinations for vulnerable populations. 

Marshfield Clinic has also developed a very unique resource known as MESA 

(Marshfield Epidemiologic Study Area) for clinical research in population health 

management.

41

iDeStefano F, Eaker ED, Broste SK, Nordstrom DL, Peissig PL, Vierkant RA, Konitzer KA, 

Gruber RL, Layde PM. (1996). Epidemiologic Research in an Integrated Regional Medical Care 

System: The Marshfield Epidemiologic Study Area. J Clin Epidemiol; 49: 643–652. 

MESA.—In the 24 zip code areas shown in map of Wisconsin, virtually all of the 88,000 residents get almost all of their medical care from a Marshfield Clinic facility.This population is 

very stable. The Clinic has medical records of this population dating back to the early 1900s.

MESA captures nearly all the health care information of those residing in the 24 

zip codes above. Consequently, population-based health research can be done that 

includes all of the populations that comprise these geographic communities. Unlike 

most other research facilities, MESA researchers can monitor the residency of individuals on a daily basis by using updates of births, deaths, new patients, and name 

and address changes to Clinic databases. This allows researchers to monitor the 

health of a community over time by linking this residency information with the extensive health care information available in Clinic databases and medical records.i

The research opportunities afforded by MESA contrast starkly to the studies performed by payers (HMOs and other insurers). Payer research is largely based on 

claims data and is restricted to narrow populations circumscribed by a common disease from multiple communities, receiving their healthcare from multiple provider 

organizations. Likewise, MESA affords a very important perspective not provided by 

the research of traditional academic medical centers. Typical academic medical research is accomplished through randomized clinical trials. In these studies populations are studied across multiple sites in very disparate geographic communities. 

Typically, the populations are medically homogenous except for the single hypothetical factor that is being tested. This type of research has limited value because 


Insert offset folio 82324a.001
42

ii Evans, R., M. Barer, and T. Marmor. (1994) Why are Some People Healthy and Others Not? 

The Determinants of Health of Populations. Aldine de Gruyter. New York. iii Chapman, LS. (1997). HEALTH MANAGEMENT: Optimal Approaches for Managing the 

Health of Defined Populations. Summex Corporation. Seattle, WA.

it is so severely restricted. It is widely accepted that multiple, often un-anticipated 

variables, are important determinants to individual’s and populations’ health. Yet, 

there are very few tools to study multiple variables simultaneously. MESA is a platform that enables analysis of multiple variables simultaneously. 

‘DISEASE MANAGEMENT’ AS A PART OF ‘POPULATION HEALTH 

MANAGEMENT’

Medicare is defined by a predominantly aged population, many members of which 

have chronic diseases or conditions. Hence, the need for ‘disease management’. Patients with chronic conditions typically enter a health care delivery system seeking 

acute care services traditionally covered under insurance, but they also may need 

services related to counseling and behavior change, support groups, communication 

between visits, continuous coordination with other health professionals, and medical 

supplies. Unfortunately, traditional fee-for-service payment approaches offer a 

chronically ill patient face-to-face office visits as the primary mechanism for receiving care and rarely encompass the range of services needed across the continuum 

of care. There is a misalignment among what the patient needs, how the services 

are provided, and how needed services are reimbursed. 

The explosive growth in the size of the Medicare population is one of three drivers 

that will completely transform health care in the next 10–15 years. The other two 

drivers are human genomics and a revolution in healthcare consumerism. It is essential to consider these drivers, as well as the health factors that drive chronic disease, so that we minimize the possibility that changes in the Medicare health system cause unintended, more expensive, consequences. 

People use physicians primarily when they are, or perceive they are, ill. Their use 

of physicians is defined primarily by encounters. Most traditional fee-for-service reimbursement occurs on a ‘per encounter’ basis. Therefore, physicians compete with 

each other for per-encounter business. They compete more vigorously for those encounters that reimburse at higher rates. The corollary is also true. It is not in the 

best business interest of physicians to compete for those patient encounters that are 

reimbursed at lower rates (i.e. Medicare). This situation poses a significant access 

problem for the Medicare population. Especially, when because of their age and 

chronic diseases, they require so much non-reimbursed care (care that does not have 

to be physician-encounter-driven). Therefore, it becomes in our enlightened self-interest to manage patients in the most cost-effective manner possible. Hence, our 

strategy to use population health management principles. 

Population health management. The sine qua non of population healthcare management is the improvement of the health status of a selected population by focusing on the needs of that population. There are multiple determinants of the 

healthcare needs of any population. 

Multiple determinants of health model.ii

In the context of the multiple determinants of health model, population health 

management can be defined as ‘‘the technical field of endeavor which utilizes a variety of individual, organizational and cultural interventions to help improve the morbidity patterns (i.e., the illness and injury burden) and the health care use behavior 

of defined populations.’’ iii


Insert offset folio 82324b.002
43

ivFos, PJ, DJ Fine, and PJ Foss. (2000). Designing Health Care for Population: Applied Epidemiology in Health Care Administration. Jossey-Bass. San Francisco vMontrose, G. (1995). The Art & Science of Demand Management. Group Health Association 

of America vi Herzlinger, R. (1997). Market-Driven Health Care. Perseus Books, New York. vii Runde, D. (1999). Weaving Disease Management Into the Fabric of Patient Care. Health 

Care Horizons Institute for the Future. Menlo Park, CA 

The generally accepted objectives for population health management include: (1) 

reduction in volume of services utilized, (2) shift of utilization to lower cost settings, 

(3) achievement of clinical improvement by focusing on the health status of the population, (4) integration of health care services, (5) organization of providers into networks, and (6) evaluation and documentation of quality.iv Within each of these objectives, there is great number of considerations from both philosophical and operational perspectives, especially as they relate to the performance of the access system for a horizontally integrated health system like Marshfield Clinic. 

To simultaneously accomplish the first 3 goals of population health, mechanisms 

must be in place to assist patients in becoming active, empowered participants in 

their own health care decisions, while reducing the need and use of unnecessary or 

ineffective medical services—enhancing the overall health status of a defined population.v

The increase in patient responsibility inevitably results in a fundamental change 

in the patient-physician relationship. Patients, and the information with which they 

make decisions, are no longer solely dependent on their physicians. Patients, in the 

above model, are partners. They are customers. They are consumers. The consumerism that has already reshaped other large parts of the American economy (retail, information, automotive, and manufacturing) is carrying over to healthcare.vi

Much of this consumerism is driven by the increased information available on the 

Internet. 

Physicians at Marshfield Clinic are not unique in their resistance to the demands 

of a changing healthcare delivery system. The value of specialty practice culturally 

persists at the Clinic today. The desire to develop this core competency of specialty 

care drove the formation of the Clinic. Implicit in subspecialty training is the emphasis on ‘‘sickness-care’’. Specialists are not needed to prevent illness. They are 

needed to perform extraordinarily technical deeds to stave off mortality and reduce 

morbidity. However, even the most ardent advocates of specialty practice will now 

admit that it is not efficient use, for example, of a heart surgeon’s time to manage 

a post-operative valve replacement patient’s anticoagulation medicine. It is also not 

good patient care, because it not something that heart surgeons are expert at doing. 

Likewise, it is not the best use of a cardiologist’s time to manage Type II diabetes 

in patients that have a stable myocardial status. Again, it is also not good patient 

care. It is not something that cardiologists are expert at doing. Then, whose job is 

it to manage these patients with these problems? At Marshfield Clinic, like many 

physician-oriented multi-specialty clinics, it falls to the primary care physicians—

internists and family practitioners, and their physician extenders (Nurse Practitioners and Physician Assistants). For the last 6 years, the Marshfield Clinic has 

purposefully re-directed patients under the care of procedural specialists to the primary care departments. 

We believe that the business case to be made for this approach is sound, even 

considering the internal conflict attendant Medicare fee-for-service reimbursement. 

Primary care is the entry point from which subspecialty care demand is generated. 

Dysfunctional access to primary care limits the growth of subspecialty care. Dysfunctional access to primary care makes it virtually impossible to develop a consistent, system-wide collaborative effort to maximize customer satisfaction and consumer health outcomes at the lowest cost per life. 

To further improve access to primary care, we are redefining the scope of practice 

for the different members of the health care team. For example: primary care physicians see new patients, provide hospital care, do complex follow-up exams, and perform procedures. Nurse Practitioners and Physician Assistants do most follow-up 

care and screening (as opposed to diagnostic) exams. Registered Nurses triage acute 

patient symptoms, provide case management, educate, and coach behavioral 

change—all integral elements of disease management. 

Disease Management. Disease Management is a further refinement and application of population health principles that we now utilize in the Marshfield Clinic. 

There are four basic steps.vii One, define the population. Two, determine what care 

processes will most effectively and efficiently meet the needs of that population. 

Three, measure the effectiveness of those care processes. Four, improve the care 

processes further. The vision for Marshfield Clinic using population health as a core 

44

strategy is to develop consistent, continually improving, system-wide collaboration 

to maximize customer satisfaction and consumer health outcomes at the lowest cost 

per life, and as a result, deliver care that is of superior value and liking to the members of its communities. 

DISEASE/POPULATION HEALTH MANAGEMENT AT MARSHFIELD 

CLINIC 

In 1995, Marshfield Clinic performed an ‘‘outside-in’’ assessment of its primary 

care system. From the patient-as-a-customer perspective, we found that our system 

could improve greatly by addressing the following needs: providing symptom-based 

advice with respect to whether patients needed to see a provider; if they don’t, how 

they can self-manage their symptoms; if they do, when do they need to be seen, and 

with what type of provider. 

The needs of the providers-as-a-customer were different. Our providers wanted to 

provide continuity of care 24–7–365 (although they were not willing/able to work 

24–7–365) and increase their access (by reducing unnecessary patient encounters). 

Marshfield Clinic found that the respective needs of the patients and the providers could be met, and exceeded, by a 24–7–365 Registered Nurse (RN) call center 

that systematically answered patients symptom-based concerns, and, using 

Marshfield Clinic’s electronic medical record in combination with the physicians oncall, provide true continuity of care. Strictly speaking, we developed a population 

health management/disease management intervention on healthcare resource utilization. 

This RN call center department was named ProActive Health. This department 

provided these interventions on behalf of both Marshfield Clinic and Security Health 

Plan (the Clinic’s wholly owned insurance product). The interventions that this department developed in collaboration with its customers include the following: symptom-based triage, prenatal health, asthma, secondary cardiac prevention, diabetes, 

and anticoagulation management. The basic principles underlying all of these interventions are as follows:

• Patients are selected. In the case of RN ‘‘triage’’ and pregnancy, they are selfselected. In other cases they are identified through the use of Health Risk Appraisals or utilization data.

• A condition/symptom-specific assessment is performed telephonically. This assessment includes reviewing the patient’s electronic medical record. And for 

those patients with a chronic condition, particular attention is paid to the providers’ care plan.

• Marshfield Clinic has developed an extensive intranet repository of clinical 

practice guidelines that were/are modified from national guidelines. Provider 

care plans are checked against those guidelines (particularly for asthma, diabetes, and secondary heart prevention). Our QI department, which organizes 

the development of these guidelines, is now examining interventions directed 

towards compliance with these guidelines.

• For acute symptom-based advice, the RNs consult more than 500 guidelines, 

many of which were specifically modified by Marshfield Clinic physicians to 

enhance their effectiveness. These guidelines help the RN advise the patient 

if they need to be seen, in what time frame, and by what type of provider. 

In addition, the RN helps the patients to develop a self-care plan. For the condition-specific (i.e. ‘‘Disease Management’’) interventions, the patients and 

RNs customize a curriculum of educational messages and behavioral coaching 

based on the patients’ current knowledge base, and the degree to which that 

individual is at risk for acute decompensation.

• For several of these programs, active RN case management is integrated with 

the education and behavior coaching. Case management is the heart of population health management. Simply stated, it is a collaborative multi-disciplinary process to assess, monitor, and intervene. Physicians are part of the 

team, but the actual case managers are non-physicians, often nurses. The 

overall mission is to provide care efficiently, minimizing unneeded office visits, maximizing usefulness. Most of the services can be provided by telephone. 

In these programs, the RN assumes responsibility for a group of patients. 

These patients require particularly close monitoring and medication management towards a specific clinical or laboratory indicator. After specialized 

training, using protocols developed by our physicians, in compliance with the 

legislatively defined scope of an RN’s practice, our Disease Management 

Nurses help patients adjust their medications (without having to see their 

physician).

45

Marshfield Clinic has a number of disease management programs in various 

states of maturity. These programs include: Diabetes, Prenatal Health, Congestive 

Heart Failure, Asthma, Lifestyle Management, Secondary Cardiac Prevention, and 

Anticoagulation Management. In addition, a number of programs are on the ‘‘drawing board’’. Those programs include Hypertension, Hyperlipidemia, Obesity, Postnatal care, and Low Back Pain. Many members of the Medicare population suffer 

from several of these conditions concurrently. To give you a more complete picture 

of how a mature disease management program should work, we will describe our 

Anticoagulation Service Disease Management program in more depth. 

The Anticoagulation Service is particularly germane for the following reasons. 

One, it demonstrates how all the essential components of a disease management 

program work together. Two, it is the program of ours that is most fully developed 

with respect to clinical and economic outcomes measurement. Three, it demonstrates the power of connecting a disease management program directly to physician practices. 

Anticoagulation is the process of making the blood less likely to clot (form a scab) 

inside the body. When a clot forms inside the body (within the blood vessels), it 

causes either a stroke or heart attack. There are a number of very common conditions in the Medicare problem that predispose the formation of these internal clots. 

These conditions include atrial fibrillation (2–3% of the population over 65 years of 

age), congestive heart failure, deep vein thrombosis (especially after orthopedic procedures and during cancer chemotherapy), and mechanical heart valve replacement. 

Almost all of these conditions are caused by age and chronic disease. 

The most common outpatient drug used for anticoagulation is warfarin. While the 

risk/benefit ratio of using warfarin in this patient population is indisputable, the 

window of therapeutic benefit is narrow. That is, under-anticoagulation with this 

drug doesn’t prevent stroke and heart attack. Over-anticoagulation can cause dangerous internal bleeding. Furthermore, the metabolism of this drug (the way that 

it is broken down by the body) is very sensitive to changes in diet, exercise, and 

many other common medications taken by this population (e.g. antibiotics). Therefore, the administration of this drug has to be done very carefully. A monthly blood 

test is required to adequately monitor the effects of this medication. 

When this drug is administered in the standard way, the incidence of hospitalizations or death is 7–10% per year (the risk of stroke or heart attack without this 

drug is substantially higher). However, with our disease management approach to 

patients taking this medication, that risk is reduced to less than 2% per year. 

All five of the ‘ProActive Health’ dot points described above were used in this program. The patients are introduced to the program by their physicians (to reassure 

the patient that it is an extension of their physician’s practice) or are referred immediately upon discharge from the hospital. The patients are entered into a special 

tracking database that prevents them from falling through the ‘cracks’ due to the 

complicated monitoring schedule and telephonic follow-up routine. Our nurses case 

manage the patients through guidelines developed by Marshfield Clinic. They adjust 

the patients’ warfarin doses according to protocol. They educate and coach the patients about recognizing on their own the many pitfalls that influence 

anticoagulation (diet, activity, other medications, other illness). The RN case managers have access to the Medical Director of the program and the patient’s personal 

physician for the 5–10% of time when the protocols don’t cover a patient’s situation. 

All of the interactions are documented in both database and the Clinic’s electronic 

medical record. The RN’s EMR note is signed by the patient’s personal physician 

(so they always know what is going on with their patient). In addition to the RN 

case manager, the patients have access to the 24–7–365 RN ProActive Health 

Nurseline for acute symptom-based advice. This entire program is done telephonically without any reimbursement from CMS. 

We recently conducted a study that was funded by the Agency for Healthcare Research and Quality under its new Integrated Delivery System Research Network initiative. It assessed the impact of Marshfield Clinic’s Anticoagulation Service on 

health care utilization measures, including urgent care, emergency department and 

inpatient events. In the study, we compared these measures in two study groups 

of individuals receiving warfarin therapy. One group consisted of individuals that 

were enrolled and managed in the Anticoagulation Service; the other group consisted of individuals who received standard care for their warfarin management 

needs. All study subjects were under the care of Marshfield Clinic cardiologists for 

at least some of their health conditions. The study included a total of 408 study subjects and 359 years of study observation time. 

In the course of providing this intervention, we noted that two-thirds of the phone 

calls were not directly related to warfarin dosing. Rather, they resulted from the patients calling in about other health concerns that they correctly thought would influVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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ence their state of anticoagulation. Therefore, in the study funded by AHRQ, we 

looked at all hospital events, not just the events directly related to warfarin. Hospital events occurred at a much lower rate in the Anticoagulation Service group 

compared to the standard care group. Based on our analyses, the expected difference 

in hospitalizations per 100 person years was approximately 28.7 hospitalizations. 

This difference was not only large but also statistically significant (P<.014). 

For the 86% of the study population that are Medicare beneficiaries, total Medicare costs avoided per hospital event were estimated at $9,443 in constant year 

(2000) dollars. Hospital facility costs represented about 76% of these costs. Non-hospital costs, primarily physician and laboratory costs for both inpatient and outpatient care, represented the remaining 24% of costs. Estimated avoided CMS costs 

were $8,221 per hospitalization. The difference between total Medicare costs per 

hospitalization and CMS avoided costs, which was $1,222 per hospitalization, is represented by expected Medicare beneficiary co-payments and deductible: $446 per 

hospitalization and annual Part B deductible of $776. 

Total avoided Medicare hospitalization-related costs per 100 person years of 

Anticoagulation Service enrollment compared to standard care was estimated at approximately $271,014 based on a differential hospitalization rate of 28.7 events and 

an average total Medicare-related cost of $9,443 per hospitalization. CMS total 

avoided costs per 100 person years were estimated at $235,943. Reduced Medicare 

beneficiary co-payments and deductibles were estimated at $35,071. In developing 

estimates of avoided costs, a conservative approach was utilized; it is believed a 

greater savings are likely available than those estimated. 

Using the Marshfield Enhanced Charting & Code Acquisition (MECCA), we know 

that our system has 12,477 unique patients on warfarin anticoagulation. 95% of 

those patients are Medicare-eligible. If we generalized the Anticoagulation Service 

to the entire population receiving warfarin under the care of Marshfield Clinic, CMS 

would avoid over $28,000,000. It will cost Marshfield Clinic about $3,000,000 to do 

so, none of which is currently reimbursed. 

We are certain that near-equally compelling savings can be achieved with our congestive heart failure, diabetes, and other population health initiatives. The anti-coagulation example provides clear evidence that better health can be achieved at significantly less cost. These results can be greatly expedited if Medicare reimbursement policy influences the healthcare market to rely less on patient-physician encounters, and more on integrated systems of care that extend the benefits of patientphysician relationships. 

THE RELATIONSHIP OF MEDICARE REIMBURSEMENT TO THE 

HEALTHCARE MARKETPLACE AND POPULATION HEALTH MANAGEMENT

The health care system that we presently live with is not well designed to meet 

the needs of the chronically ill. The current delivery system responds primarily to 

acute and urgent health problems emphasizing diagnosis, ruling out serious conditions, and relieving symptoms. Patients with chronic conditions are better served by 

a systematic approach that emphasizes self-management, care planning with a multidisciplinary team, and ongoing assessment and follow-up. This systematic approach requires a large front-end investment in information systems and process 

change. Marshfield Clinic is making that investment. Yet the health care marketplace, largely shaped by CMS reimbursement policy, works against developing this 

type of approach. 

Even without any financial incentive or reimbursement for this front-end investment required for population health, clinics like Marshfield in the Wisconsin Medicare payment locality, are already under-reimbursed by CMS. Marshfield Clinic recently conducted an internal analysis to determine to what extent the Medicare program covers the cost of providing services to Medicare beneficiaries. Our analysis 

demonstrates that the Clinic presently recovers only about 70% of its costs in providing Medicare Part B services. We do not believe that we are unique, but suspect 

that the shortfalls in Medicare revenue are common for physicians providing Medicare Part B services. We urge you to take steps to remedy this inequity as soon as 

possible. 

To calculate the percent of its Medicare allowed costs for which Medicare reimbursement is received, Marshfield accountants eliminated all expenses and revenues 

received that might potentially be questioned by the Medicare program. Our methodology for FY 2000 follows principles applied in our annual FQHC cost report that 

was audited by external auditors and submitted to the state. (Marshfield Clinic in 

conjunction with Family Health Center Inc. functions as a federally qualified health 

center (FQHC) under the Medicaid Program.) For the purposes of this analysis, all 

expenses and revenues from activities such as the outreach lab, veterinary lab, reVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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viii Institute of Medicine (U.S.). Committee on Quality of Health Care in America. (2001). 

Crossing the Quality Chasm: A new Health System for the 21st Century. Washington, D.C. National Academy Press. 

search and education, rental property and optical and cosmetic surgery departments 

were removed. Our accountants also removed all non-Medicare ‘‘Allowed’’ costs related to our bad debt, interest expenses, marketing programs, government affairs 

activities, National Advisory Council, goodwill amortization and other miscellaneous 

costs. 

For FY 2000, Marshfield Clinic’s Medicare revenue was 71.52% of costs for feefor-service Medicare. For FY 2001 Medicare revenue (un-audited) as a percent of 

costs goes down to 70.59%. For FY 2002 we project that Medicare revenue will decrease as a percent of costs to approximately 68.5%. 

Reimbursement shortfalls of this magnitude interfere with the Clinic’s capacity to 

further implement disease management programs in the many departments where 

we believe efficiencies can be captured. The declines in Medicare reimbursement 

that Marshfield Clinic experienced in FY 2000 and 2001, and has projected for FY 

2002 are due in part due to payment updates lowered by CMS in anticipation of 

volume offsets. CMS has assumed that increasing volume in response to tightening 

reimbursement takes place uniformly across the country. We believe that this simplistic point of view and the pursuant regulatory response by CMS are a constant 

source of frustration and a major obstacle to the coordination of care for beneficiaries by organizations whose mission is to provide better patient care. 

Marshfield Clinic has demonstrated that by reducing both the volume and intensity of services provided to Medicare beneficiaries, savings are accruing to Medicare 

Part A, Medicare Part B, and the beneficiaries we serve. Unfortunately, from the 

point of view of promoting the financial viability, disease management activities 

that serve the welfare of beneficiaries and the interest of the Medicare program can 

be potentially self-defeating if not reimbursed. It will be difficult to promote the 

long-term view that disease management strategies are a rational response to the 

current economic incentives of the Medicare fee-for-service program. 

Organizations that stake their future to the currency of patient-physician encounters as the basic unit of medical care value are at risk in the present fee-for-service 

reimbursement environment. At the same time, we believe that patients who stake 

their future to the healthcare system that devalues the benefit of patient-physician 

relationships are equally at risk. 

CONCLUSIONS

In summary, we believe that there are significant quality-of-care concerns as well 

as the business case to be made that population/disease management holds significant promise for the Medicare program. However, Congress must take several steps 

to address the misalignment of incentives in the Medicare reimbursement market. 

The Institute of Medicine suggests that fee-for-service payment can be adapted to 

provide incentives for quality improvement by encouraging cooperation and providing reimbursement for care outside of the traditional office visit, which is not always optimal for meeting patients’ needs. This approach involves developing relative 

values for the elements of work performed over time by physicians and other health 

professionals.viii

That may be a reasonable suggestion, but probably not realistic. It still relies on 

encounters (although not face-to-face), rather than care as the unit of value from 

which reimbursement occurs. And that is the reason that capitation, as it has been 

thus far administered, also doesn’t work. It also relies on encounters. Although in 

a capitated system, encounters have negative value instead of a positive value. 

We need to develop a reimbursement system that is somewhere in between: a system that reimburses for continually improving value (quality +quantity , unit cost) 

in care. Marshfield Clinic looks forward to the opportunity to work with you on this. 

Thank you for considering our views.

Chairman JOHNSON. Dr. Anderson? 

f

48

STATEMENT OF GERARD ANDERSON, PH.D., PROFESSOR, PUBLIC HEALTH AND MEDICINE, JOHNS HOPKINS UNIVERSITY, 

BALTIMORE, MARYLAND, AND DIRECTOR, PARTNERSHIP 

FOR SOLUTIONS, JOHNS HOPKINS UNIVERSITY, BALTIMORE, 

MARYLAND 

Dr. ANDERSON. Chairwoman Johnson, Ranking Member Stark, 

Members of the Subcommittee, thank you for inviting me to testify 

this afternoon. 

I am Gerard Anderson, a Professor at Johns Hopkins University 

and Director of the Robert Wood Johnson National Program Partnership for Solutions: Better Lives for People with Chronic Conditions. 

In my testimony this afternoon, I want to focus your attention 

on the large number of Medicare beneficiaries with multiple chronic conditions and how this creates challenges and opportunities for 

disease management. Our analysis suggests that 63 percent of 

Medicare beneficiaries have two or more chronic conditions, and 

this is in contrast to only 5 percent of children and 20 percent of 

adults with multiple chronic conditions. 

So, when we think of disease management in the Medicare program, we need to be considering the complex, multiple conditions 

of a disabled and aged population. This is probably the most critical differences between disease management programs in the private sector and in the Medicare program. It is much easier to design a disease management program for a patient with a single 

chronic disease, such as diabetes, arthritis, or congestive heart failure than it is to design a disease management program for a patient with diabetes, arthritis, and congestive heart failure. 

If Medicare is going to pursue a disease management program 

strategy, then these programs must be able to demonstrate they 

are equipped to handle Medicare beneficiaries with multiple chronic conditions. In the working age population, multiple chronic conditions are the exception. In the Medicare population, they are the 

norm. 

Caring for Medicare beneficiaries requires that disease management programs make certain modifications. For example, and as 

we have heard today, many disease management programs rely on 

self-management as a backbone to their success. However, many 

Medicare beneficiaries are unable to self-manage because of their 

dementia or their problems with multiple chronic conditions. 

Medicare beneficiaries are very likely to see many physicians. 

For example, 1 in 5 Medicare beneficiaries sees 14 or more doctors 

during the year. Therefore, all disease management programs 

should have the information capability to allow physicians to know 

what other physicians are doing when they treat a patient in common. 

Now we know that doctors recognize the need for better care coordination. We, ourselves, conducted a national Survey of Physicians, surveying physicians who provide more than 20 hours of patient care per week. These physicians told us they were having difficulty coordinating care with other doctors and other health professionals. Two-thirds of them told us they were not well-trained in 

care coordination. The payoff to the Medicare program of better coVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
49

ordination is fewer unnecessary hospitalizations, fewer nursing 

home placements, and fewer drug-drug interactions. 

In our survey of physicians, 44 percent of them told us that poor 

care coordination results in adverse drug reactions; 36 percent said 

that it resulted in unnecessary hospitalizations; and 24 percent of 

them said it leads to unnecessary nursing home placements. 

Lack of care coordination is also a problem expressed by people 

with chronic conditions. We did a survey of Americans, and we 

found that about 16 million Americans go to the pharmacist every 

year only to be told of a drug-drug interaction. 

Now, think of the Medicare beneficiary going to the pharmacist, 

those fortunate enough to have drug coverage, they go to the drug 

store only to be told that their drug can’t be filled because another 

medication, probably ordered by a different doctor, is going to give 

them a potential problem. So what do they do? Do they fill it anyway? Do they ask the pharmacist? Do they call the doctor who ordered the prescription? Do they call their primary care physician? 

Do they phone a friend? What do they do? Disease management 

programs must be able to help this Medicare beneficiary standing 

at the pharmacy counter. 

An alternative to disease management programs for fee-for-service Medicare is to pay explicitly for care coordination. For example, 

our data suggests that cost utilization and poor outcomes really 

started about four or more different chronic conditions. So perhaps 

an enhanced payment, a monthly management fee, for example, 

would be appropriate for physicians who are willing to take on the 

clinical and possibly other service coordination activities for this 

group of complex patients. These physicians would have to meet 

certain criteria in order to be able to be eligible for payment; for 

example, having appropriate office staffing, information and communication systems. 

I would like to leave you with a fact and a concept. The fact is 

that two-thirds of Medicare spending is for Medicare beneficiaries 

with five or more chronic conditions, two-thirds of Medicare spending. The concept is that Medicare is a program for people with 

chronic conditions. It just doesn’t know it. 

[The prepared statement of Dr. Anderson follows:]

50

1The top 15 most common chronic conditions in Medicare are: hypertension; diseases of the 

heart (including coronary arteriosclerosis and congestive heart failure, cardiac disrhythmia, 

among others); disorders of the lipid metabolism (including hyperlipidemia and pure 

hypercholesterolemia among others); eye disorders (including senile nuclear sclerosis, senile cataract, glaucoma among others); diabetes mellitus; non-traumatic joint disorders (including osteoarthritis and rheumatoid arthritis among others); thyroid disorders (including hypothyroidism 

and thyrotoxicosis among others); COPD and bronchiectasis (including chronic airway obstruction and chronic bronchitis among others); diseases of the male genital organs; diseases of arteries, arterioles, and capillaries (including peripheral vascular disease, arteriosclerosis of extremities or aorta, among others); senility and organic mental disorders (including Alzheimer’s and 

senile dementia among others); spondylosis, intervertebral disc disorders, and other back problems; affective disorders (including neurotic depression, major depressive disorder among others); osteoporosis; diseases of the urinary system; viral infection (chronic); chronic ulcer of the 

skin; other connective tissue disease; other nutritional, endocrine, and metabolic disorders; other 

endocrine disorders; nutritional deficiencies; anemia, schizophrenia and related disorders; anxiety, somatoform, dissociative, and personality disorders; other nervous system disorders; cerebrovascular disease (including cerebral arteriosclerosis among others); asthma.

Statement of Gerard Anderson, Ph.D., Professor, Public Health and Medicine, Johns Hopkins University, Baltimore, Maryland, and Director, Partnership for Solutions, Johns Hopkins University, Baltimore, Maryland 

Good morning and thank you for inviting me to testify on the important topic of 

disease management in Medicare. I am Dr. Gerard Anderson, Professor of Public 

Health and Medicine at Johns Hopkins University, and Director of a Robert Wood 

Johnson Foundation project, Partnership for Solutions: Better Lives for People with 

Chronic Conditions. 

My role today is to provide this Committee with information about chronic conditions in the Medicare population and talk about some aspects of disease management that are particularly important to consider for Medicare. 

Chronic Conditions in Medicare

The top five chronic conditions in the Medicare population overall are: hypertension, diseases of the heart, diseases of the lipid metabolism, eye disorders, and 

diabetes.1 There is not a great deal of variability by age or eligibility status in the 

top disease rankings although there is some variation by age and eligibility status. 

• Senility and organic mental disorders are most prevalent in the 85 years and 

older population. They begin appearing among the top 15 conditions in the 

75–79 year old group. 

• Affective disorders are the fifth most prevalent group of conditions for the disabled population but rank 13th for the general Medicare population. Other 

conditions related to mental health appear more prevalent in the disabled 

population than in the aged Medicare population. 

• Asthma is one of the top 15 most common conditions among disabled Medicare beneficiaries but asthma is not otherwise very prevalent in the Medicare 

population.

51

General Prevalence and Cost

About 78% of the Medicare population has at least one chronic condition while 

almost 63% have two or more. Of this group with two or more conditions, almost 

one-third (20% of the total Medicare population) has five or more chronic conditions, 

or co-morbidities.

In general, the prevalence of chronic conditions increases with age—74% of the 

65 to 69 year old group have a least one chronic condition, while 86% of the 85 years 

and older group have at least one chronic condition. Similarly, just 14% of the 65–

69 year olds have five or more chronic conditions, but 28% of the 85 years and older 

group have five or more. Fourteen percent of the people with disability-related eligibility have five or more chronic conditions but 46% of the ESRD patients have five 

or more.


Insert offset folio 82324c.003
52

Average per beneficiary spending increases gradually with age but the variation 

in average costs related to number of chronic conditions is more significant. In 1999, 

the average per person costs for people with no chronic conditions was $160 (including the under 65 entitled), while the average per person cost jumps to $13,700 for 

people with five or more chronic conditions. The average per beneficiary spending 

across all ages and eligibility groups is $4,200. Per beneficiary spending increases 

more than 21⁄2 times between two and four chronic conditions, and nearly triples 

again from four to five chronic conditions.

People with one chronic condition are 15% of the Medicare population but only 

3.5% of the spending. People with 3 chronic conditions are also 15% of the population but 10% of the spending. People with 5 chronic conditions are 20% of the population but 66% of program spending.


Insert offset folio 82324d.004
53

2This number of unique physician visits is 6.7 when people who died are included and is 4.6 

when only outpatient settings among the age-entitled are included in the analysis.

Key Utilization

There is strong pattern of increasing utilization as the number of conditions increase. Fifty-five percent of beneficiaries with five or more conditions experienced 

an inpatient hospital stay compared to 5% for those with one condition or 9% for 

those with two conditions. 19% of Medicare beneficiaries have an inpatient stay. Inpatient days per thousand beneficiaries jumps from 335 days for those with one condition to over 7000 days per thousand among those with 5 or more conditions. The 

average days per thousand across all beneficiaries was 1944. 

In terms of physician visits, the average beneficiary has just over 15 physician 

visits annually and sees 6.4 unique physicians in a year.2 There is almost a fourfold increase in visits by people with five chronic conditions compared to visits by 

people with one chronic condition. The number of unique physicians seen increases 

almost two and half times for people with five or more chronic conditions relative 

to those with just one chronic condition. 


Insert offset folio 82324f.006
54

The average Medicare beneficiary fills almost 20 prescriptions. Within this average, the under 65 year old population fills on average 26.3 prescriptions and those 

65 years and older fill 19.1 on average. We found that beneficiaries with no chronic 

conditions fill an average of 3.7 prescriptions per year while those with any chronic 

conditions fill an average of 22.7. 

There is a strong trend in utilization of prescriptions when examined by number 

of chronic conditions.

• Average annual prescriptions filled jumps from 3.7 for all people studied with 

no chronic condition to 49.2 for people with five or more chronic conditions.

• Growth in usage between those with no chronic conditions and those with one 

chronic condition is over 180 percent—from 3.7 to 10.4 prescriptions filled.

• Usage grows 72% between one and two chronic conditions, from 10.4 to 17.9 

prescriptions filled.

• There is a 48% growth in average annual usage between four and five chronic 

conditions (33.3 to 49.2).


Insert offset folio 82324g.007 Insert offset folio 82324h.008
55

3This analysis includes only age-eligible beneficiaries.

Implications

So what does all this information mean for beneficiaries, the providers that serve 

them and the program overall. There are indications in the data that there is a lot 

of care provided to beneficiaries with chronic conditions—particularly those with 

multiple chronic conditions. There are also indications that the care may not be 

well-coordinated and that for beneficiaries with multiple chronic conditions there 

are adverse outcomes. 

For instance, we have found that as the number of chronic conditions increase, 

so too do the number of inappropriate hospitalizations for illnesses that could have 

received effective outpatient treatment (Ambulatory Care Sensitive Conditions). Per 

1,000 beneficiaries, these hospitalizations increase from seven for people with one 

chronic condition to 95 for beneficiaries with five chronic conditions, and jumps 

again to 261 for people with 10 or more chronic conditions.3

These poor outcomes are likely a result of poor care coordination among the many 

services used and providers seen. It may be that different providers are recommending conflicting treatments that result in poor outcomes including adverse drug 

events. It could be that one condition is receiving treatment, while other chronic 

conditions go unattended and then become acute episodes. 

There is other information to support this theory. In our surveys of people with 

chronic conditions and people with serious chronic conditions, we know that care coordination is a problem. 

We hired Gallup to conduct a national survey people with serious chronic conditions:

• 26 percent report receiving contradictory advice from different doctors in the 

past year

• 20 percent report they were often or sometimes sent for unnecessary or duplicate tests or procedures

• 23 percent report that they often or sometimes received conflicting information from different health care providers

• 25 percent report that they were often or sometimes diagnosed with different 

medical problems for the same set of symptoms from different providers

Our work at Partnership for Solutions shows that physician think that care coordination is both important and difficult to do. We conducted a national survey of 

physicians who provide more than 20 hours of direct patient care during the week. 


Insert offset folio 82324i.009
56

Almost two-thirds of these physicians reported that their medical education training 

was not adequate to the task of caring for people with chronic conditions and 17 

percent reported that they had problems coordinating care with other physicians. 

Most importantly, physicians in our survey think that poor care coordination leads 

to poor outcomes.

What Can Be Done to Change the Situation?

I believe policymakers, payors, and providers are increasingly attentive to the 

issue of chronic conditions. The Centers for Medicare and Medicaid Services (CMS), 

for example, is becoming more actively engaged in the issues of chronic care in 

Medicare, in part thanks to the efforts of Congress in the Balanced Budget Act of 

1997 and more recent legislation. 

As you know, CMS is implementing a 15-site Medicare Coordinated Care Demonstration that will provide case management and disease management services to 

different Medicare populations. An important aspect of these demonstrations is coordination with community-based services. There is also a more recent CMS call for 

proposals for a demonstration testing disease management strategies and the benefit of prescription drugs for beneficiaries with specific diseases (congestive heart 

failure, diabetes, and coronary heart disease). 

These demonstrations are important and will test the idea of integration and coordination in larger health care settings. I think there are issues in traditional disease management that need to be explored and addressed in order for them to be 

successful in the Medicare population whether these programs are applied only in 

demonstration or directly into the larger program. 

Disease management programs in Medicare must be able to demonstrate that 

they are equipped to handle Medicare beneficiaries with multiple chronic conditions. 

In the working age population, multiple chronic conditions are the exception, in the 

Medicare population they are the norm. Unlike the working age population, it is 

more common in Medicare to have patients who cannot adequately self-manage 

their care because of dementia or other problems. Many disease management programs rely on improving self-management. Any disease management program 

should have the information capacity to allow physicians to know what other physicians are doing to treat a shared patient, which can be particularly challenging in 

a program where the average beneficiary sees slightly more that six unique doctors 

in a year. Finally, disease management programs need to have protocols for handling people with multiple, complex chronic conditions. 

Beyond disease management, there are other options worth exploring that will improve care for Medicare beneficiaries with multiple chronic conditions. These options 

would be interim, modest steps in for Medicare program. We know a great deal 

about Medicare beneficiaries and their conditions, as well as the lack of coordination 

within the system that affects them. 

Unlike the traditional method of disease management, which targets enrollees 

with particularly high cost conditions, it may be useful to look at some of the people 

who are having the most difficult time with multiple medical conditions (whatever 

those conditions may be). We should focus on people with four or five chronic condiVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324

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57

tions who, for whatever reason, have difficulty self-managing one or more of their 

conditions. These are people who typically see many physicians, who fill a large 

number of prescriptions, who need an array of health care services, and who are 

at risk of poor outcomes if the clinical care and other care is not well-coordinated. 

For this group of target beneficiaries, there could conceivably be a physician payment adjustment that compensates physicians for the additional visit and other office time necessary to work with these patients. This type of adjustment could be 

available to all physicians treating any Medicare patient who meets the criteria. 

Unlike a broad-based payment available to all physicians, a more targeted approach could also be considered. Again, the target beneficiary population would be 

those with four or five conditions who have difficulty self-managing one of their conditions. This approach is modeled roughly on Medicaid Primary Care Case Management programs and would reimburse certain providers for complex clinical care 

management and coordination. In this model, a treating physician accepts added responsibility to coordinate the clinical care provided by all treating physicians. Beneficiary enrollment would be voluntary. 

Physicians could participate to the extent that they agreed to follow certain administrative procedures to track and monitor all aspects of a beneficiary’s care, act 

as a referral, receive and coordinate clinical reports from others involved in the patient’s care, maintain a comprehensive medical record and be available to provide 

greater consultation time surrounding a qualified beneficiary’s care. 

There are a number of payment options that could apply to this clinical care management model, two of which are used in Medicaid. One would be a monthly per 

patient management fee which is separate and apart from billing for specific services rendered. Another option is a monthly capitation to the physician for a range 

of primary care services and the care coordination activities. 

There are a number of design issues that would have to be considered in applying 

a PCCM-type approach to Medicare. Under either payment structure, the model 

would require some sort of provider designation such that participants would have 

to meet certain standards for care, quality, and administrative capabilities. Because 

only one provider can be paid for the clinical care management of a particular patient, more administrative capabilities may be required of the carriers. 

Another possible modest step for Medicare would be to develop a modified home 

visit benefit. The current home health benefit is for people in need of extended home 

nursing and personal care services and who meet a technical definition of ‘‘homebound.’’ The current 60-day episode of care payment reflects the extended nature 

of the benefit. There seems to be need, however, for another type of benefit that is 

not as extensive or intensive as the current home health benefit. 

Although current rules require direct physician supervision of staff seeing Medicare patients, direct supervision is not always practical. Physicians have said it 

would be helpful to clinical care if they could authorize their office nurses or physician assistants to periodically conduct home visits to check on patients. This benefit 

would be limited in scope to infrequent medical monitoring when a patient is not 

able to come to the office due to temporary or otherwise acute health conditions but 

allows the physician more direct knowledge of health status and functioning than 

a service delivered through a separate agency. 

There could be limits built into the design of any new benefit such as limiting 

the number of visits per beneficiary per year, defining the qualifications of practitioners who might make such home visits, restricting services within the benefit, 

and having the visits related to patient-specific events such as acute exacerbations 

of chronic conditions, or times when a patient’s treatments have been altered due 

to a change in health status. 

One other option, that is not mutually exclusive with anything else discussed here 

has to do with physician training and physician ability to care appropriately for people with chronic conditions. I note that the Medicare program is providing almost 

$8 billion in direct and indirect medical education support in 2002. For this money 

Medicare could ask the training programs to emphasize care coordination as part 

of their curriculum. The Medicare program could encourage analysis of the appropriate treatments for people with multiple chronic conditions, given that most Medicare beneficiaries have multiple chronic problems, this should be a priority.

Summary

Chronic care in Medicare is an important issue although a difficult one. Chronic 

conditions affect both program beneficiaries and program financing in significant 

and growing ways. 

It is important for the program to begin to take steps to address the growing disparity between what the program is currently designed to do and the changing 

needs of its beneficiaries. 

58

I have proposed some ideas today that we are working on at Partnership for Solutions. Indeed, there are many other ideas as well that need to be debated and refined. In general, I would ask Members to think about solutions to the current problems keeping in mind a few key principles or goals.

• Care coordination for people with multiple chronic conditions should be a top 

priority.

• Any new benefit or service should address the common problems of beneficiaries with multiple chronic conditions rather than address similar needs 

disease by disease.

• Any new benefit or service should be accessible to all beneficiaries and not 

be designed such that it only can be provided in special settings or by providers who are not widely available to beneficiaries.

I thank you for this opportunity and will be happy to answer any of your questions.

Chairman JOHNSON. Dr. Henschke? 

f STATEMENT OF CLAUDIA I. HENSCHKE, M.D., PH.D., PROFESSOR OF RADIOLOGY, WEILL MEDICAL COLLEGE, CORNELL UNIVERSITY, NEW YORK, NEW YORK 

Dr. HENSCHKE. Madam Chairman, thank you very much for 

having this important hearing and for including me. For the record, 

I am Claudia Henschke, Professor of Radiology of Weill Medical 

College of Cornell University. 

Each year, approximately 160,000 Americans die of lung cancer. 

That is more than 50 times the number of people who died in the 

attack on New York City in Washington on September 11. The 

overall cure rate of lung cancer is dismal, somewhere around 10 

percent. 

About 85 percent of the lung cancers found in our usual care 

today are of late stage, and their cure rate is essentially zero. None 

of the other major cancers—that is colon, breast, prostate—for 

which screening is provided has such a poor outcome. 

The prognosis of patients found with early stage lung cancer is 

much brighter. It is well accepted that early stage, Stage I, non 

small-cell lung cancer has a 5-year survival rate of over 70 percent. 

Thus, early detection is compelling as the probability of cure is significantly increased. 

However, today’s usual care results in less than 15 percent of the 

non small-cell lung cancer being found in early stage. Low-dose CT 

screening, on the other hand, finds about 80 percent of cancers in 

this early stage, and this high percentage has been well documented in studies in the United States, Japan, and Europe. This 

improvement is due to the many more detailed images obtained by 

the CT Scan, currently about 300 images per person and, thus, 

lung cancers can be found as small as a grain of rice, as compared 

to being recognized when they are the size of a grapefruit. This resulting dramatic shift from finding 15 percent of cancers in the 

early stage to over 80 percent, suggests a concomitant improvement 

in the cure rate. However, further follow up is still needed of the 

currently ongoing studies to confirm the exact amount of this improvement. 

Analysis of Medicare cost data has shown that the cost associated with treatment of late-stage lung cancer is at least twice the 

cost of treatment of early stage lung cancer. Thus, there is considVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00062 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
59

erable financial incentive for early detection as well. The charge of 

a low-dose screening CT is currently set at $300 at our institution, 

although in some places it is lower and in other places higher. This 

test is painless, the images are acquired in a single breath hold in 

less than 20 seconds, and this equipment is already available in 

private practice offices, community hospitals, as well as major medical centers throughout the country. 

In my opinion, the most realistic scenario suggests that the cost is less than $3,000 per life year saved, much less than the benchmark value of $50,000 for renal dialysis, and the worst-case scenario is still less than that benchmark amount. 

Today, under usual care, thoracic surgery is performed on many 

individuals with no cancer at all. By following the recommended 

management plan of nodules, either incidentally detected by chest 

X-ray or CT, many unnecessary biopsies and surgeries may be 

avoided by assessment of nodule growth on subsequent CT scan 

one or several months later. A rational lung cancer management 

plan of screening and standardized workup, in terms of actual nodule growth, provides the benefit of early diagnosis and early treatment and thus could save many lives. 

Current cost of care of the 170,000 annually diagnosed patients with lung cancer averages at least $50,000 per case, totaling more 

than $8.5 billion a year. The majority of these dollars are spent on 

late-stage treatment, with a very poor outcome. This does not include the work of many benign nodules, which often undergo surgery as well. 

We are most concerned about the currently planned National 

Cancer Institute (NCI) randomized trial for assessment of CT 

screening for lung cancer. It will be the most expensive screening 

trial ever planned, well over $200 million, and it will take at least 

10 years to complete. It is, however, unlikely to provide an answer, 

as it has the same design flaws that recently caused the firestorm 

about mammography screening. Our published article points out 

these fundamental flaws, and this article was widely endorsed. 

Even the front page article in the New York Times noted that 

our article caused the NCI to continue to endorse mammography. 

It is simply not rational for the NCI to embrace the design considerations when it comes to mammography and yet ignore these 

same considerations when it comes to lung cancer. Now is an opportune time to intervene before the planned trial starts, so as to 

avoid the misleading results and resulting confusion seen in mammography screening. 

However, despite numerous attempts for open discussion of the 

currently planned trial or design alternatives that are less costly 

and more efficient, we have been ignored. Such alternative designs 

allow for assessment of the effectiveness of CT screening as a part 

of a practice management plan. These designs provide the benefit 

of CT screening to all participants and allow for careful assessment 

of the improvement in the lung cancer cure rate and the associated 

costs. 

These alternative studies will lead to more definitive answers in 

much less time than the contemplated NCI trial. It is important to 

recognize that our group in New York has been doing lung cancer 

screening over 10 years. We have found that the costs to perform 

60

the trial being contemplated by the NCI to be at least six times the 

cost per patient as other alternatives. 

We think this is a very important topic for the Subcommittee to 

address and appreciate the opportunity to present our views. A 

thoughtful approach to the careful evaluation of the benefit and 

cost of CT screening now has the potential to save more lives than 

all of the other treatments developed for cancer to date. Such a 

benefit should not be delayed for years by a very expensive and 

probably inclusive trial. 

I suggest to the Subcommittee that the issue of cancer screening 

and how such screening is evaluated is the most important health 

care issue of our time. With our rapidly changing technology, we 

need to make rapid and accurate decisions regarding the scientific 

application of these potential screening tests. 

The prevailing methodology has overwhelming design flaws and 

an open scientific debate is essential. The confusion about mammography screening for breast cancer, despite seven large trials involving more than $500,000 women over 30 years make this point 

abundantly clear. 

Thank you. 

[The prepared statement of Dr. Henschke follows:]

Statement of Claudia I. Henschke, M.D., Ph.D., Professor of Radiology, Weill 

Medical College, Cornell University, New York, New York 

Each year, approximately 160,000 Americans die of lung cancer, that is more than 

50 times the number of people who died in the attack of September 11, 2001. The 

overall cure rate of lung cancer is dismal, somewhere around 10%. 

About 85% of the lung cancers found by our ‘usual’ care are late-stage, and their 

cure is essentially zero. None of the other major cancers (e.g., colon, breast and prostate) has such a poor outcome. 

The prognosis of patients found with early stage lung cancer is much brighter. It 

is well accepted that early stage (Stage I) non-small-cell lung cancer has a 5-year 

survival rate exceeding 70%. Thus, the emphasis on early detection is compelling, 

with the probability of cure significantly increased. 

Today’s ‘usual’ care results in less than 15% of non-small-cell lung cancer being 

found in Stage I. Chest x-ray screening alone resulted in less than 30% of cancers 

being found in this early stage. Low-dose CT screening, on the other hand, finds 

about 80% in this early stage and this high percentage has been well documented 

by studies in the United States, Japan, and Europe (1–6). This diagnostic improvement of the CT is due to the many more detailed images it produces of the lungs 

(currently over 300/person) as compared to the single chest x-ray image. The resulting dramatic shift in early stage cancers from 15% to over 80% suggests a concomitant improvement in the cure rate. However, further follow-up is still needed of the 

currently on-going studies to confirm the exact amount of this improvement. 

Analysis of Medicare cost data has shown that the cost associated with treatment 

of late stage lung cancer is at least twice the cost of treatment of early stage lung 

cancer. Thus, there is also considerable financial incentive for early detection. The 

charge of a low-dose screening CT scan currently set at $300 at our institution, although it may be as low as $200, although considerably more is charged in some 

settings. The test is painless, the images are acquired in less than a single breathhold, that is in less than 20 seconds and this equipment is already available in private practice offices, community hospitals as well as major medical centers throughout the country (7–9). In my opinion, the most realistic scenario suggest that the 

cost is less than $3,000 per life-year saved, the worst-case is less than $40,000 per 

life-year saved. 

Today, under ‘usual’ care, thoracic surgery is performed on many individuals with 

no cancer at all. By following the recommended management plan for nodules either 

incidentally detected on chest x-ray or CT, many unnecessary biopsies and surgeries 

may be avoided by assessment of nodule growth on a subsequent CT scan one or 

several months later. A rational lung cancer management plan of screening and 

standardized work-up in terms of actual nodule growth provides the benefit of early 

diagnosis and early treatment to over 80% of the individuals diagnosed with lung 

61

cancer as compared to that less than 15% as currently found and thus save lives 

now. 

Current cost of care of the 170,000 annually diagnosed with lung cancer averages 

at least $50,000/case, totally more than $8.5 billion. This does not include the workup of many benign nodules, which often undergo surgery as well. The majority of 

these dollars are spent on late-stage treatment, with a very poor outcome. 

We are most concerned about the currently planned National Cancer Institute 

randomized trial (RCT) for assessment of CT screening for lung cancer. It will be 

the most expensive screening trial ever planned (well over $300 million currently 

estimated) and it will take at least 10 years to complete. It is, however, unlikely 

to provide an answer as it has the same design flaws that recently caused the 

firestorm about mammography screening (10). Our published article pointed out 

fundamental flaws of the design and this article was widely endorsed (11–13). Even 

the front-page article in the Los Angeles Times noted that our article in part caused 

the NCI to continue to endorse mammography. It is simply not rational for NCI to 

embrace the design considerations when it comes to mammography yet ignore these 

same considerations when it comes to lung cancer. It is an opportune time to intervene before the planned trial starts so as to avoid the misleading results that occurred with mammography. 

However, despite numerous attempts for open discussion of the currently planned 

trial, or design alternatives that are less costly and more efficient, we have been 

ignored. Such alternative designs allow for the assessment of the effectiveness of CT 

screening as part of the practice management plan; these designs provide the benefit of CT screening to all participants and allow for careful assessment of the improvement in the cure rate and associated costs. These alternative studies will yield 

more definitive answers in much less time than the traditional trial being contemplated. It is also important to recognize that our group in New York has been 

doing lung cancer screening for over 10 years and we have found that the cost to 

perform the trial being contemplated by the NCI is at least 6 times the cost per 

patient as other alternatives. In addition, it will take more than 10 years to have 

an answer, which will most likely be misleading. 

We think this is a very important topic for the Committee and appreciate the opportunity to present. A thoughtful approach to careful evaluation of the benefit and 

cost of CT screening now has the potential to save more lives than all of the treatments developed for cancer to date. Such a benefit should not be delayed for years 

by a very expensive but probably inconclusive trial. I suggest to this committee that 

the issue of cancer screening and how such screening is evaluated is the most important healthcare issue of our time. With our rapidly changing technology, we need 

to make rapid and accurate decisions regarding the scientific application of these 

potential screening tests. The prevailing methodology has overwhelming design 

flaws and an open scientific debate is essential. Just looking at the confusion we 

have in regards to mammography where there have been no fewer than 7 large 

trials involving more than 500,000 women over 30 years makes this point abundantly clear. 

References

1. Henschke CI, McCauley DI, Yankelevitz DF, Naidich DP, McGuinness G, 

Miettinen OS, Libby D, Pasmantier M, Koizumi J, Altorki N, Smith JP. Early 

Lung Cancer Action Project: Overall Design and Findings From Baseline 

Screening. The Lancet 1999; 354:99–105

2. Henschke CI, Naidich DP, Yankelevitz DF, McGuinness G, McCauley DI, Smith 

JP, Libby D, Pasmantier M, Koizumi J, Flieder D, Vazquez M, Altorki N, 

Miettinen OS. Early Lung Cancer Action Project: Initial results of annual repeat 

screening. Cancer 2001;92:153–159

3. Kaneko M, Eguchi K, Ohmatsu H, Kakinuma R, Naruke T, Suemasu K, 

Moriyama N. Peripheral Lung Cancer: Screening and detection with low-dose 

spiral CT versus radiography. Radiology 1996;201:798–802

4. Sone S, Takahima S, Li F, Yang Z, et al. Mass screening for lung cancer with 

mobile spiral computed tomography scanner. Lancet 1998;351:1242–5

5. Sone S, Li F, Yang Z–G et al. Results of three-year mass screening programme 

for lung cancer using mobile low-dose spiral computed tomography scanner. 

British Journal of Cancer 2001;84:25–32

6. International Collaboration to Screen for Lung Cancer. Proceedings of the First, 

Second, Third, Fourth and Fifth International Conference on Screening for Lung 

Cancer. New York, NY (Website: http://ICScreen.med.cornell.edu.)

62

7. Miettinen OS. Screening for lung cancer: Can it be cost-effective? Canadian 

Medical Association Journal. 2000;162:1431–6

8. Marshall D, Simpson KN, Earle CC, Chu CW. Economic decision analysis model 

of screening for lung cancer. European Journal of Cancer 2001;37:1759–67

9. Wisnivesky JP, Mushlin A, Kimmel M, Sicherman N, Henschke CI. Cost-effectiveness of baseline low-dose CT screening for lung cancer. Chest 2002. Accepted

10. Kimmel M, Gorlova OY, Henschke C. Randomized controlled trials for CT 

screening for lung cancer: The impact of protocol nonadherence. Submitted

11. Miettinen OS, Henschke CI, Pasmantier MW, Smith JP, Libby DM, Yankelevitz 

DF. Mammographic screening: No reliable supporting evidence? Lancet 

2002;359:404–5

12. Miettinen OS, Henschke CI, Pasmantier MW, Smith JP, Libby DM, Yankelevitz 

DF. Mammographic screening: No reliable supporting evidence? 

www.Lancet.com Feb 2, 2002

13. Miettinen OS, Henschke CI. ‘‘Method appears appealing’’ but ‘‘analysis is 

thank you all for your testimony. 

Chairman JOHNSON. Thank you very much, Dr. Henschke, and 

flawed’’! Lancet 2002;309:70613.ab

f Dr. Wennberg, I have been interested in your work documenting 

the really tremendous variations across the Nation in patterns of 

practice and the lack of any evidence of parallel variations in quality. Yet, solutions to this irrational and costly variations have been 

difficult to develop. 

Do you think that disease management, because the protocols 

are developed through professional experience based on outcomes 

research and best practices, could help us not only establish a more 

uniform approach to core illnesses nationwide, but reduce the costs 

in some regions without compromising quality? 

Dr. WENNBERG. That is quite a question. I believe that the evidence seems to be pretty clear that when we have scientific consensus that something should be done based on clinical trial evidence, as the best quality of evidence, and that particular intervention does not involve tradeoffs that imply preferences, that disease 

management programs have definitely shown themselves capable 

of getting the beta blockers out, getting the A1C hemoglobin done, 

and so I think that we can count on a quality improvement along 

those dimensions. 

The cost issues are more complicated. First of all, the costs that 

we see that are associated with the variations in regional costs 

have nothing to do with beta blockers, failures to do them, and so 

forth. It has to do with the intensity with which chronically ill people are treated across the board. I have always been aware that 

there is a balloon effect in health care, namely, if you improve the 

way that a certain subgroup of the population is treated, the rest 

of the population is likely to get the spillover effects of the supply 

side problem. 

For example, we have observed in some of our studies that patients have engaged in decision support systems for shared decision 

making will become more conservative in their treatment choices, 

but the overall workload of surgery in the region continues at the 

same level. In other words, other patients that aren’t involved in 

the study are getting it. So, I am concerned that, for example, a 

successful disease management program may be apparently working, in terms of reducing overall cost, but unless the control group 

is carefully defined, namely, as those others at risk of receiving the 

63

care that is in that region that isn’t being used by that population, 

you can get a very different opinion on that. 

I think that, and I said in my testimony, that I think ultimately 

the cost issues are going to have to come back to an open debate 

about what is an efficient capacity of the system, and some of our 

systems have just twice as many resources in them as others do. 

Until we come to terms with that, we will continue to see regional 

variations. 

As we continue to increase the capacity of the system by training 

more physicians and building more technologies, we can count on 

the costs going up, and the reason is because this kind of care is 

not driven by science. It is not driven by well-articulated medical 

theories about intervention. It is done basically by the simple hypothesis or the simple fact that if you have twice as many physicians in a region, you have twice as many office hours to offer, and 

you therefore have twice as many visits, and visits associated with 

all sorts of other kinds of activities. 

Chairman JOHNSON. I appreciate what you are saying, and the 

significance of your response. On the other hand, as Dr. Anderson 

says, Medicare is increasingly going to be about managing chronic 

illness and is—— Dr. WENNBERG. Right. 

Chairman JOHNSON. A chronic disease management program, 

though we don’t have chronic disease management capability. As 

we get that capability in place, and we begin to manage those 

chronic illnesses, and then if we do, as you suggest in your article, 

which is a little different than any disease management demonstration I am aware of, look at end-of-life illness management 

from the same point of view, then I think we are going to, at a very 

profound level, change the way we practice. 

Now that brings me to my second question. Disease management 

does depend on patient participation. A number of you had really 

marvelous, pithy ways of describing this. Dr. Lord, you said supported self-management in a systemless world and the supported 

self-management, and then you did point out that somebody with 

Alzheimer’s can’t self-manage. This issue of self-management, outside of Medicare you can create systems in which the right of physician to educate a patient about self-management can be absolute, 

and it is no surprise that it is outside of the fee-for-service reimbursement system of Medicare that this capability for physicians to 

act differently in order to get patients to act differently has developed. 

All of you know perfectly well our coding process, all of the experts we have involved in coding, all of the complexities of coding, 

we can’t even—and I see my colleague, Mr. McDermott isn’t here, 

but we were on the phone when we asked experts who have been 

in the Medicare program for 10 years what the difference between 

a comprehensive physical is and a detailed physical, and they can’t 

tell you till this moment. 

I spent a year and a half trying to get my intermediary to figure 

out what partial hospitalization is versus outpatient mental health 

for seniors, and we can hardly do that. 

Now, the idea that Medicare could define, and one of you mentioned a management fee, could define a management fee or could 

64

define a physician visit education component in a fee-for-service 

system that whether it is in government or in the private sector 

focuses on encounters is, in my mind, simply not possible or else 

we cannot wait for it. If we did, it would be so complicated that 

there would be mostly war over whether this was or was not eligible for a management reimbursement. 

That is one of the reasons why I am so focused on systems. I 

brought systems out in terms of technology, and some of you talked 

about the need for that, but this issue of patient involvement goes 

very directly to physician activity. If reimbursements don’t encompass that activity, you will never get management education. In the 

disease protocols that I am familiar with, that management education function moves from the physician to the disease management company, who then educates the patient in the guidelines of 

the doctor. 

So, I don’t know that you can do this through fee-for-service. I 

don’t really see any opportunity to do that because while you can, 

a system can contract management or can develop management 

within its capability, I don’t see how Washington can develop the 

definition of management, and how the complexity of our coding 

system for a moment will enable us to reimburse for this in a way 

that the Inspector General won’t destroy in the course of events. 

So, I would like for you to comment on that issue of physician 

involvement and the degree to which disease management does require a different attitude toward physician education of the patient. 

Dr. WENNBERG. Me? 

Chairman JOHNSON. Yes, and anyone else who wants to comment as well. 

Dr. WENNBERG. Well, let me say that I am not here defending 

the current fee-for-service system. The questions about how that 

payment system is organized is really what a lot of this debate is 

all about, and I would think some way of paying for the management of chronically ill people, where we have organizations that 

are responsible for that, can work in many ways. For example, at 

least several of the organizations that are represented around this 

table have fully salaried physicians and have health care organizations that are already serving defined populations. The question is 

how do we modify the current payment systems to make it work. 

Capitation is one strategy, but capitation has always been presented as a competitive model, and many parts of the country there 

simply is only one system, and we have got to figure out somehow 

how to make that system work. Clearly, the kind of models we are 

talking about, patient education, group visits, is a wonderful idea, 

and it works, but you can’t bill for it. In fact, it is very efficient, 

and it breaks this kind of supplier-induced demand problem between the doctor supply and that because they are suddenly no 

longer being paid just for doing piecework. That is where we need 

to get to. 

So, the question is how can we get there? In our proposal that 

we put in the Health Affairs article, we basically wanted to allow 

certain health care organizations that are intimately involved now 

in chronic disease management, in fee-for-service environments, to 

see if they could not come up with some suggestions for modificaVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
65

tions in the fee structure that would support the fundamental reforms which, Madam Chairman, I hear you asking for. 

Chairman JOHNSON. Thank you. Dr. Lord? 

Dr. LORD. Several comments. First, with respect to self-management, I think one of the things that we have been focused on, in 

terms of program design, and an area that Jack and I have collaborated on for the last several years, is trying to level the ball field 

so that people have a fair shake in the health care system, understanding their disease and understanding their choices. 

I think if anybody on the panel holds up a hand-mirror about 

their experiences in the system or their family’s experience, it is 

confusing. It is very confusing when you are sick. It is even more 

confusing and scary when you are facing a fateful decision. How 

can we help people at that time of absolute need just deal with the 

confusion and the lack of ‘‘systemless,’’ the combination of fragmentation of care, coupled with what was described by Dr. Anderson as multiple co-morbidities? It creates real problems and challenges for folks. 

Now the world has changed. The world has changed from a technology perspective, the world has changed from access-to-information perspectives, the world has changed in a number of ways that 

we can work with, collectively and individually, with people who 

are facing significant illness. I think there are opportunities within 

the Medicare structure to create a fee-for-service model that would 

pay for someone to serve as a concierge or coordinator or adviser 

to people who have chronic illness. It may be another function that 

hasn’t been defined yet in the health care system, but it is something that if you think about people’s experience, they really need. 

It may be unreasonable to expect that is only a physician’s role out 

into the future, and I believe, through some of the demonstration 

projects that CMS is presenting, we have an opportunity to try 

some different approaches that really help deal with a very common and a very human issue that all of us have touched or faced 

somewhere in our family’s lives. 

Chairman JOHNSON. Dr. Anderson? 

Dr. ANDERSON. In the long run, I agree with you that we have 

got to change the payment system, but in the short run, we have 

to deal with the existing fee-for-service system. So, what I would 

take a look at is the Medicaid program, which has been running 

primary care case management programs quite successfully for a 

number of years, and has dealt with the payment issues with this, 

has dealt with the coding issues in the primary care case management program. So there is a model for Medicare to take a look at 

to do many of these functions. 

The way I would set it up in the Medicare program is to take 

a look at people that had four or five different chronic conditions, 

different chronic conditions. These people see an average of 10 to 

12 doctors in the course of the year. They need their care coordinated desperately. 

The care that is actually being provided to them is not very good, 

as my example about the prescription drugs illustrated, but I could 

also give you examples about unnecessary hospitalizations or unnecessary nursing home patients. There would be savings from 

care coordination if we could figure out a way to get these 10 docVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
66

tors to talk to each other. Part of it is information system, but we 

need a primary care physician to be responsible for saying, ‘‘What 

is the endocrinologist doing, what is the cardiologist doing for my 

patient?’’ To get that to happen, I think you need to pay them. 

Chairman JOHNSON. Those are very interesting comments. I 

think they underestimate the problem of getting the information 

from all of the people involved when you have got a lot of chronic 

illnesses, and I think they completely ignore the liability concerns. 

If you have Medicaid, you are sheltered from liability. I don’t know 

who would want to take the liability on their shoulders of coordinating the care, when you have multiple chronic illnesses, and possibly disagreeing with one of the doctors so that you can better integrate the care. 

So, I think this is a pretty big and difficult issue. It is one that 

systems are solving themselves. So, right now we can reimburse 

the system, and the system can do it. In the long run, of course, 

we have to have a way for the whole system to do it, but I feel real 

urgency about pressing ahead and encouraging systems that can 

take on this responsibility to move rapidly because this is—I agree 

with you—this is already a chronic care program. 

Dr. Hillman? 

Dr. HILLMAN. Yes, I agree completely with you. I think to rely 

on physicians, first of all, to educate patients is a misuse of health 

care resources. Physicians have no training in patient education, 

patient behavior paradigms, that type of thing. It is just not part 

of physician training. 

Likewise, to ask physicians to be coordinators of care is also 

probably a misuse of their capabilities. I think that there are other 

types of health care providers that can provide these functions as 

long as they have coordination in terms of having an electronic 

medical record. For example, that is portable from site-to-site or 

physician to physician. Those information systems allow a case 

manager, such as a registered nurse, well within their scope of 

practice, to perform these functions. 

I don’t think that it is going to be beneficial to put an individual 

in a role where they are going to be adversarily questioning other 

people’s judgments. If the system keeps the care in mind itself, as 

opposed to the encounters in mind, is what our current reimbursement system does, I think we will do a lot better. 

Chairman JOHNSON. Mr. Stark? 

Mr. STARK. Well, I thank you all for taking the time. 

One of the things that troubles me—the Chair asked if I would 

yield to——

Chairman JOHNSON. Let me recognize Mr. Houghton, since he 

has to leave and has taken a very, very great interest in the issue 

of lung cancer detection. Congressman Houghton. 

Mr. HOUGHTON. Thank you very much. 

Listen, I am sorry to do this, Pete. Thank you very much for your 

letting me—I have just got to get out of here——

[Laughter.] 

Mr. HOUGHTON. It is not because I want to, but because of 

something else. 

Dr. Henschke, if I understand it, you have got two points; one, 

get it early, and then don’t go into these expensive trials which are 

67

going to push off the inevitable. I would like to ask you really two 

questions. The first is this. 

We talk about lung cancer, and then obviously you get into the 

idea of smoking. Smoking inevitably enters the discussion, and 

don’t smoke, and you won’t get cancer. Do you agree with this? 

Also, why should we put money into research on early screening 

detection, when perhaps it would be better spent on prevention, 

and cessation programs and things like that? 

Dr. HENSCHKE. Well, I certainly agree that we should put a lot 

of effort in smoking cessation programs particularly in those of 

younger individuals. However, there are 50 million currently smoking individuals in this country and some 50 million former smokers. Even if we stop smoking today, if no one smoked, we would 

have lung cancer deaths for a considerable time, 20 or 30 years in 

the future, and we should do something for these individuals, and 

we can save many of those lives. 

So, we think that screening should go hand-in-hand with smoking cessation, that actually you can give them a lot of information, 

and people who come to screening programs also are interested in 

stopping. So, these two should go hand-in-hand. 

Mr. HOUGHTON. The second question, and I will be brief, there 

was a report presented to the National Cancer Institute in August 

last year that presents really a very pessimistic picture. It talks 

about lack of progress in research, and high-death rate, and 

unenthusiastic attitude of doctors, and researchers, and other 

health care providers, and also total lack of communication and cooperation among those involved in treating and managing the disease that you might want to comment on that. 

Dr. HENSCHKE. Well, I was a participant of that program 

project review for lung cancer, and, yes, lung cancer has, there has 

been a pessimistic attitude in these past years, but now with 

screening really making its changed the attitudes. At that meeting, 

there was emphasis on collaborative efforts, there were a whole set 

of priorities that were detailed that are very good priorities. The 

problem is that funding for lung cancer has been much less than 

funding for the other cancers, even though, for example, it kills 

more than seven times as many cancers—it causes seven times as 

many deaths as breast cancer, it gets about a tenth of the funding 

or so. 

So, the pessimism is more due to the lack of funding, and we do 

have now a lot of information that we could obtain about the biology and the innovative treatments that could be used in view of 

these new techniques. So, there is a lot of excitement, there has to 

be funding, and there has to be implementation of those priorities 

that were set by that report. 

Mr. HOUGHTON. Thank you very much. Thank you, Madam 

Chairman. 

Chairman JOHNSON. Thank you for being with us today, Congressman Houghton. Congressman Stark? 

Mr. STARK. Well, thank you again, as I said. I am glad to see 

that the Marshfield Clinic, it used to be the Doege Clinic? 

Dr. HILLMAN. It used to be the Dayton Clinic? 

Mr. STARK. Dr. Doege? 

Dr. HILLMAN. Doege, yes. 

68

Mr. STARK. I grew up next door to him in the summers, a long 

time ago. He is no longer—Marshfield is easier to spell. 

I am troubled, and I want to say at the outset that Dr. Lord had 

nothing to do with this, but what was absent in his testimony and 

what can happen in case management as a result, I suppose, of 

clinical strategy and innovation, was the Chipps case that Humana 

was involved with, where they terminated 100 critically ill children 

to save $78.5 million for the Humana program. Fortunately, the 

court decided to whack them with punitive damages for $78.5 million, but that was overturned. My question is of concern of might 

this be used, and I would be more concerned in the for-profit part 

of medical delivery than I would in the not-for-profit because the 

incentives would not be so high there is how do we prevent mischief? 

If you begin to identify people with chronic diseases, as I presume you would in the workplace before they mature into Medicare, do we run the risk of tremendous selectivity, companies like 

Humana or Aetna, Marshfield Clinic, Johns Hopkins saying we 

don’t want you or finding whatever ways they can to discourage 

these people? Are we all going to have the red mark of ‘‘C’’ on our 

foreheads saying we are chronic and therefore become the great unwashed of the people running around hat in hand looking for 

health care. 

Now, this is a panel of physicians, and I am far more comfortable 

with your training and approach to taking care of me than I am 

your company treasurer or whomever may make these decisions at 

some point to, say, terminate or design recruiting or advertising 

programs to subtly select. There is a new health care gang out, 

Sterling, I guess it is, who does a fee-for-service Managed Care 

Plus Choice. They have got some cute tricks—50-percent co-pay for 

durable medical equipment. What does that tell you? Nobody in a 

wheelchair or walker should apply or 50-percent deductible, as 

many have for mental illness procedures. 

I guess I am worried that this could turn on us if we are not 

careful, and that is my question, how do we prevent and, Dr. Lord, 

I impugned your company here by sort of indirection, and I will let 

you respond, but I am concerned that we not begin, and the privacy 

issues come up this morning. I don’t think that is as bad for a 

Democrat that is probably blasphemy, but I really think that we 

have got to sacrifice some privacy to get the kind of research that 

I would like to see in outcomes research done. 

How can we assure that this won’t just kind of categorize the 

people we end up getting back to the Hansen’s disease farms and 

sort of putting all of these Medicare critical people off in one corner, and then we will have trouble getting them into the best of 

the plans? 

I am sorry, Dr. Lord, go ahead. You were not there. I want to 

stipulate, you did not come aboard until this case was behind you. 

Dr. LORD. First of all, the Chipps case really has nothing to do 

with today’s testimony, but beyond that, I think in terms of the disease management programs that we provide, we provide to all 

beneficiaries, regardless of plan design and regardless of program—

government, commercial, TriCare, programs that are provided, as 

my 20-year-old daughter would say ‘‘disregardless’’ of how people 

69

have shown up at our doorstep and provide a set of services that 

really are intended to try to get rid of waste that exist in the system. 

I think the theme-line, from Jack through all of the panelists 

here, is that there is waste and inefficiency in the system because 

it does not act like a system. The more that we can do a few things, 

one, help provide information, coordinate services, allow people to 

be sovereign in terms of making some choices that are right for 

them, which in many cases people have been disenfranchised of 

choice, how can we do that and how can we make that work on a 

systematic base? 

I believe that it is the incentives that exist for, for-profit enterprises, nonprofit enterprises, but most importantly people, that we 

somehow rationalize the kinds of care that we provide and allow 

the fact that we live in a world with a lot of abundance and don’t 

live in the paradox of abundance that creates waste and get rid of 

the waste that exists in the system today. 

Dr. ANDERSON. I think it is not that most Medicare beneficiaries have one ‘‘C’’ on their forehead, Mr. Stark, but it is probably two or three or four ‘‘C’s.’’ We have essentially got to deal with 

the issue of multiple chronic conditions, not just the single ‘‘C,’’ and 

we have got to deal with it in two different ways. In fee-for-service 

Medicare, I think we do have to pay for coordination of care. If we 

don’t pay for it, we make the person or their care giver the de facto 

care coordinator. I think in many cases self-care coordination is 

fine, but I would like to have the advice and really the guidance 

of a physician in many cases, and I think I, unfortunately, need to 

pay for those types of activities. 

Mr. STARK. I would like that. I mean, as a patient, I would 

rather talk to one of you guys than I would some kind of social 

worker who has been trained to tell me the kind of stuff I can find 

on the Internet. I am not very comfortable or I wasn’t before I went 

to see Dr. Walsh reading about it on the Internet, and he is not 

the most charming, bedside manner guy in your institution, I 

might add, but, nonetheless——

Dr. ANDERSON. Technically, very good. 

Mr. STARK. Yes, thank God, but nonetheless, what I am suggesting is that we patients would just as soon talk with the guy 

that has got the knife, what is going to happen, Doc? Don’t send 

me over there to somebody who is going to just give me the stuff 

I can read. I want to know what are you going to do relative to me. 

Dr. ANDERSON. I am taking into account your specific circumstances, because your collection of chronic conditions that you 

have, which is different from the next person, and you have got——

Mr. STARK. Does Marshfield still—Dr. Hillman wants to say 

something—does Marshfield deal with fee-for-service? Do you take 

fee-for-service patients? 

Dr. HILLMAN. Yes. 

Mr. STARK. I guess what I want to ask, and then you can say 

whatever you want, is would Dr. Anderson’s idea of having a fee, 

a physician whose job it would be to be a coordinator work in your 

system, for example? 

Dr. HILLMAN. Most definitely. Just to reinforce that, I forgot 

which management guru said that you can’t manage what you 

70

don’t measure. I can tell you 100 percent that what you don’t reimburse, you certainly aren’t going to measure, and you are certainly 

not going to manage, and we have to do that. 

Marshfield Clinic is a 501(c)(3) clinic, and as a public trust, we 

see everybody. One of the things that you had asked a question before of Mr. King-Shaw was why couldn’t physicians be required, for 

example, to follow clinical practice guidelines and provide care 

plans in order to participate in Medicare? I can tell you that, for 

example, in our area, which is one of the under reimbursed areas 

in the country, that our competitors would welcome that because 

they would say, ‘‘Hey, look. We are no longer qualified to take care 

of Medicare patients. Ship them to Marshfield,’’ which is what they 

do right now anyway. 

That is why we have had to develop the systems that we have, 

and that is why we have made the investment to develop an electronic medical record, to develop the epidemiological database that 

we have, basically, so that we can take care of people in a more 

effective manner. 

I would also point out one other thing. You may feel better right 

now, and I agree that if you were going to have a surgery or a specific care intervention that is dangerous to you, you would feel 

more comfortable talking to a physician, but the majority situations 

that arise in chronic care aren’t related to that. They are related 

to behavioral changes, to monitoring the effectiveness of dosage 

changes in the medications, and those things don’t need to be done 

by a physician. We are wasting a huge amount of health care resource by not employing the right type of provider to provide those 

services. As the Anticoagulation program that I detailed in my testimony showed, those things can be done by nurse case managers, 

and the patients like it a lot better. It is done on a 24-hour basis, 

it is done when it is convenient for the patient. It is backed up by 

another nurse call center that has access to the patient’s medical 

records so that people know what is going on, not just from their 

physician at Marshfield, but among any of the other 38 regional 

centers that Marshfield Clinic provides care at, many of which are 

in disproportionately socioeconomic-challenged populations. 

Mr. STARK. I grew up there. 

[Laughter.] 

Dr. HILLMAN. Well, you made it out. 

[Laughter.] 

Mr. STARK. I miss it. I am sorry. Thank you, Madam Chair. 

Chairman JOHNSON. Thank you. That was very interesting. 

Congresswoman Thurman? 

Mrs. THURMAN. Thank you. 

Dr. Anderson, in reviewing and looking over the testimony by 

Ruben King-Shaw, it struck me that many of the demonstration 

programs that they are embarking on in fee-for-service seemed to 

concentrate on maybe one specific illness, as versus what you are 

suggesting is I think, which I actually think is a very good idea, 

it seemed to me that where you would want to start is where those 

are four or five so that you could have a real idea of how you were 

managing. 

I think, for the most part, a doctor that deals with somebody 

with CHF for whatever, I mean, pretty much manages that patient. 

71

So, the real management of disease is when you are talking about 

many kinds of disease that would be a problem. So, I would hope 

that maybe one of the messages this Subcommittee could carry 

back in a demonstration issue is to maybe look at a demonstration 

where you are looking at a patient with several chronic conditions, 

as versus one. That does concern me a little bit. I think that is a 

very good idea. 

The liability issue, and, of course, we have all been through this 

Patient’s Bill of Rights, and this issue and that issue, but, Dr. 

Lord, because you do this now, that is what your company does is 

supposedly manages for managed care, and how do you work 

through this? I mean, doctors, maybe you as an individual or as 

Humana can’t be held liable, but the fact of the matter is your doctors and others could. So, I am not sure that I understand this liability issue when it comes to a managed or when you are trying 

to manage different disease management. I kind of got lost in that 

argument there. Can you help me a little bit here? 

Dr. LORD. Sure. The disease management function is to support 

the care between practitioner and patient, and it is to provide access to resource, in terms of information for both groups as they 

enter what Dr. Anderson described as a very complex world. Very 

few people have just a single disease to contend with. They have 

multiple pieces of challenges going on clinically, as well as in their 

family life, as well as economically, that all make a full picture. 

The only person who could be making the kinds of decisions that 

are right for that individual are, first, the individual and, second, 

with the advice of their practitioner, whether that is a physician 

or another type of practitioner. 

What we have tried to do is get out of the management business 

and be in a position to provide best-in-class information to both the 

patient, as well as to the practitioner, to provide information that 

helps reinforce things that the patient should be doing. 

For instance, if a patient is receiving a drug after a heart attack, 

they need to take that drug on a regular basis. We can send out 

an automated reminder that lets them know they haven’t gotten 

the refill. Why can we do that? In our commercial programs, our 

pharmacy benefits manager lets us know within about 24 hours 

every time we fill the position. We can go ahead and use automated 

systems and use some logic around our electronic data warehouses 

to provide that information to people. 

Now, we are not prescribing the drug, we are reminding the individual about their care. Health plans are not care providers. They 

are not hospitals, they are not doctors, but what we can do is a 

much better job, and what we are trying to do is a much better job 

of getting information back to people. We are the hub and spoke 

of a lot of the transactions that take place in the health care system. We know and we have insights about what works for people 

and what are best practices, and we can serve that up in ways that 

both practitioners can take advantage of, as well as patients. I 

think that really is the focal point for our business as we go forward, and clearly it is the insight that we want to try to give to 

people who face the complex problems that Dr. Anderson described. 

Mrs. THURMAN. It is not insurmountable to believe that Medicare fee-for-service could do very similar. I think that Dr. Anderson 

72

mentioned that. Dr. Hillman, you seem like you want to just jump 

right in here. Did you have something you wanted to add to this? 

Dr. HILLMAN. Yes, and I will be a little bit careful because I 

am going to be a little bit provocative. 

Mrs. THURMAN. We love it. 

Dr. HILLMAN. I think that information is very helpful, but, 

quite frankly, information is of limited use. For example, I don’t 

know how many people know how many teeth they have in their 

mouth. You don’t need that information to know that you have to 

brush them twice a day. 

When you have multiple chronic diseases, and you have multiple 

facets of information about complex systems and drugs, and a lot 

of these people that are seeing 5 and 10 physicians are taking 15 

and 20 medications and that type of thing. There is only so much 

information that you are going to be able to pass on to something 

that they are going to be able to act responsibly with before they 

become overwhelmed, dejected, and decide to forget the whole 

thing. That is why I think that case management is a very critical 

part of this. 

The other thing that I think has been ignored by it—— Mrs. THURMAN. Earlier you thought this couldn’t be done in 

one of your responses. So, I am curious to what you think case 

management is. I got the indication that you thought only a doctor 

could do it or—— Dr. HILLMAN. No, quite the opposite. 

Mrs. THURMAN. Okay. 

Dr. HILLMAN. I think a physician doing case management is 

not an appropriate use of health care resources. That is why I detailed the Anticoagulation program, because it is basically a nursing program that has medical direction, has prescribed protocols. 

All of the interactions that the nurses have with patients are documented in the electronic record, which is confirmed and electronically signed off with the providers, but they all work on very specific guidelines. 

The point about that program that I think I failed to make in 

my written testimony is that that case manager for anticoagulation 

basically is acting as a chronic disease manager, because when we 

looked at hospitalization rates between the control group, the usual 

care group, versus the group that was in the Anticoagulation Service, we looked at global hospitalizations. The difference there was 

huge, and I have the numbers in the written testimony. The reason 

we looked at global hospitalizations is because we found that in the 

education process or the behavioral training or development process of patients, that we were able to get them to call the nurses 

the minute something else changed in their health care. By getting 

that information sooner, the nurse was able to advise them on 

what to do either about their medication or about seeing a provider 

on an outpatient basis or adjusting some other aspect of their regimen that allowed them to avoid those hospitalizations. 

I agree with basically everything that Dr. Anderson said, but we 

actually have a program that basically, with a little bit of expansion, accomplishes what he said. Unfortunately, we get no reimbursement for this whatsoever. While we have 1,000 patients enrolled in this program right now, and many of those patients inciVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00076 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
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dentally have a trial fibrillation and heart valve replacements that 

have been caused by chronic diseases related to sachemic or coronary artery disease, diabetes, and hypertension. That is the value 

of the case manager. 

Mrs. THURMAN. I would just say, based on the testimony on 

page 5, it says they are talking about giving M+C organizations 

that meet specific quality indicators extra payments, recognizing 

the cost of successful outpatient management. In this case, it was 

just the CHF. So, it sounds to me like they are noticing it in one 

area, but it should be recognized, I guess, in the fee-for-service for 

any kind of demonstration program we would do there as well. 

Dr. HILLMAN. I agree with you 100 percent. 

Mrs. THURMAN. Thank you. 

Dr. HILLMAN. That is why we didn’t participate in that disease 

management demonstration. It was too narrowly focused. There 

was a huge risk associated with it, in terms of its budget neutrality, and you were required to provide medications, and I think 

that is a fair criticism of that demonstration project. I don’t really 

see that we are going to get much out of it, quite frankly. 

Mrs. THURMAN. Thank you. 

Chairman JOHNSON. Thank you, Karen. 

There have been some questions raised. To just pursue Karen’s 

questions in two aspects. First of all, I want the record to reflect 

very clearly that all of you at the table who are involved in disease 

management programs are providing disease management services, 

whether they are sort of narrow and computer-driven or whether 

they are more interactive and have a human being there actually 

doing a lot of following, and advising and communicating, and that 

Medicare does not reimburse you for them, for that aspect of your 

service. 

I thought it was very interesting that you pointed out in Mr. 

King-Shaw’s testimony, and I noticed it, too, that in the demonstrations, they are going to pay for this function, but in the Choice 

plans. It is one of the ways in which the Choice plans bear costs 

that Medicare doesn’t bear, and it is one of the reasons I am so intent on at least reimbursing them at 100-percent fee-for-service because if they are going to perform, they have additional costs they 

have to bear. 

I was very interested, Dr. Hillman, with your description of the 

amount of technology you have put in place just to have electronic 

records available throughout the very large serving area of your 

system, which I believe is multi-county, is it not, in Wisconsin? 

Dr. HILLMAN. Yes, it is. 

Chairman JOHNSON. It is a big system over rural and urban 

areas, but without that technology, you could not possibly implement disease management protocols, correct? 

Dr. HILLMAN. That is correct. Here is the perverse incentive of 

the whole thing. Our reimbursement for Medicare fee-for-service is 

so low, about 70 percent of our costs, done by the CMS methodology. We have to raise our commercial fee-for-service rates, which 

increases, indirectly, the number of uninsured, which indirectly increases the number of people that are on Medicaid, which indirectly causes even lower fee-for-service payments on the services 

that we started providing to begin with. This is an untenable situaVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00077 Fmt 6633 Sfmt 6602 E:\HR\OC\A324.XXX A324
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tion, and the only reason that you have it at Marshfield Clinic is 

because we are so mission-driven and passionate about delivering 

the quality-of-care that we do, that we have to believe, at some 

point in time, what goes around comes around. 

Chairman JOHNSON. You are the only system I know of nationwide, and that doesn’t mean there aren’t any, it just happens to be 

that the others haven’t come to my attention, that is systemically 

involved in disease management with no reimbursement and serving a very low-paying, but also a needy population. 

Mr. Stark? 

Mr. STARK. Are your Medicare fee-for-service rates lower than 

Wisconsin’s Medicaid? I am curious. I don’t—— Dr. HILLMAN. No. Despite the fact that we get probably I think 

it is 50 cents on the dollar for our Medicare reimbursement, Medicaid is actually a little bit less, although—— Mr. STARK. Does anybody pay a dollar? 

Dr. HILLMAN. No, but they pay a whole lot more than 50 cents 

on the dollar. 

Mr. STARK. Do you own your own hospitals or do you contract 

with—— Dr. HILLMAN. We do not. We are completely outpatient. I will 

tell you we do have a capitation contract with the State for medication, at least Security Health Plan, our subsidiary does, and that 

plan actually does retain some net earnings above what they pay 

us. So, we are able to sustain it on a capitated basis, but we do 

not have a gatekeeper system with that. We use the system that 

I described with the anticoagulation management in order to make 

that margin. 

Chairman JOHNSON. In other words, a management system. 

Dr. HILLMAN. That is correct. 

Mr. STARK. If Medicare pays you 50 cents on the dollar, what 

is the next lowest commercial contract on fee-for-service; does it 

pay you 60 cents? You don’t have to tell me the name of it, but the 

private insurer that then pays you the next lowest. 

Dr. HILLMAN. Seventy cents. 

Mr. STARK. Seventy cents, it is that big a gap. 

Dr. HILLMAN. That is our own health plan. 

Chairman JOHNSON. That is 70 cents versus 50 cents for Medicare and less than that for Medicaid? 

Dr. HILLMAN. Yes. 

Chairman JOHNSON. So, we are not so great. 

Mr. STARK. Thank you. 

Chairman JOHNSON. Let me go back to the malpractice issue 

that I had raised because I didn’t actually raise it in the context 

that Karen heard it. Within a plan, I understand that there would 

be whatever the plan’s liability is under that State law or whatever 

we do in Patient’s Bill of Rights. If you are trying to coordinate 

care across individual physicians reimbursed under Medicare, now 

I think you do have a problem. If they are not part of the same 

group practice, if they are not part of the same system, I do not 

know how you identify that responsibility, and how you reimburse 

it. I think in identifying it, you would not be able to provide the 

nurse practitioners and stuff because the liability is—I mean, to 

me, that is a real can of worms. 

75

Dr. Hillman? 

Dr. HILLMAN. The only way we can do it so to be self-insured, 

and that is what we do. That is why we have such a high interest 

in maintaining quality-of-care. 

Chairman JOHNSON. That is interesting. You are self-insured 

for malpractice as well. 

Dr. HILLMAN. That is correct. 

Chairman JOHNSON. That is outstanding. 

Before I conclude, I just want to say that I really appreciate Dr. 

Henschke’s comments. We will work with you on your thoughts and 

opinions on the clinical trials program that is being proposed, if 

only because 10 years, give me a break. With the pace of medical 

change, at the end of 10 years we will know about a procedure that 

is no longer the state-of-the-art, so truly a ludicrous proposal on 

their part. 

If you were to advise us as to how we could do a better job in 

terms of Medicare being a force for early diagnosis of lung cancer, 

what would you suggest we do? 

Dr. HENSCHKE. Well, I don’t know all of the complications of 

Medicare, but I—— Chairman JOHNSON. Well, the big complication, of course, is 

money, but, nonetheless, what would you suggest that we do in 

order to have a program that did do for lung cancer, basically, what 

we have done for breast cancer and colon cancer. 

Dr. HENSCHKE. I think one could develop demonstration 

projects. Medicare, I have talked to Medicare. They were very interested in the results, but they said it is Congress who has to 

mandate any screening policy. So—— Chairman JOHNSON. That is true. For instance, sometimes we 

are able to mandate screening policies when there are a combination of factors that will identify those who are prone. So, sometimes 

we have done that. We do that in colonoscopies. Certain procedures 

are available—am I correct, staff? Yes, certain procedures are 

available if you meet certain criterion, and other lower cost procedures are available if you don’t meet those criteria. 

So, if you will give that some thought and get back to us, we will 

be very grateful. 

Dr. HENSCHKE. Thank you very much. 

Chairman JOHNSON. Thank you very much. 

I thank the panel for their thoughtful comments today, and I 

thank the Members for their participation on a Tuesday. I notice 

the Democrats are in town, and the Republicans aren’t. I thank you 

for that and commend you. 

[Whereupon, at 5:29 p.m., the hearing was adjourned.] 

[Submissions for the record follow:]

Statement of Richard Burford, Product Marketing Manager, 3M Health 

Information Systems, Wallingford, Connecticut

‘‘On behalf of 3M Health Information Systems (3M HIS), I am pleased to submit 

written comments to the House Ways and Means Subcommittee on Health hearing 

to be held on disease management on April 16th, 2002. Our comments make the 

case for the importance of coordinated of care and the need for greater coordination 

of care in federally funded health care programs. For the sake of simplicity, our 

comments are submitted in the attachment in a question and answer format. 

3M HIS is a market leader in the healthcare information technology business. 3M 

HIS specializes in coding and classification tools in acute care and the payer marVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00079 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
76

ket. The views advanced in our written comments result from our experience in 

working in the managed care arena and, particularly, with companies in the business of delivering care management and case management services.’’

A Case for Better Coordination of Care 

What is coordinated care and care management? Why is it important?

• ‘‘Coordinated care’’ is getting the right health care services to the right patients at the right time and in the right setting. Delivering well-coordinated 

care is important for maintaining and improving the health status of beneficiaries.

• Effective care management is also important for successfully managing the financial risk of an enrolled population. 

What are the basic steps in the care management and care coordination 

process? 

• The first step to delivering high quality care management services is understanding the disease burden of the enrollees. Enrolled members with chronic 

health conditions must be identified, classified into clinically meaningful 

groups and stratified according to severity. Disease progression and anticipated costs must be projected.

• Next, specific beneficiaries are then targeted for case management intervention. Case management interventions (care plans) are devised and implemented to promote effective, high quality care. The result is effective case 

management programs that meet the needs of enrollees by improving their 

health status while reducing health plan financial risk. 

How did the original intent of managed care related to better coordination 

of care?

• In managed care, payment methods were originally designed to foster and 

promote the provision of coordinated care. However, capitation, which is the 

predominant method of payment under managed care, does not provide adequate incentives to foster well coordinated care.

• Under capitation, health plans accept an annual fixed fee to deliver a defined 

set of health care services to an enrolled population and, thereby, assume financial risk.

• If the capitated revenues health plans receive do not cover the costs of administering and delivering covered health care services, health plans lose money. 

This creates an incentive for health plans to enroll healthy beneficiaries that 

are expected to have low costs and to avoid beneficiaries with chronic illnesses that are expected to have high costs.

• The beneficiaries with chronic illnesses are the very ones that would benefit 

most from care coordination and case management services.

• To introduce positive incentives for the delivery of well coordinated care, payments to health plans must be adjusted to compensate for differences in the 

health status or disease burden of beneficiaries enrolled in the plan (risk adjustment) Also, direct payments for case management services can be made, 

specifically, for those beneficiaries that would benefit most from care coordination. 

Why is effective case management and care coordination important to the 

future success of the Medicare+Choice program?

• Just 15.7 percent of Medicare beneficiaries account for 76.6 percent of all 

Medicare program payments. (1997 Medicare data)

• 76.2 percent of Medicare beneficiaries are relatively healthy and account for 

only 7.1 percent of Medicare program payments. (1997 Medicare data)

• Because of this high concentration of expenditures in a small number of Medicare beneficiaries, targeting enrollees for case management services and implementing effective programs of care coordination is vital to the future success of the program.

• Coordinated care is especially important for the high cost, chronically ill beneficiaries. These are the patients that, frequently, are at highest risk for deteriorating health status and the related ‘‘exponentially’’ increasing costs for 

health care services. 

77

What are some key characteristics of a properly designed system of coordinated care?

An effective system of coordinated care should accomplish the following:

– Predict future health care resource use of beneficiaries (costs), especially for 

the frail elderly and individuals with special health care needs.

– Provide for effective systems of targeting cases for case management intervention and tracking the cases over time.

– Pay health plans fairly for the delivery of case management services, taking 

into account differences in the health status of the populations they serve.

– Be based on a clinical model that is easy to understand and verify.

– Provide clinically meaningful information to health plans in order to promote 

care coordination, quality improvement, disease management and provider 

profiling.

– Demonstrate value, i.e., the efficacy of the care management processes.

– Provide Medicare with accurate data on the competitive performance of 

health plans in delivering coordinated care. 

What are the benefits of an effectively designed system of coordinated 

care?

• Health plans are paid fair and equitable capitation rates that give them incentive to serve all beneficiaries, regardless of their health status. Thus, negative program incentives that promote selective enrollment of healthy beneficiaries and the ‘‘de-selection’’ of sick beneficiaries are eliminated.

• Health plans are able to shift their operating emphasis from managing risk 

Statement of the Advanced Medical Technology Association (AdvaMed) 

to delivering coordinated care that was the original vision of managed care.

f AdvaMed, the Advanced Medical Technology Association, is pleased to submit this 

comment for the record on the important role that disease management can play 

in the delivery of high quality, cost effective medical care to the growing number 

of seniors and people with disabilities under Medicare. 

AdvaMed is the world’s largest association of medical technology manufacturers, 

with over 1,100 members worldwide. Our members develop and produce the advanced medical technologies that are integral to disease management and other innovation forms of high quality health care delivery. 

Disease management technologies have a key role to play in Medicare in the 21st 

century: improving patient care, improving health system efficiency, and reducing 

overall costs. Realizing these benefits will be critical in the coming years as Medicare faces a rapid increase in the number of beneficiaries it serves. AdvaMed supports efforts by Congress and the Centers for Medicare and Medicaid Services 

(CMS) to expand access to technologies that facilitate the management of disease—

by ensuring adequate reimbursement and coverage.

AdvaMed believes the following three key points are important to keep in mind 

when considering the increasingly important role of disease management technologies:

(1) The aging population of the U.S. demands technology solutions to manage 

chronic disease and reduce disability.

(2) Technologies will likely bring the greatest strides in the future towards improving the management of chronic and short-term diseases.

(3) Medicare should take steps to encourage more timely adoption of medical 

technologies that facilitate disease management. 

The aging population of the U.S. demands technology solutions to manage 

chronic disease and reduce disability.

The United States faces unprecedented challenges in the number of elderly patients who will rely on Medicare to ensure their health and well-being. Based on 

historic trends, the most expensive patients are those that need ongoing institutional care—and the costs of caring for patients in nursing homes accounts for a 

growing share of our health care budgets. Other expensive critical care services also 

are expected to become more numerous as the elderly population grows. 

Fortunately, technologies offer the potential for many to change the paradigm of 

care and reduce hospitalizations and allow patients with serious chronic conditions 

to lead active, productive, independent lives. Recent advances offer cost-effective soVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00081 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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lutions to some of the conditions that are the costliest to Medicare, such as congestive heart failure, diabetes, and coronary artery disease. 

Study results announced in March at the 2002 American College of Cardiology 

Annual Scientific Session show one way that advanced medical technology can improve health care quality and efficiency. The study found that a breakthrough technology called cardiac re synchronization therapy can reduce by 50% the number of 

hospitalizations for congestive heart failure. Heart rhythm disorders currently account for more than 761,000 hospital visits annually at a cost of more than $6,000 

apiece. 

Drug-eluting stents (stents that slowly release medication after being implanted 

to keep the coronary artery open) show promise in eliminating the problem of arteries renarrowing, or restenosis—which is a major cause of repeat medical procedures 

in patients with coronary artery disease. In recent clinical trials, drug-eluting stents 

completed eliminated restenosis. This ‘‘could become one of the biggest breakthroughs in treating cardiovascular disease,’’ according to the American Heart Association. 

A landmark study published last year by Duke University researcher Kenneth 

Manton, PhD illustrates one way that innovative tests and treatments are reducing 

the number of people who need disease management and yielding long-term savings. 

Manton’s research finds that, due in part to advances in medical technology, the 

rate of chronic disability among Medicare-age patients has fallen significantly over 

the last two decades. In fact, today there are 1.4 million fewer Medicare beneficiaries with chronic disability than would have been the case without these gains. 

This reduction saved Medicare an estimated $19 billion in 1999. 

Technologies will enable the greatest strides in the future towards improving the management of chronic and short term diseases.

Medical technology innovations are helping make effective disease and case management a reality. Many emerging breakthroughs are empowering patients to take 

a more active role in the effective management of their disease or condition. 

Recently FDA approved the first-ever cardiac pacemakers with remote monitoring 

capability. This technology enables patients to transmit information about their 

heart condition and pacemaker performance from home directly to their caregiver. 

These ‘‘virtual office visits’’ promise to improve patient care and increase efficiency 

in treating patients with chronic heart conditions through more timely follow-up and 

better overall patient management. 

Advances in diabetes detection and monitoring are playing key roles in the management of the disease. Diabetes and its related complications consume one of every 

four Medicare dollars. The Centers for Disease Control and Prevention (CDC) warns 

it is ‘‘a major public health threat of epidemic proportions.’’

Recently, the first-ever non-invasive blood glucose monitor became available in 

the U.S. HHS Secretary Tommy Thompson remarked that introduction of the device 

‘‘heralds the advent of new technologies that promise dramatic improvements in the 

quality of life for the millions of Americans who have diabetes.’’

In 2001, new technologies also were introduced to make blood glucose monitoring 

simpler and less painful. One product made available last year was the world’s first 

combined blood glucose monitoring and insulin dosing system. In addition, a growing number of monitors were introduced that allow patients to draw blood samples 

from sites other than the fingertip, such as the arm. HHS Secretary Thompson also 

recently called on doctors to test many people for ‘‘pre-diabetes,’’ a condition of elevated blood glucose levels that often leads to diabetes. 

Advanced diagnostic technology called prothrombin self-testing allows patients on 

blood-thinning drugs like Coumadin to closely monitor their clotting time (prothrombin time) at home. Information from the test enables the physician to adjust 

the blood-thinning medication to avoid serious complications like bleeding and 

stroke. 

The genomics revolution also is yielding gains in disease management. New 

genomic disease management tests, by providing new information not currently 

available through existing methods, enable physicians to diagnose disease more 

quickly and accurately, to determine the most appropriate treatment and to monitor 

disease progression and reoccurrence during therapy. These tests also enable the detection of disease at the very early or developing stages when treatment is likely 

to be most effective. 

In addition, many new information management technologies are emerging to 

help providers successfully monitor and care for patients across the spectrum of the 

health care delivery system. 

79

Medicare should take steps to encourage more timely adoption of medical 

technologies that facilitate disease management.

Unfortunately, Medicare procedures and policies often discourage the adoption of 

new medical technologies that can facilitate disease management—or reduce the 

need for it altogether. 

Diabetes testing policy:

CMS has issued several policies to reduce reimbursement and restrict access to 

the glucose monitoring technologies patients need to achieve tight glucose control. Congress and CMS must work to remove these restrictive policies and ensure that Medicare patients have access to advanced monitoring technology.

Recently CMS finalized a policy to cut reimbursement for blood glucose testing 

by 26%. The Congressional Diabetes Caucus had expressed concern to CMS that 

it was employing a flawed process to make this cut.

In early 2000, CMS issued an extremely burdensome policy that is discouraging 

close monitoring of glucose levels for patients in nursing homes. Despite the fact 

that glucose monitoring is designed to show a trend in glucose levels over time, 

CMS has said that nursing home caregivers must obtain a physician’s order for 

each individual measurement that is taken. Because it is impractical and time 

consuming to obtain a physician’s order for each measurement, this requirement 

has meant that nursing homes must either perform fewer glucose tests or absorb the cost of perform needed tests.

CMS further restricted Medicare patients’ access to glucose testing in a recent 

policy that allows them to purchase glucose monitors and test strips only from 

retailers that are Medicare suppliers. However, because of Medicare’s burdensome and complex requirements for gaining recognition as a Medicare supplier, 

many small retailers choose not to apply for this status. This policy, which has 

never been applied to any other product or service under Medicare, could make 

it difficult for many patients to purchase the glucose monitors and supplies they 

need, especially in rural areas that lack a Medicare supplier. 

Innovative diagnostic tests:

In addition to problems specific to diabetes tests, other diagnostic tests integral 

to successful disease management face significant barriers at Medicare.

A report issued by the Institute of Medicine (IoM) on Medicare policy and procedures for diagnostic tests states that ‘‘current Medicare payment policy for outpatient clinical laboratory services seems not only outdated, but also irrational.’’

The report concluded that ‘‘Medicare needs a more timely and appropriate 

method for integrating the proliferation of new technologies anticipated in the 

near future.’’

Legislation pending in the Senate and passed by the House as part of the Medicare Regulatory Relief bill (H.R. 3391) would help address the serious problems 

in Medicare’s procedures for new diagnostic tests. It would establish an open 

public process for gathering input on reimbursement decisions for new tests and 

require Medicare to establish objective criteria for setting payment rates. 

Hospital inpatient coding and payment:

CMS typically takes two years or more to fully integrate new medical technologies like coronary stents into the hospital inpatient payment program. A 

regulation published by the agency last year on adoption of new medical technologies into the inpatient setting leaves in place current delays in Medicare 

coding and payment decisions that create barriers to patient access to medical 

technologies.

Congress and CMS must take steps to support patient access by eliminating 

delays in assignment of new codes and adequate payment rates for new inpatient technologies. H.R. 2973, bipartisan legislation introduced in the House by 

Reps. Jim Ramstad (R–MN) and Karen Thurman (D–FL), would take steps to 

improve patient access to innovative technologies in the inpatient hospital setting. 

Medicare technology adoption delays:

According to a report by the Lewin Group, Medicare can take 15 months to five 

years or more to integrate new medical technologies into the program. This has 

a significant impact on patient and provider access to innovative disease management technologies like remote monitoring devices, gene-based testing and diabetes monitoring.

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1Lawrence Fisher & Karen L. Weihs, Can Addressing Family Relationships Improve Outcomes 

in Chronic Disease? 561 Journal of Family Practice 561 (June 2000). 

H.R. 3391 contains provisions from H.R. 2973 to improve accountability and coordination between offices in CMS that make coverage, coding and payment decisions on new technologies. 

Healthcare information technology:

In its report Crossing the Quality Chasm, the IoM said ‘‘health care delivery has 

been relatively untouched by the revolution in information technology that has 

been transforming nearly every other aspect of society.’’ Many of these information technologies play a key role is successful disease management. Medicare 

must ensure that health care providers have the resources they need to adopt 

effective new information technologies.

AdvaMed appreciates the Subcommittee’s interest in technologies that facilitate 

disease management and other innovative forms of high quality health care delivery. Given the vital role disease management technologies play in improving patient 

care, spurring health system efficiency, and reducing overall costs, AdvaMed and its 

member companies look forward to the opportunity to work with the Subcommittee 

on these issues in the future.

Statement of Robert Bonow, M.D., President-Elect, American Heart 

fAssociation 

My name is Robert Bonow, MD, and I am the president-elect of the American 

Heart Association. On behalf of the American Heart Association and its over 22.5 

million volunteers and supporters, I am pleased to submit this statement for the 

hearing record. 

Since 1924, the American Heart Association has dedicated itself to reducing disability and death from cardiovascular disease and stroke through research, education, community-based programs and advocacy. Providing effective, credible scientific information is vital to our mission. The American Heart Association and the 

American Stroke Association, a division of the American Heart Association, actively 

participate in efforts to improve the delivery of disease-specific health care through 

the widespread adoption and implementation of scientifically based standards and 

guidelines. 

Cardiovascular Disease and Stroke Contribute Significantly to Chronic Illness in the United States

More than 125 million Americans have at least one chronic illness. This number 

is approximately 40% of the total U.S. population, and approximately 40% of those 

patients have at least two chronic conditions. The direct medical costs of chronic 

conditions in the U.S. will total $600 billion per year, and the care and management 

of patients with chronic disease represents the single largest cost to our health care 

system.1 Significantly, the cost of cardiovascular disease and stroke in the United 

States in 2002 is estimated at $329.2 billion. 

Of these chronic illnesses, cardiovascular disease accounts for almost as many 

deaths as the next seven leading causes of death combined, costing this country almost $300 billion a year in healthcare expenditures and lost productivity—more 

than any other single disease. Some 60 million Americans—about 1 in 5—suffer 

from some form of cardiovascular disease, ranging from high blood pressure to myocardial infarction, angina pectoris, stroke, congenital vascular defects and congestive 

heart failure. One form of cardiovascular disease alone, heart disease, is the number 

one killer in the U.S., and another form of cardiovascular disease, stroke, is the 

third leading killer. 

Disease Management as an Approach to Confronting Chronic Illness

Disease management is one strategy used to confront the challenges presented by 

chronic illness. It is a term widely and inconsistently used. Hundreds of ‘‘disease 

management programs’’ exist for a wide array of chronic illnesses, including congestive heart failure, diabetes, asthma and depression. Increasingly, disease management is being offered as an approach to health care management in the public and 

private sectors. For example, Federal agencies are currently evaluating the cost effectiveness and patient outcomes of programs that rely on disease management 

techniques to deliver patient care; a number of states are offering disease management services through their Medicaid programs; key members of Congress are introVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00084 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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2Finley A. McAlister et al., A Systematic Review of Randomized Trials of Disease Management 

Programs in Heart Failure, 110 American Journal of Medicine 378, 381 (April 1, 2001). 3 Jeff Tieman, Disease Management Making a Case for Itself Clinically and Financially, Modern Healthcare, July 9, 2001. 4Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Applying Quality Improvement Standards in Medicare (January 2002). 

ducing legislation to fund new disease management initiatives; and pharmaceutical 

benefit managers (PBMs) are contracting with states to provide disease management services through pharmaceutical assistance programs for seniors. There are as 

many definitions of ‘‘disease management’’ as there are programs that claim to provide disease management services. 

Although advocates for the approach argue that it lowers costs, improves patient 

care, and allows for effective evaluation of services, some policy experts suggest that 

disease management programs may actually lower costs at the expense of patients’

healthcare needs, or alternatively, that it may actually increase health care costs 

through added services (which may include administrative costs and other indirect 

costs). In addition, the effectiveness of disease management in improving clinical 

outcomes is currently being evaluated.2

The American Heart Association Urges Policymakers to Focus on Quality 

as the Guiding Principle

Disease management is an evolving concept. As government, health plans and clinicians have adopted disease management models to fit their own needs and goals, 

the various meanings of disease management have diversified. In practice, disease 

management can cover a range of potential activities, from distributing pamphlets 

to patients that instruct them on self-management techniques related to their particular condition to relying on a case manager to develop patient-specific care 

plans.3

The American Heart Association finds the concept of disease management promising, but also urges the Subcommittee to consider two issues——

(1) any quality standards or performance measures for cardiovascular disease 

and stroke must be based appropriate, objective and scientifically-derived, evidence-based guidelines; and

(2) quality of care must be prioritized over cost-containment or other financial 

incentives in all disease management initiatives. Disease management should 

be primarily about improving patient outcomes and only secondarily about cost 

containment.

For disease management to truly put patients first, clinical guidelines must rely 

on a template that emerges from medical community consensus. Additionally, appropriate disease-specific programs should reach low-risk patients as well as high-risk 

patients to best serve long-term health needs. In short, to focus on appropriate patient-centered clinical guidelines, medical community standards must serve as the 

fundamental framework for any disease management program that hopes to draw 

widespread approval and acceptance. 

How Congress chooses to confront this issue for Medicare beneficiaries will likely 

impact the entire U.S. healthcare system. As noted in a recent MedPAC report to 

Congress, ‘‘. . . because Medicare is the single largest purchaser of health care in 

the country, its actions influence the care that all patients receive nationwide.’’ 4

The American Heart Association Provides Leadership and Consensus

It is fitting that the American Heart Association adds its voice to the many that 

are currently speaking to the issue of disease management. Although within most 

clinical areas there are many organizations, health plans and manufacturers that 

promote clinical guidelines based in part on the clinical literature, few organizations 

have the expertise or resources to establish and continually update consensus based 

standards that represent a holistic view of cardiovascular and stroke care. Importantly, the American Heart Association represents not just providers but all stakeholders in cardiovascular and stroke care—physicians, nurses, emergency medical 

support personnel and others. Most significantly, the American Heart Association 

represents the patient. 

The American Heart Association is at the forefront of investigating ways to improve the quality of care for patients with cardiovascular disease and stroke. We 

have developed and are currently operating a number of patient-centered programs. 

Our programmatic efforts have increased and evolved with the dynamic advances 

made in cardiovascular and stroke care. 

82

In essence, the American Heart Association’s existing programs and guidelines 

provide a foundation for managing disease. We are extremely proud of the process 

through which our guidelines are developed and place great emphasis on ensuring 

objectivity and sound science. The American Heart Association and the American 

College of Cardiology have developed joint guidelines on the treatment and management of heart disease, including guidelines for acute myocardial infarction, unstable 

angina, congestive heart failure, chronic coronary disease and secondary prevention. 

The American Heart Association and the American College of Cardiology also 

work in partnership in the development of performance measures, including developing measures for acute myocardial infarction and chronic heart failure. The American Stroke Association, a division of the American Heart Association, develops scientific guidelines for managing and treating stroke and is currently developing performance measures for stroke. 

Our programs are developed based on our scientific guidelines. The following is 

a brief description of two of our programs designed to improve the quality of care 

for cardiovascular and stroke patients.

• Get With the Guidelines—This program is an acute care hospital-based program that helps manage risk factors in coronary artery disease and stroke patients. Get With the Guidelines strives for long-term behavioral change by focusing on workable patient management strategies in the hospital setting. 

Get With the Guidelines incorporates a multi-disciplinary approach to risk factor management. The program encourages links between cardiologists, neurologists, primary care physicians, nurses and pharmacists. It also provides 

resources to build consensus and optimize discharge protocols.

• Acute Stroke Treatment Program—This multimedia toolkit includes guidelines 

and criteria for hospitals to use in meeting the standards of a primary stroke 

center. The criteria follow the consensus of the Brain Attack Coalition guidelines and helps hospitals evaluate their capacity to threat stroke patients.

The American Heart Association’s work on disease management is ongoing. We 

are currently reviewing various models of disease management, particularly in the 

area of cardiovascular disease and stroke. We are analyzing the effectiveness of 

these models and hope to use this information to refine our current policies, programs and other efforts, if needed. 

Conclusion

In addition to the use of appropriate clinical guidelines, it is critical to ensure that 

disease management programs are driven by the clinical needs of patients rather 

than cost containment or financial profit. While we recognize the need for cost containment and careful allocation of health care resources, improving the quality of 

care must be the primary goal of any disease management program. The American 

Heart Association appreciates the opportunity to provide these comments to the 

Ways & Means Health Subcommittee on this timely and important issue, and we 

look forward to working with the Subcommittee as it continues to consider the appropriate integration of disease management into the Medicare program.

Statement of the Hon. Richard Burr, a Representative in Congress from the 

State of North Carolina 

f I would like to offer my thanks and praise to the Chairman for calling this hearing on disease management in Medicare. I have long been committed to providing 

the best possible services to Medicare beneficiaries and to creating incentives for the 

development of innovative new medical technologies that will improve care. Disease 

management offers the opportunity to do both. 

I have introduced a bill that takes a simple but important first step toward Medicare coverage of emerging remote technologies that play an increasing role in disease management. The bill would improve patient care while moving forward the 

modernization of Medicare’s benefit package. I look forward to working with you on 

disease management, and enlisting your support for H.R. 3572, the Medicare Remote Monitoring Services Coverage Act. 

Emerging Disease Management Approaches Emphasize Technology

Several broad market trends are placing new focus on disease management today.

• Managed care plans are shifting their focus from tightly controlled access to 

services to more loosely structured preferred provider organizations, resulting 

in increased outsourcing of disease management services.

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• A growing sense of self-empowerment among patients with chronic conditions 

is leading to the development of patient-focused solutions.

• Finally, advances in telecommunications are facilitating improved interactions between patients and health care professionals. Data advances that 

automate information collection and patient tracking are making it easier to 

identify and treat patients with chronic conditions.

Emerging disease management vendors are employing technology to enhance 

their product offerings. Patient-focused services feature disease assessment surveys, 

personal action plans, and on-line information and support, while services tailored 

to clinicians include tools to track patients, frequently asked practice questions, and 

online clinical care guidelines. 

Among the most significant technology-focused services are those that strengthen 

the link between patients and physicians. These services provide for interactive case 

management and support, ‘‘push’’ surveys that solicit patient information and feedback, live chats with nurses or other health experts, and home monitoring with 

automatic or manual data transmission. 

While traditional disease management approaches have emphasized case management by nurses as a key interaction between patients and clinicians, emerging disease management techniques feature home data monitoring and interactive case 

management and support, along with nurse case management, to create greater 

linkages between patients and clinicians. 

Analyses by firms that specialize in disease management show that technologycentered approaches reduce hospitalizations and medical costs and lead to greater 

physical health and patient satisfaction. The development of new technologies expands the promise of emerging disease management approaches. 

Lack of Medicare Coverage Hinders Broader Adoption of Remote Monitoring

Despite the innovations emerging in disease management, many new clinical information and remote management technologies have failed to diffuse rapidly. A significant barrier to wider adoption of disease management approaches that utilize remote monitoring services is the lack of payment mechanisms in fee-for-service Medicare to reimburse for remote, non-face-to-face management services provided by a 

physician. 

Consider the implications for an elderly Medicare beneficiary with a heart condition similar to the Vice President’s. If, for example, the beneficiary receives a shock 

from her implantable cardioverter defibrillator (ICD) over the weekend when her 

heart specialist is not in the office, the patient would likely go to the emergency 

room where there may not be a heart specialist on staff familiar with her condition. 

Yet if the beneficiary had remote monitoring technologies in her home, she could 

immediately forward information concerning her heart and the ICD securely 

through the Internet to her physician. The heart specialist could then decide if the 

patient should come into the clinic on the next business day or to proceed immediately to an emergency room. More likely, the patient would be reassured that everything is appropriate, thus saving an often stressful and expensive trip to a hospital emergency room. 

Under existing Medicare payment rules, many physician billing codes are primarily for face-to-face interactions between the physician and patient. The payments often do not account for the clinician time involved in non-face-to-face interactions that are necessary for interpretation and response to data from remote management technologies. As a result, the payment systems do not adequately reflect 

the value of physician services involving remote monitoring services, and serve as 

an impediment to disease management approaches that involve remote monitoring 

services. 

The Medicare Remote Monitoring Services Coverage Act

To provide greater incentives for the adoption of remote patient management 

services, changes in Medicare reimbursements are necessary. My bill—H.R. 3572, 

the Medicare Remote Monitoring Services Coverage Act—takes an initial step toward covering remote monitoring services. It would create parity between certain 

face-to-face and remote services. Under the bill:

• Remote monitoring services that are found to be comparable to face-to-face, 

encounter-based, monitoring services will be given the same coverage and 

level of Medicare payment as the comparable encounter-based physician service.

• Remote monitoring services are defined to be services provided through a system of technology that allows a remote interface to collect and transmit clinVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00087 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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ical quantitative data between a patient and a provider, for the purposes of 

clinical review or response by the provider.

• The Secretary of Health and Human Services would have the discretion to determine comparability between face-to-face and remote monitoring services. 

The remote monitoring services would be subject to the same frequency guidelines developed now or in the future for the comparable in-office services.

• The provision is designed to be budget-neutral. We anticipate that remote 

monitoring services will substitute for the existing in-office services only when 

appropriate. In the event utilization increases, the bill includes a mechanism 

to ensure budget neutrality.

There are several benefits of the legislation.

• It will improve patient access, care, and management, as well as spur the development of new technologies and disease management approaches that will 

improve services further. For patients in more rural settings, it may be the 

most practical means for patient management in order to make timely adjustments in the program of care before a more serious health event occurs.

• The proposal attaches value to physician time dedicated to remote management technology and will encourage physician use of tools that improve services to patients. It will also enable enhanced care and real-time feedback that 

will avoid unnecessary hospitalizations and patient anxiety.

• It ensures that payment will only be provided for services that are comparable to those provided in face-to-face interactions. The Centers for Medicare and Medicaid Services would retain authority through existing initiatives 

to monitor the quality of such services. 

Conclusion

Madam Chairman, let me once again commend you for your leadership in calling 

this hearing today. Advances in technology are expanding the promise of disease 

management, and Medicare must take advantage of the opportunity to improve care 

for those with chronic conditions. My bill provides a simple but important first step 

toward the coverage of new remote technologies featured in emerging disease management approaches today. I urge you to join me as a cosponsor of the bill, and I 

look forward to working with the members of this Committee, as well as with my 

fellow colleagues on the Energy and Commerce Committee, to passing the bill this 

year. Thank you very much for the opportunity to present my views.

Statement of Christobel Selecky, Chair, Government Affairs and Health 

Policy Committee, Disease Management Association of America 

f Chairwoman Johnson and distinguished members of the Subcommittee, it is a 

pleasure to have the opportunity to provide testimony to the Subcommittee on the 

strong value of disease management programs to improve quality and control costs 

under the Medicare program. My name is Christobel Selecky and I am a member 

of the Board of Directors of the Disease Management Association of America 

(DMAA) and also the Chair of their Government Affairs and Health Policy Committee. I am also the Chief Executive Officer of LifeMasters Supported SelfCare, a 

privately held Disease Management Organization (DMO). 

Overview.

Comprehensive Disease Management (‘‘DM’’) programs have demonstrated their 

effectiveness in improving health status, health care quality, patient and provider 

satisfaction, and financial outcomes for populations with congestive heart failure 

(CHF), diabetes, coronary artery disease (CAD), chronic obstructive pulmonary disease (COPD), end-stage renal disease (ESRD), asthma, obesity, and several other 

chronic illnesses. Commercial, Medicare FFS, Medicare+Choice, and some state 

Medicaid plans have already implemented DM programs and benefited from these 

clinical and financial outcomes. A majority of large private payors have already 

launched major disease management programs and have signaled their commitment 

to DM as the core element of their new medical management strategy. 

The Disease Management Association of America fully supports and commends 

the Congress and the Centers for Medicare and Medicaid Services (‘‘CMS’’) for promoting the expansion of DM programs in its efforts to modernize and revitalize 

Medicare+Choice, and through the coordinated care, Benefits Improvement and Protection Act (BIPA), and other demonstration projects. 

85

1Disease management is a multidisciplinary, systematic approach to health care delivery that: 

(1) includes all members of a chronic disease population; (2) supports the physician-patient relationship and plan of care; (3) optimizes patient care through prevention, proactive, protocols/ 

interventions based on professional consensus, demonstrated clinical best practices, or evidencebased interventions; and patient self-management; and (4) continuously evaluates health status 

and measures outcomes with the goal of improving overall health, thereby enhancing quality 

of life and lowering the cost of care. Qualified Disease Management programs should contain 

the following components:

• Population Identification processes; • Evidence-based practice guidelines; • Collaborative practice models that include physician and supp ort-service providers; • Risk identification and matching of interventions with need; • Patient self-management education (which may include primary prevention, behavior 

modification programs, support groups, and compliance/surveillance); • Process and outcomes measurement, evaluation, and management; • Routine reporting/feedback loops (which may include communication with patient, physician, health plan and ancillary providers, in addition to practice profiling); and • Appropriate use of information technology (which may include specialized software, data 

registries, automated decision support tools, and call-back systems). 

In order to build on the incremental progress made to date, DMAA strongly urges 

federal policymakers to offer the benefits of full-service DM programs to all enrollees in:

• The traditional Medicare fee-for-service (‘‘FFS’’) program;

• Any new Medicare+Choice programs, such as point of service, PPO, or MSA 

products; and

• All State Medicaid programs, including FFS and managed care alternatives. 

Disease Management and the DMAA.

Disease Management is an approach to patient care that seeks to limit ‘‘preventable’’ events by maximizing patient adherence to prescribed treatments and to 

health-promoting behaviors. For patients with chronic diseases, the anticipated benefits of disease management include superior clinical outcomes; improved functional 

capacity and quality of life; lower health care costs; reduced need for hospitalization, 

surgery or other invasive care; and greater access to care support service. 

The Disease Management Association of America (DMAA) is the only association 

in America dedicated exclusively to the DM industry. The DMAA draws members 

from throughout the United States and has representatives from all segments of the 

DM industry, including health plans, hospitals, employers, pharmaceutical companies, physicians, and stand-alone DM organizations. The DMAA seeks to advance 

the use of DM programs as a means to build a better system of care that will predictably improve quality and reduce costs in private and public sector health care 

programs. DMAA also works to promote research, accreditation, education, and the 

science of DM, and to increase the effectiveness of DM programs. 

The DMAA has established an industry-standard definition 1 of qualified disease 

management programs and entities. The DMAA definition—established in consultation with primary care and specialty physicians, and incorporating private practice, 

health plan and institutional perspectives—has been relied upon widely by CMS 

(the definition is cited by CMS in its February 22, 2002 solicitation for proposals 

to conduct the DM demonstration projects authorized in the BIPA, by DM 

accreditors (NCQA, URAC and potentially JCAHO) and by payors and providers. 

Disease Management Improves Health Status & Quality and Helps Control 

Costs.

Disease management programs produce significant clinical improvements at the 

same time that they achieve financial savings. For example, one study published in 

a peer-reviewed cardiology journal (Am Heart J 1999; 138: 633–640) followed the 

progress of a population of CHF patients enrolled in a multidisciplinary DM program including patient education, interactive vital sign and symptom monitoring, 

nurse support and physician intervention. Clinical impacts measured twelve months 

after enrollment included an 18 percent reduction in inpatient days, a 36 percent 

reduction in inpatient admissions, a 31 percent decrease in emergency department 

visits, and a 20 percent decline in average length of stay. Patient satisfaction surveys showed a 16 percent improvement. Financial savings for the group were reflected in a 54% drop in disease specific claims and a 42% average reduction in all 

claims. Numerous similar examples of such impressive outcomes are fully described 

in DMAA’s Medicare and Medicaid ‘‘White Paper’’ (available at www.dmaa.org). 

DM has already been proven to be successful in Medicare and Medicaid populations. In Hawaii, American Healthways, a DMAA member DM company, provided 

86

2To Err is Human: Building a Safer Health System, Linda T. Kohn, Janet M. Corrigan, and 

Molla S. Donaldson, Eds., Committee on Quality of Health Care in America, Institute of Medicine, National Academy Press, Washington, D.C. (1999). <http://books.nap.edu/books/

0309068371/html/R1.html#pagetop> 3 Crossing the Quality Chasm: A New Health System for the 21st Century, Committee on Quality of Health Care in America, Institute of Medicine, National Academy Press, Washington, D.C. 

(2001). <http://www.nap.edu/books/0309072808/html/>

diabetes disease management services to 6,000 Medicare FFS cost contract beneficiaries enrolled in HMSA. In the first year, the program yielded a 17.2% reduction 

in total claims savings over the population resulting in a $5 million net savings to 

CMS. In Florida, LifeMasters has been providing CHF disease management services 

to approximately 3,000 FFS Medicaid recipients in the northern half of the state for 

almost two years. After just one year, total claims costs for this population were reduced by 21% resulting in a $3 million net savings to the state. In addition to cost 

savings, quality of care and satisfaction for these populations was significantly improved. 

One DMAA member company’s calculations indicate that the difference between 

annual baseline costs for CHF in the Medicare FFS program and the company’s claims-reconciled costs for patients in a disease management intervention for one 

year is over $14,000. Extrapolating savings across the Medicare program using a 

conservative figure of $11,000 for both the Medicare+Choice and FFS programs, 

CHF disease management alone could produce total Medicare savings of over $8.3 

billion annually. The FFS program would account for $7 billion, or nearly 85 percent 

of the total savings opportunity, suggesting the critical need for testing the expansion of disease management to this segment of Medicare. 

DM programs also improve access to care. Sophisticated information technology 

is used to both identify and enroll all persons with a given health condition. This 

proactive outreach process helps to include individuals who are otherwise isolated 

from the health care system. And many programs run by DMAA members are administered on a multi-lingual basis in languages such as Spanish, Cantonese and 

Mandarin. 

DM programs can also play a crucial role in reducing medical errors and improving quality. The recent Institute of Medicine (IOM) reports on medical errors 2 and 

the deteriorating quality of healthcare in America 3 argue that DM is not only integral to preventing medical errors, but also to protecting and improving overall 

health care quality, especially for the chronically ill. As the IOM studies emphasized: 

• One of the chief culprits in medical errors is the lack of care management and 

coordination, resulting from the decentralized and fragmented nature of the 

health care delivery system, and the multitude of unaffiliated providers practicing in different settings without access to complete medical record information or coordination (such as can be provided by DM organizations).

• More than 100 million Americans have at least one chronic illness. ‘‘Clinicians, health care organizations, and purchasers . . . should focus on improving care for common, chronic conditions such as heart disease, diabetes, and 

asthma that are now the leading causes of illness in the United States and 

consume a substantial portion of health care resources. These ailments typically require care involving a variety of clinicians and health care settings, 

over extended periods of time . . . who work so independently from one another that they frequently provide care without the benefit of complete information about patients’ conditions, medical histories, or treatment received in 

other settings.’’

Disease Management is Needed ‘‘Inside’’ Medicare and Medicaid.

Diseases such as arthritis, asthma, cancer, chronic obstructive pulmonary disease, 

CHF, depression, and diabetes account for 60 percent of medical costs in the United 

States. Cardiovascular disease is the leading cause of death among both men and 

women and across all racial and ethnic groups. About 58 million Americans live 

with some form of the disease. In 1999 alone, cardiovascular disease cost the nation 

an estimated $287 billion in health care expenditures and lost productivity, and this 

burden is growing as the population ages. In the Medicare population, a 1993 chronic care demonstration proposal indicated that roughly 10 percent of the Medicare 

beneficiaries accounted for 70 percent of the $129.4 billion in total Medicare expenditures. The majority of these 10 percent suffered from chronic illnesses. Medicare 

has recognized that an acute care system is no longer appropriate where the major 

morbidity, mortality and cost drivers of our era are chronic conditions. However, 

Medicare and Medicaid have thus far lacked the legislative and regulatory authority 

87

to implement demonstrations on a wide scale to provide fair access to all beneficiaries. 

DMAA believes that comprehensive DM, if fully employed in Medicare and Medicaid, can:

• Improve the safety and quality of care by adhering to evidence-based treatment guidelines and outcomes data, and by providing patients with a safety 

net between physician and hospital visits, thereby reducing drug and treatment errors and improving care coordination (identified by the Institutes of 

Medicine as the two principal problems with the America health care system)

• Improve access to care by around the clock nursing and high-tech contacts, 

and by assisting rural caregivers and their patients who do not have the benefit of easy entre ́ to in-person care

• Improve patient self-management of, and responsibility for, preventing and 

treating their conditions by its innovations in patient-centered and collaborative education

• Improve financial cost containment without sacrificing quality or patient satisfaction by serving as an alternative to the increasingly unacceptable cost-containment techniques of managed care, such as utilization review, 

gatekeeper restrictions, referral limitations, and drug restrictions

• Enhance efforts in the Public Health arena by providing health improvement programs on a population basis; creating financial incentives to promote 

and deliver preventive interventions on a large scale using advanced outreach 

technologies, especially secondary preventive measures; and encouraging 

those segments of the private sector that have not yet embraced DM to do 

so.

DM should be implemented in Medicare FFS, Medicare+Choice, and Medicaid according to the following principles endorsed by the DMAA:

• There should be no discrimination against FFS enrollees, who currently 

lack any access to the benefits of DM programs available to Medicare+Choice 

and certain Medicaid enrollees (or have lost access to these programs as a result of the loss of their Medicare+Choice coverage).

• Medicare and Medicaid FFS programs should directly contract with DM organizations to offer such benefits on a population basis. Further, DM programs and demonstration projects sponsored by CMS should reflect models of 

DM which have been successfully utilized in the commercial sector. Specifically, these programs should not require that DM be linked with the provision 

of a drug benefit which is not a standard offering of DM providers.

• Medicare and Medicaid managed care programs should provide financial 

and other incentives to private health plans and public managed care programs and their enrollees to join HMOs, PPOs, MSAs, point of service plans, 

and other alternatives to traditional FFS.

• DM programs should be compensated for their services on an equitable and 

competitive basis that compensates them for their investments, provides them 

with incentives to maximize both clinical and financial outcomes. Historically 

fees paid to DM organizations are a fraction of the savings generated for their 

payor customers.

As the only association in America dedicated exclusively to the DM industry, we 

would like to offer the services and expertise of DMAA’s staff and member organizations to serve as a resource to the Subcommittee as you explore the various ways 

in which Disease Management can improve the delivery of healthcare in the United 

States. 

Thank you for the opportunity to provide these views to the Subcommittee.63

The Disease Management Association of America, a non-profit, voluntary 

membership organization, founded in March of 1999, is the only industry organization dedicated to advancing disease management. DMAA’s members represent disease management organizations, health plans, employers, pharmaceutical companies 

and benefits managers, hospitals, physicians, and other stakeholders in the disease 

management community.

f

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Statement of Sandeep Wadhwa, M.D., MBA, Vice President, Disease Management Services, McKesson Health Solutions, McKesson Corporation, 

San Francisco, California 

I am pleased to submit this statement on behalf of McKesson Corporation to the 

Subcommittee on Health of the House Committee on Ways and Means, subsequent 

to the April 16 hearing on Promoting Disease Management in Medicare. McKesson 

Corporation strongly supports the creation of a disease management benefit for 

Medicare and Medicaid recipients. Furthermore, McKesson recommends the expansion of disease management services to recipients of Federal government sponsored 

health care benefits (Veterans Health Administration beneficiaries, military personnel and dependents and Federal employees) and to rural underserved populations. 

As the world’s largest healthcare services company, McKesson is an industry leader in the provision of disease management services for commercial, Medicaid and 

Medicare populations. The Disease Management Purchasing Consortium and the 

Health Industry Research Company have both recognized McKesson as a Top Ten 

disease management firm from more than 160 companies. Our disease management 

clients cover a broad host of purchasers of health care, including commercial health 

plans such as Blue Cross Blue Shield of Texas, Anthem Midwest, and Blue Cross 

Blue Shield Federal Employees Plan; state Medicaid programs and managed care 

plans such as the State of Washington and Columbia United Providers; and high 

risk insurance pools like CoverColorado. As such, we are uniquely positioned to provide Congress with information on currently available solutions, as well as ideas for 

improving the health status of populations while decreasing health care costs 

through the use of disease management programs. 

McKesson is the industry leader in care management services and software and 

has market leadership positions in demand management and utilization criteria. 

Furthermore, we are leading providers of physician and quality profiling software 

and case management workflow software. As an early provider of these programs, 

we have been delivering disease management services since 1996. McKesson’s disease management programs leverage our experience with patient services, pharmacy management, and health care quality improvement activities. Many of these 

programs and services reflect the capabilities and expertise of our 165 year old company, one of the largest nationwide distributors of pharmaceuticals and health care 

products and the largest health information technology company in the world. 

The disease management industry arose from the recognition that the nation’s 

health care system is largely geared towards meeting the acute and symptomatic 

needs of patients, rather than the long-term needs of those with chronic diseases. 

However, by providing proactive rather than reactive care, disease management 

services can help retard the progression of disease by encouraging a more rapid 

adoption of evidence-based standards of care which reduces the likelihood of acute 

care intervention. 

Disease management is one of the few health care innovations that can improve 

health status and access to care while reducing net expenditures. In developing this 

program for Medicare beneficiaries, McKesson recommends that Congress initially 

focus on those conditions for which there are national, evidence-based guidelines of 

care and that lend themselves to a net savings. In addition, it is important to focus 

on conditions where the gap between the standards of care and actual practice leads 

to hospitalizations and emergency room visits, both of which might otherwise be 

avoided through adherence to the guidelines. Conditions that meet these criteria include congestive heart failure, diabetes, asthma, and chronic obstructive pulmonary 

disease (COPD). 

Demonstrated Results

McKesson’s success with disease management is a function of leveraging information technology through the creation of clinical decision support software, utilization 

of advanced relational database management systems, and application of state-ofthe-art call center technology. Our system relies on both ‘‘high tech’’ information 

technology and ‘‘high touch’’ nursing to achieve its impact. We position our services 

to complement and extend, and not threaten or disrupt, the patient-physician relationship. Our aim is to reinforce physician treatment plans that are often misunderstood or incompletely understood as well as to promote awareness and adherence 

to evidence-based guidelines. 

McKesson’s disease management services are delivered by health care professionals. We rely primarily on nurses to provide patient counseling and education 

through telephonic nursing, also known as telenursing. These health care professionals are able to impart evidence-based education and assess patients’ underVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00092 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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1 Board of Trustees of the Federal Hospital Insturance Trust Fund. Annual report of the Federal Hospital Insurance Trust Fund. Washington, D.C.: USGPO, 2000. 

standing of their condition and barriers to compliance. In addition to proactive monitoring and counseling, our disease management programs offer patients around the 

clock access to nurses who are able to answer patients’ symptom-related concerns 

and safely direct patients to the appropriate level of care. Telephone access to 

nurses for health care advice and support also benefits the Medicare patient or 

those living in rural, underserved areas without ready access to a physician’s office 

or to emergency room facilities. Our nurse triage function complements the 

proactive components to reduce inappropriate utilization of services. 

McKesson programs have demonstrated dramatic improvements in the health status of patients, with marked reductions in hospitalization and emergency room visits that have resulted in net reductions in health care costs. In order to achieve improved outcomes, our programs focus on teaching patients self-management principles, symptom control strategies, and optimal medical management practices. In 

patients with congestive heart failure, which is the leading cause of admissions in 

Medicare, we demonstrated for one disease management client an 89% increase in 

the usage of ACE-inhibitors, heart failure drugs which lower mortality and morbidity rates. With the same client, we also documented a 24% increase in influenza 

vaccination and a 44% increase in patients’ adherence to a low salt diet. These 

changes in care management and patient behavior led, over the course of one year, 

to a 51% reduction in inpatient costs, 36% reduction in emergency room visits and 

an overall reduction in claims costs of 24%. Furthermore, patients in this program 

reported very high satisfaction with the service and noted improvements in their 

overall quality of life. 

Our diabetes program not only helps patients improve their blood sugar values, 

but also focuses on reducing risk of strokes and heart attacks, which account for 

the overwhelming morbidity and mortality in diabetics. For one client, we have demonstrated a 33% increase in patients’ use of glucose meters and a 70% increase in 

the use of aspirin, which contributed to a documented 35% reduction in hospitalization and 28% reduction in diabetes-related missed work days. 

Overall, annual net savings in health care costs inclusive of program fees for disease management for our congestive heart failure program range from $610 to 

$4,872 per patient. For diabetes, annual net savings range from $755 to $2,138 per 

patient, and for asthma, we have net savings ranging from $223 to $899 per patient. 

We have demonstrated these results in commercial, Medicare and Medicaid settings, 

and with government employees. McKesson has conducted evaluations using different study designs, including pre/post evaluations, prospective cohort evaluations, 

and randomized controlled trials. We believe that the benefits of disease management programs can be evaluated using the most rigorous study designs 

Market Segments

Medicare

To date, disease management programs have largely been an innovation in the 

commercial insurance market and serve the families of adult workers. However, the 

burden of chronic disease is disproportionately higher in the elderly, and concomitantly leads to increased costs of care and utilization of services in that population 

segment. McKesson believes that Medicare rates of hospitalization and emergency 

room use can be reduced, sometimes dramatically, in patients with chronic diseases, 

particularly those with congestive heart failure, asthma, diabetes, and COPD. These 

conditions are highly prevalent in the Medicare population, and the avoidance of unnecessary hospitalizations and emergency room visits can result in sizable savings 

while improving the quality of lives of Medicare beneficiaries. For example, for one 

Medicare+Choice client, we demonstrated a 48% reduction over six months in bed 

days in a program designed to treat congestive heart failure. 

The Medicare population is expected to double over the next 30 years.1 Disease 

management programs can serve as a fiscally prudent measure to temper the rate 

of growth in the costs of Medicare services. In addition, when a prescription drug 

benefit is created for Medicare recipients, disease management programs can help 

rationalize the appropriate use of medications and greatly improve healthcare outcomes. 

Medicaid

As states continue to grapple with rising Medicaid expenditures, disease management can serve as an important service to control health care costs. McKesson believes that the greatest opportunity is in the Medicaid elderly and disabled catVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00093 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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2 Hoffman C, Schlobohm A. Uninsured in America: a Chart book. 2nd ed. Washington, D.C.: 

Kaiser Commission on Medicaid and the Uninsured, March 2000. 3Medicaid: a primer. Washington, D.C.: Kaiser Commission on Medicaid and the Uninsured, 2001. 4 National Rural Health Association. Annual Report 2000. 

egories. Eleven million of the 40 million Medicaid recipients qualify for Medicaid on 

the basis of disability or age.2 Despite being roughly 25% of the population, this 

group accounts for nearly 66% of the Medicaid costs.3 Furthermore, very few disabled and elderly Medicaid recipients are covered by managed care organizations 

due to their very high costs and pre-existing conditions. Therefore, these vulnerable 

patients lack many of the care coordination services common to managed care organizations. Disease management programs provide patient counseling, care coordination, and a patient advocate who is able to counsel patients and help them navigate 

through a complex health care system. 

McKesson has several Medicaid clients. We have contracted directly with the state 

in some cases and with Medicaid managed care plans in other cases. Although Medicaid reimbursements are lower than reimbursements from commercial payers, 

there is usually higher utilization of services in Medicaid programs. In an asthma 

disease management program conducted for Medicaid recipients in a Mid-Atlantic 

state, we have demonstrated a 37% reduction in hospitalizations and a 22% reduction in emergency room visits, which resulted in a 19% return on investment for 

the health plan. 

Government Employees

McKesson also recommends that the benefit design for Federal Government employees be expanded to include disease management services. Focusing on conditions such as asthma, diabetes, congestive heart failure, and COPD can result in 

net reductions in health care costs and an improvement in the health status of employees or dependents with these conditions. 

We believe that current and former military personnel also should be included in 

this initiative. The Veterans Health Administration (VHA) system is rapidly expanding and faces increased costs associated with providing care for veterans, particularly those who served in World War II and Korea. Tricare and the VHA are 

beginning to conduct pilot trials of disease management services and have solicited 

bids from companies including McKesson. We strongly support expansion of these 

trials with a focus on solutions that are scalable across wide geographic settings. 

Rural, underserved populations

Disease management services are particularly relevant in underserved areas. For 

the 61 million Americans who live in rural settings, access to health care is an issue 

of major concern.4 In these settings, investments to promote patient self-management and education are particularly fruitful. By increasing compliance and self-reliance, disease management can help lessen the demand and, therefore, the need, for 

scarce health care resources. Telenursing services in disease management programs 

are able to efficiently and economically overcome geographic barriers for care provision. Disease management services can act as a physician extender in these underserved areas. McKesson strongly recommends the implementation of disease management programs in rural, underserved areas and suggests pilot projects to demonstrate the effectiveness of disease management services in these settings. 

Conclusion

Disease management has emerged as a private sector solution that provides incremental technology and professional resources to improve care for those with chronic 

conditions. These services improve the health of patients by decreasing symptoms 

and improving their quality of life. Disease management also reduces the frequency 

of emergency room visits and hospitalizations as patients learn to effectively manage their diseases. Overall, we believe that the savings from reductions in hospitalizations and emergency room visits outweighs the costs of delivering these programs. 

McKesson urges the creation of a disease management benefit for Medicare recipients. The impact of these programs is greater for vulnerable populations such as the 

poor, elderly, and disabled, where the frequency and costs of chronic conditions are 

higher and health care delivery is generally highly fragmented. The outcomes-focused, evidence-based interventions provided in disease management programs improve patients’ ability to participate in their care and help physicians by reinforcing 

medical recommendations. As Congress grapples with improving the quality and delivery of health care, we support the greater utilization of disease management proVerDate 0ct 09 2002 01:30 Oct 26, 2002 Jkt 082324 PO 00000 Frm 00094 Fmt 6633 Sfmt 6621 E:\HR\OC\A324.XXX A324
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grams as a vital way to enhance care outcomes for the elderly while concurrently 

reducing the cost of delivering better care. 

We look forward to working with members of this subcommittee as you address 

these important concerns.

RMS Disease Management Inc., an affiliate of Baxter Healthcare Corporation, 

Statement of RMS Disease Management Inc., McGaw Park, Illinois 

f provides disease management (DM) services for patients with chronic kidney disease. Founded in 1996, RMS coordinates care for approximately 5,000 patients 

across the United States. Clients include regional and national health plans as well 

as the State of Florida’s Medicaid program. 

We strongly support the Subcommittee’s efforts to expand disease management 

programs in the Medicare fee-for-service (FFS) population. Disease management has 

been proven to improve both clinical and economic outcomes while concurrently increasing patient and provider satisfaction. Applying DM to the FFS population offers the government a singular opportunity to improve the quality of care for Medicare beneficiaries, while also addressing increasingly critical funding issues. 

Comprehensive disease management programs directly address the issues raised 

in the March 2001, Institute of Medicine 2 Report ‘‘Crossing the Quality Chasm: A 

New Health System for the 21st Century’’. Specifically, DM programs supply the patient centered data, necessary information systems, aligned incentives, and integrated care coordination that the report authors believe are required to close the 

chasm. 

End-stage renal disease provides an ideal opportunity for applying disease management principles due to the characteristics of this population and its care. These 

characteristics include:

– A clearly defined population using the HCFA 2728 form

– Patients typically have multiple co-morbidities in addition to their renal disease which requires complex care that takes place in a variety of care settings

– Care delivered is fragmented as a result of multiple physician specialists and 

allied care professionals working in an uncoordinated manner

– High annual costs

– Incomplete capture of patient care data in one medical record file

– Important need for ongoing patient counseling and education

The RMS program has been designed and implemented to address all of these 

issues and needs. RMS uses evidence-based medicine, state-of-the-art information 

technology, and highly experienced nurses to provide care support for renal patients 

and their attending physicians 24 hours per day, 7 days a week. Patients receive 

education, counseling, and care coordination based on individual care plans created 

by their physicians. Physicians receive incremental nursing support and comprehensive patient data that otherwise would not be available to them. Activities in the 

field are overseen by board certified nephrologists and a nationally recognized Medical Advisory Board. 

Program results published in the peer-reviewed American Journal of Kidney Diseases, May 2001, showed a 35 percent reduction in hospitalization and 20 percent 

reduction in mortality for patients whose care was coordinated by RMS. Emergency 

room visits have dropped by over 75 percent compared to the pre-program baseline. 

Further, self-reported patient and provider satisfaction is also consistently very 

high. 

We believe expanding the availability of disease management to the fee-for-service 

ESRD population will achieve similar benefits to those that have been obtained in 

managed care populations. In its deliberations, we would suggest the Subcommittee 

consider the following:

(1) Establish high standards for defining disease management programs. There 

is widespread variability as to what constitutes ‘‘true’’ disease management. 

As a starting point, we propose that the accreditation guidelines established 

by NCQA be used as a baseline.

(2) Ensure that payment mechanisms for patient categories are properly risk 

adjusted and funded. For example, current ESRD AAPCC rates do not fully 

account for the impact of diabetic status, MSP, and transplant. This results 

in wide disparities between the actual cost of care and the AAPCC payments for ESRD patients.

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(3) Create payment methodologies that reflect how most disease management 

organizations are structured. Unlike managed care organizations, most disease management organizations are not set up to contract with providers or 

pay claims.

(4) View disease states in their totality. In the case of chronic kidney disease, 

costs can be reduced significantly if disease management intervention begins 

before onset of ESRD and dialysis. Currently, the care and payment systems 

are not constructed in a way that captures patients before the emergent 

need for dialysis. Therefore, the appropriate patient care and education does 

not take place, which results in unnecessarily high costs and sub-optimal 

clinical outcomes.

Again, RMS is strongly supportive of the Subcommittee’s initiative to capture the 

benefits of disease management for the fee-for-service population and appreciates 

the opportunity to comment.

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