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USING INNOVATION TO REFORM MEDICARE 

PHYSICIAN PAYMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JULY 18, 2012 

Serial No. 112–167 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

EDOLPHUS TOWNS, New York 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 4 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 5 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 8 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 136 

WITNESSES

Scott P. Serota, President and Chief Executive Officer, Blue Cross and Blue 

Shield Association ................................................................................................ 9 

Prepared statement .......................................................................................... 12 

Bruce Nash, Senior Vice President and Chief Medical Officer, Capital District 

Physicians’ Health Plan ....................................................................................... 36 

Prepared statement .......................................................................................... 38 

David L. Bronson, President, American College of Physicians ............................ 42 

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

David B. Hoyt, Executive Director, American College of Surgeons ..................... 72 

Prepared statement .......................................................................................... 74 

Kavita Patel, Fellow, Engelberg Center for Health Care Reform, The Brookings Institution ..................................................................................................... 87 

Prepared statement .......................................................................................... 89 

SUBMITTED MATERIAL

Statement, dated July 18, 2012, of Garrison Bliss, President, Qliance Medical 

Group, submitted by Mr. Pitts ............................................................................ 102 

Letters of March 30, 2011, from Ms. Sebelius to Mr. Pallone and Mr. Waxman, submitted by Mr. Pallone ........................................................................... 131 

(1) 

USING INNOVATION TO REFORM MEDICARE 

PHYSICIAN PAYMENT 

WEDNESDAY, JULY 18, 2012 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:02 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Burgess, Shimkus, Rogers, Murphy, Blackburn, Gingrey, Latta, McMorris Rodgers, Lance, 

Cassidy, Guthrie, Pallone, Dingell, Towns, Engel, Schakowsky, 

Christensen, and Waxman (ex officio). 

Staff present: Julie Goon, Health Policy Advisor; Debbee Keller, 

Press Secretary; Ryan Long, Chief Counsel, Health; Katie Novaria, 

Legislative Clerk; John O’Shea, Professional Staff Member, Health; 

Andrew Powaleny, Deputy Press Secretary; Chris Sarley, Policy 

Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; Phil Barnett, Democratic Staff Director; Alli Corr, 

Democratic Policy Analyst; Amy Hall, Democratic Senior Professional Staff Member; Karen Lightfoot, Democratic Communications 

Director and Senior Policy Advisor; Karen Nelson, Democratic Deputy Committee Staff Director for Health; and Roger Sherman, 

Democratic Chief Counsel. 

Mr. PITTS. The subcommittee will come to order. Chair recognizes himself for an opening statement. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

There is no disagreement that the current Medicare physician reimbursement system, the Sustainable Growth Rate, or SGR, is broken. Time and again, Congress has had to override scheduled cuts 

in physician reimbursement to avert disaster, and we will have to 

do it again before the end of this year. Absent congressional actions, physicians will face a 27 percent cut starting January 1, 

2013. 

There is also no disagreement that the SGR needs to be replaced 

with something that actually is sustainable, and reimburses for 

outcomes and quality instead of just volume of services. 

The focus of today’s hearing is not the well-documented deficiencies of the current system, it is about the future. What should 

the new physician payment system look like, and what can we 

2 

learn from the private sector’s experience in this area that may 

serve as a roadmap for reform? What has been tried and failed, 

and what has worked? 

Our witnesses today are here to share with us the innovative 

payment systems and care delivery models they have experimented 

with, and their outcomes. I want to thank all of them for their testimony. 

So thank you. I yield the remainder of my time to the vice chairman of the subcommittee, Dr. Burgess. 

[The prepared statement of Mr. Pitts follows:] 

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OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for the recognition. It has 

been a very interesting congressional term. We are now 18 months 

into it. I think this term I have seen more work done on this problem than I have at any other time that I have been in Congress, 

but we are still pretty far away from the goal that we expect to 

achieve. Everyone on both sides of the aisle accepts the premise of 

the SGR has got to go. The conversation about actual innovative 

replacements that providers in the future—and really, I do want to 

ensure, my vision is that people will have options, that they will 

not see a ‘‘one size fits all’’ that we think is best for their practice, 

but they will actually be able to choose the option that is best for 

their practice. But in the meantime, we have got to sketch out the 

means by which to ensure that Medicare beneficiaries can continue 

to see their physicians. 

We have been in the process of testing models for years. The witnesses at the table also have been in the process of developing 

models for some time, and we expect that they are going to have 

some interesting ideas to share with the committee, and look forward to that. 

But we have got a cut coming in just a few months, and a lot 

of uncertainty as we face elections, while we face expiration of existing tax policy, we have the payroll tax holiday ending, we face 

unemployment insurance needing to be extended, and oh yes, who 

can forget all the collegiality that existed in this body a year ago 

with the discussion of the debt limit? We are likely to face that 

again, but this time, without all of the good feeling that we all had 

last August. 

We could have taken this problem and moved it a little farther 

away from December, recognizing that December is going to be 

such an uncomfortable month for so many reasons. I had—many 

members of this committee had asked for a 2-year extension in December of last year. A 2-year extension passed without a lot of 

other things attached to it so that it would be sure to pass. In fact, 

we could probably do it on suspension on a Monday afternoon. But 

I didn’t get that. We didn’t get that. You didn’t get that. And as 

a consequence, we got a 1-year extension or what ended up being 

a 1-year extension that expires in the middle of this fiscal holocaust at the end of the year. 

So all I would suggest is we know that we are not likely to end 

up doing something that will provide that long-term relief and 

long-term replacement for the Sustainable Growth Rate by December 31. I wish we could, but I have been here long enough to know 

that that is a goal that is going to be difficult to achieve. But what 

I would like to suggest is this month, before the August recess, the 

House of Representatives could pass yet an additional extension to 

give us that 2 years that we asked for in December of last year so 

that we have time to fully vet and evaluate the proposals that are 

before us. The committee staff has done a good job in developing 

some of these ideas. It is now up to us to take them to doctors 

across the country and get their feedback so we get the best possible policy. So I will be introducing that legislation later today or 

this week to extend the SGR for an additional year. 

5 

Mr. Chairman, I thank you for the recognition. I will yield back 

to you the time. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the ranking member of the subcommittee, Mr. Pallone, for 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. Let me associate myself with the remarks of Dr. Burgess. Of course, I don’t know how 

he is paying for the 2-year extension, so I won’t associate myself 

with that until I see what the pay-for is. But I think that what he 

said overall is very true. I think we have to be very honest with 

the physician community. We all agree that the SGR needs to be 

replaced, but you know, the question is is there political will to do 

that, and whether or not it can be done effectively by the end of 

the year with all these other problems that need to be addressed 

out there? It is very questionable. I don’t have any doubt that this 

committee and the members of this committee would like to accomplish that, but I don’t know whether or not the House or the GOP 

leadership, you know, would be willing to put it on the agenda for 

a long-term fix. 

I want to, though, go beyond what Dr. Burgess said and say that 

I also think we have to be very careful that when we talk about 

pay-fors, because pay-fors, it is not only a question of the new formula, but also the pay-for. I think we have to be very careful. We 

need a pay-for that is big. I have always suggested the overseas 

contingency operation fund, or the PEACE dividend, as it is called, 

for the pay-for, because we need a large amount of money. I think 

that this idea of constantly picking at other providers, whether it 

is hospitals or nursing homes, home health care providers, is not 

the way. It bothers me many times when I hear other physicians 

say, ‘‘Well, you know, we can take it from other parts of the health 

care system.’’ I don’t see that. And I would also warn my GOP colleagues that I certainly will not support, and I think it is useless 

politically, to try to take the money away from the Affordable Care 

Act. You know, I don’t want to say for sure, but so many times the 

answer has been, ‘‘Oh, you know, let us get rid of the prevention 

fund, let us get rid of the community health centers, let us get rid 

of, you know, the subsidies or the tax credits that would make premiums more affordable for certain incomes.’’ That is not the answer. I think that the health care system is in crisis, and the other 

providers have the same problems. And so for us to suggest that 

we are going to, you know, go after the ACA or other providers I 

think is really a huge mistake. 

So the question remains, how do we fix it? I don’t think there is 

a ‘‘one size fits all’’ approach. Any new payment system should rely 

on improved outcomes, quality, safety, and efficiency. In addition, 

while there must be fee-for-service within the future payment system, we must stop rewarding doctors for volumes of services. Primary care must be strengthened and given special consideration, 

and a new system must better encourage coordinated care while 

incentivizing prevention and wellness within the patient. 

6 

Now, there a number of innovative programs that are currently 

underway across the country. We will hear today from two private 

payer plans that are learning and building on successes from such 

initiatives as pay-for-performance, patient-centered medical homes, 

bundle payments, and of course, arrangements with accountable 

care organizations. Many of these initiatives recognize the local 

needs of their marketplaces, which is something worthy of consideration moving forward. Local markets have different needs, and 

while one payment model may work in New Jersey, it doesn’t necessarily work in Montana. 

While we are eager to hear from the private sector, we mustn’t 

forget about the delivery system reforms already underway in the 

public sector. The Center for Medicare and Medicaid Innovation 

created by the Affordable Care Act gives CMS the ability to pursue 

many similar demonstration programs in both Medicare and Medicaid. Currently they are testing a few new models, including ACOs 

in the patient-centered medical homes. The ACA also strengthens 

incentives for reporting on quality measures for physicians. Meanwhile, in 2011, Medicare began paying a 10 percent incentive payment of primary care physicians for primary care services nationwide. 

So together, the public and private sectors can and should work 

together to get the health care system on a better path to sustainability. I look forward to hearing today about the exciting work 

being done in this field. I want to thank our witnesses. I want to 

especially note the American College of Surgeons who have taken 

a leading role on conceptualizing a new proposal to replace the 

SGR, which they are going to talk about today. 

And again, Mr. Chairman, I think this is a very important hearing. I appreciate your having it. This committee has worked effectively on dealing with the—with PDUFA and other things on a bipartisan basis. I think we can do the same here. 

I am sorry, I guess I am out of time. 

Mr. PITTS. The chair thanks the gentleman. I now recognize the 

gentleman from Georgia, Dr. Gingrey, for 5 minutes for opening 

statement. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Mr. Chairman, I won’t take the entire 5 minutes, 

but thank you for recognizing me. 

The Sustainable Growth Rate we all know is broken and none of 

us support it, and it must, must go. Therefore, I look forward to 

the testimony of those here today, our witnesses, on what payment 

models might be used to replace SGR. 

I do want to mention one thing. House Republican physicians 

worked very closely with the House leadership last year to put forward a multi-year SGR patch. I think my colleague as I walked in, 

Dr. Burgess, was talking about that. It wasn’t the full repeal that 

I wanted, but it ensured some level of stability for physicians and 

our patients. Ultimately we couldn’t get the Senate on board and 

it failed, as you all know. 

Now we find ourselves facing SGR cuts again in January of 

what, 27.4 percent if something is not done. I urge this Congress 

7 

to put partisan and election politics aside, and let us work together 

to get rid of SGR once and for all. 

I don’t agree with my colleague from New Jersey, the ranking 

member of the Health Subcommittee, in regard to the pay-fors, and 

that—but I do agree with him that that is a huge problem, how we 

are going to pay for the cliff. The last figure I saw of that cliff to 

bring the baseline back down to zero was something of the magnitude of $300 billion, but that OCO money we talked about and 

that got kicked around by the Super Committee, overseas contingency operation, honestly from my perspective, it really looks like 

funny money, very much like funny money. You can’t convince me 

that it isn’t. I agree with Mr. Pallone and his concerns, of course, 

about goring—oxing the gore or goring the ox or whatever of other 

providers within the Medicare program. Every one of them are concerned about cutbacks and taking money out of—whether it is 

home health care or hospice or whatever. I agree with him on that 

point, but I am not for OCO money. 

I will just conclude by saying that myself and the GOP Doctors 

Caucus, my colleagues, 21 of us, will be working with leadership 

again in the House, and also with our Democratic colleagues, because there is no way to get this done in a one-party, Majority 

party effort. This has got to be done in a bipartisan way. And indeed, the House can’t fix the problem alone. It has to be bicameral. 

So Mr. Chairman, thank you for calling the hearing together 

today. This hearing is hugely important. We can all work together—we have to to get this done, and I am looking forward to 

this expert panel of witnesses. 

I yield back, Mr. Chairman. 

Mr. PITTS. Is there anyone else seeking time on this side of the 

aisle? 

If not, the chair thanks the gentleman and recognizes the ranking member of the full committee, Mr. Waxman, for 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I would like 

to start by acknowledging and welcoming the bipartisan interest in 

transforming the Medicare physician payment system from one 

that focuses on rewarding volume to one that focuses on rewarding 

quality and outcomes. 

While Congress has yet to come to a bipartisan agreement on 

how to accomplish the shared goal of repealing and replacing the 

flawed Sustainable Growth Rate, SGR, mechanism, there seems to 

be bipartisan agreement that it should be done. We must find a 

way to end the unsustainable system of cuts that loom over our 

physicians every year. The uncertainty created by the current system serves no one well: the physicians who have no stability in 

payments, the beneficiaries who worry about access to their doctors, and even Congress. Even more encouraging is a bipartisan 

agreement that delivery system reforms, many of which were included in the Affordable Care Act, hold promise in a post-SGR 

world. We must work towards a new way of paying for care for 

8 

both physicians and other providers that encourages integrated 

care, improving care for individuals, improving care for populations, and reducing costs. 

Right now, the way we pay for care doesn’t always support these 

goals. The Affordable Care Act makes major strides to improve the 

way Medicare deals with physicians and other providers. Some of 

the new care models supported by the ACA include Accountable 

Care Organizations, bundled payments, medical homes, and initiatives that boost primary care and encourage paying for value and 

outcomes, not volume. As we will hear today, the private sector is 

exploring these avenues as well. 

I yearn for the day when the Republicans knew how to handle 

this problem. They simply extended the SGR payments and didn’t 

pay for it. They didn’t do a lot of things to pay for what they 

charged to the taxpayers of the United States towards the Medicare prescription drug benefit, SGR, didn’t pay for it. Now they 

want to be sure that every way to pay for this is airtight. Well, it 

is a new day where Republicans are giving us their fiscal responsibility side of things. We need to work together. Our goal should be 

to enact a permanent repeal to the existing flawed physician payment system this year. Let us do it this year. We had chances to 

do it, as Mr. Burgess pointed out, but we couldn’t get the Republican leadership, his Republican leadership, to go along with what 

he and we wanted. So it is time for the Republican leadership to 

recognize this is a problem that we ought to resolve, not just, well, 

I guess, not just kick it down the road, but I guess we would be 

satisfied just for that for a couple years. 

But we got to get on with the job of doing what is responsible. 

I want to yield the balance of my time to Mr. Dingell. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Mr. Chairman, I thank the gentleman from California for his kindness to me. I have a splendid statement. I ask 

unanimous consent that the fullness of it be inserted in the record. 

Mr. PITTS. Without objection, so ordered. 

Mr. DINGELL. I commend my colleagues on the Republican side 

for their desire to keep Medicare fiscally solvent to address the 

SGR problem, and to see to it that we fix the concerns of the medical profession in seeing to it that they are properly compensated. 

Their complaint is a real and a valid one, and it is a thing to which 

we should pay heed. 

As any good physician will tell you, we need to cure the underlying problem, not to just treat the symptoms, and the patchwork 

job that we have done in addressing these problems over the years 

has done nothing but to create a growing and painful problem, 

which gets worse and worse as time passes. So curing the matter 

for once and all with proper attention from this committee, as we 

have done in the past and in a bipartisan fashion, is the way out 

of this thicket. 

I commend my colleagues on both sides of this, and I look forward to working with them towards that very important end. 

Thank you, Mr. Chairman. 

9 

Mr. PITTS. Chair thanks the gentleman, and now will introduce 

today’s panel. First, Mr. Scott Serota is President and Chief Executive Officer of Blue Cross Blue Shield Association. Second, Dr. 

Bruce Nash is Senior Vice President and Chief Medical Officer of 

the Capital District Physicians’ Health Plan. Thirdly, Dr. David 

Bronson is President of the American College of Physicians; then 

Dr. David Hoyt is the Executive Director of the American College 

of Surgeons; and finally, Dr. Kavita Patel is the Managing Director 

for Clinical Transformation and Delivery at the Engelberg Center 

for Health Care Reform at the Brookings Institution. 

Your written testimony will be made matter of the record. We 

ask that you summarize in 5 minutes. Mr. Serota, you are recognized for 5 minutes for your opening statement. 

STATEMENTS OF SCOTT P. SEROTA, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, BLUE CROSS AND BLUE SHIELD ASSOCIATION; BRUCE NASH, SENIOR VICE PRESIDENT AND 

CHIEF MEDICAL OFFICER, CAPITAL DISTRICT PHYSICIANS’ 

HEALTH PLAN; DAVID L. BRONSON, PRESIDENT, AMERICAN 

COLLEGE OF PHYSICIANS; DAVID B. HOYT, EXECUTIVE DIRECTOR, AMERICAN COLLEGE OF SURGEONS; AND KAVITA 

PATEL, FELLOW, ENGELBERG CENTER FOR HEALTH CARE 

REFORM, THE BROOKINGS INSTITUTION 

STATEMENT OF SCOTT P. SEROTA 

Mr. SEROTA. Thank you, Mr. Chairman. 

Mr. PITTS. Poke that button there. 

Mr. SEROTA. Sorry about that. I will try again. 

Thank you, Chairman Pitts, Ranking Member Pallone, and members of the Health Subcommittee for inviting me here to testify 

today. I am Scott Serota, President and Chief Executive Officer of 

the Blue Cross Blue Shield Association, which represents 38 independent community-based Blue Cross Blue Shield companies that 

collectively provide health care coverage for 100 million Americans. 

I commend the subcommittee for convening today’s hearing. 

Blue Plans are leading efforts in their communities to implement 

payment, benefit, and delivery system reforms that will improve 

quality and reign in costs. We believe that Medicare cannot only 

learn from, but also should align with these successful initiatives. 

Today, I would like to focus on three interrelated strategies. 

First, Blue Plans are changing payment incentives by putting place 

models that move away from fee-for-service and link reimbursement to quality and outcomes. The goal is to promote patient-centered care that pays for desired outcomes, rather than the number 

or intensity of service. These payment innovations include pay-forperformance initiatives, bundle payment arrangements in more 

than 32 States, arrangements with accountable care organizations 

in 29 States, and patient-centered medical homes, with Blue Plans 

collectively supporting the Nation’s largest network of medical 

homes in 39 States. These models are driving substantial improvements in care quality, while taking avoidable costs out of the system. For example, CareFirst Blue Cross Blue Shield’s Medical 

Home Initiative includes 3,600 primary care physicians and nurse 

practitioners caring for one million members. Preliminary 2011 reVerDate Aug 31 2005 09:30 May 08, 2014 Jkt 037690 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 F:\112-16~1\112-16~1 WAYNE
10 

sults indicate that 60 percent of the eligible primary care panels 

earned outcome incentive awards, which are based on a combination of savings achieved and quality points. Among these panels, 

costs were 4.2 percent less than expected. In Pennsylvania, 

Highmark Blue Cross Blue Shield’s Quality Blue pay-for-performance program has prevented 42 wrong-side surgeries, reduced hospital-acquired infections, raised breast cancer screening rates nine 

points above the national average, all while saving $57 million over 

4 years. 

Our second strategy is to partner with clinicians to give them individualized support to be successful under new payment and care 

delivery models. This includes sharing data about a patient’s full 

continuum of care, helping improve the way care is delivered, enhancing care coordination, and providing powerful health IT capabilities. 

For example, a powerful way to improve the quality of care for 

beneficiaries with chronic illness is to enhance care coordination. 

Horizon Blue Cross Blue Shield of New Jersey has partnered with 

Duke and Rutgers Universities to train at least 200 nurses as practiced-based population care coordinators in medical homes and 

other settings. This first of its kind nurse training curriculum recognizes the workforce enhancement necessary to enable a statewide 

expansion of medical homes. 

None of these innovations would succeed without our third strategy, engaging patients. This includes providing information on cost 

and quality to help patients make informed decisions about their 

care, tiered benefit designs that encourage patients to seek care 

from high quality providers, and tools for members to improve their 

health and wellness. For example, Blue Cross Blue Shield Association’s national consumer cost tool lets members obtain information 

on estimated costs for more than 100 of the most commonly billed 

elective procedures for hospitals, ambulatory surgery centers, and 

freestanding radiology centers in nearly every U.S. zip code. In addition, Blue Plans are using health informatics from a database of 

claims data for more than 110 million individuals nationwide collected over a 7-year history. The analytics capability made possible 

by Blue Health Intelligence, or BHI, are resulting in healthier lives 

and more affordable access to safe and effective care. For example, 

BHI collaborated with Independence BlueCross in Pennsylvania to 

determine the best-performing facilities in bariatric surgery. Looking at 3 years of data, BHI analyzed potentially avoidable complications at 214 facilities and identified Pennsylvania’s CrozerChester Medical Center as having an extraordinarily low complication rate for bariatric surgery, just four-hundredths of a percent 

compared to the nationwide average of 6.7 percent. We designated 

Crozer as a best-in-class provider in this specialty under the Blue 

Distinction Initiative, which encourages patients to seek care from 

high-quality providers. 

Achieving a high-Squality, affordable care system will require a 

multi-faceted approach, using all the strategies that I have outlined. Sustaining and building on these successes will require a 

continuously evolving approach of fine-tuning strategies and implementing new ones. We believe a compelling opportunity exists to 

accelerate Medicare’s adoption of these private sector initiatives. 

11 

Payment approaches and technical assistance must be adapted to 

fit local delivery system conditions, which vary widely. This assumes patients can meet practices where they are, rather than attempting to overlay a one size fits all solution that may not be 

workable. The time is right to accelerate the pace of reform for 

Medicare, and we are pleased that Blue Plans are participating in 

pilots to test these approaches, and urge successful approaches be 

expanded rapidly beyond pilot markets. 

I appreciate the opportunity, Mr. Chairman. Thank you very 

much. 

[The prepared statement of Mr. Serota follows:] 

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Mr. PITTS. Chair thanks the gentleman. I now recognize Dr. 

Nash for 5 minutes for an opening statement. 

STATEMENT OF BRUCE NASH 

Mr. NASH. Good morning. My name is Bruce Nash, and I am the 

Chief Medical Officer of Capital District Physicians’ Health Plan, 

which is based in Albany, New York. CDPHP, as we are known, 

is a not-for-profit physician-sponsored network model plan with 

close to 400,000 members who live in the 24 counties in upstate 

New York. We are the capital district’s largest provider of managed 

commercial Medicare and Medicaid products. I also serve as the 

Chairman of the Medical Directors’ Council for the Alliance of 

Community Health Plans, or ACHP, whose members include 22 of 

the Nation’s leading non-profit regional health plans, who share 

our commitment to the Triple Aim, a concept created by the Institute for Health Care Improvement, that is improving the patient’s 

experience of care, improving the health of populations, and reducing the per-capita cost of care. 

CDPHP was founded by the physicians of the Albany County 

Medical Society 28 years ago, and to this day is governed by a 

board whose majority are practicing physicians who are elected by 

their peers. Our board chair is also required to be a practicing physician. As a consequence, we have enjoyed a close relationship with 

our provider community, enabling us to deploy market-leading initiatives that improve the care delivery for our members, despite not 

directly employing any of the clinicians. This has led to us being 

recognized as a top-ranked health plan in the State and the Nation 

for our member satisfaction and quality metrics. 

Four years ago, our board emerged from a strategic planning session with a directive for management to address the impending primary care crisis. It was noted that our local medical school was no 

longer graduating significant numbers of new physicians who were 

choosing primary care as a career. While the causes for this were 

multiple, we chose to focus on improving a primary care physicians’ 

income potential. It was clear that for this to be accomplished it 

would have to be funded by changing the way physicians practice 

with more effective and efficient care as a result. This began the 

program that we later labeled our Enhanced Primary Care program, or EPC. 

We began with an initial pilot of three practices, and over a 2- 

year period of time were able to demonstrate an improvement in 

14 of 18 specific quality metrics; a 15 percent reduction in hospital 

utilization; a 9 percent reduction in emergency department usage; 

a 7 percent reduction in the use of advanced imaging. All of this 

resulted in an $8-per-member-per-month savings in total health 

care costs. 

On the strength of these early data, CDPHP expanded its EPC 

program by establishing training programs for selected practices 

lasting 12 months and requiring significant commitment of time 

and effort from the practices as they learned the basics of Enhanced Primary Care. We currently have 75 such practices, representing 384 providers and almost 100,000 of our members. We 

are now launching our next cohort which will add an additional 70 

practices. 

37 

While much of what I have described is common to many successful patient-centered medical home initiatives nationally, we believe our unique contribution to this effort has been the creation 

and deployment of a novel reimbursement methodology. This model 

involves a risk-adjusted global payment for all services that the 

physician provides, in conjunction with a significant bonus based 

upon the elements of the Triple Aim, the patient’s experience of 

care, the quality, and the cost efficiency. It creates an opportunity 

for a physician to enhance his or her reimbursement by an average 

of 40 percent. 

Our base payment is a unique global payment to the practice for 

each of their patients. This is driven by a severity factor that was 

developed for our use by the scientists associated with Verisk 

Health, Inc., a global analytics firm. This severity score predicts 

the amount a primary care physician should be paid for a specific 

patient based upon the diagnoses of that patient. This score is then 

multiplied by a conversion factor to determine the payment for that 

given patient based upon their plan type, that is, Commercial, 

Medicare, or Medicaid, and we pay this to the practice on a monthly basis. 

We still pay fee-for-service for a small subset of physician services, about 15 percent. These payments represent things that we 

would like to incent the primary care physicians to do in their office as opposed to referring to a specialist, such as minor skin biopsies, or for the acquisition cost of things like immunizations. 

The bonus or pay-for-performance aspect of the model is focused 

on the Triple Aim. We measure the satisfaction of the practice’s patients to determine bonus eligibility for the practice. Currently we 

utilize HEDIS metrics to measure the quality of care delivery. A 

weighted average of 18 distinct metrics creates a quality score for 

the practice. Our efficiency metric is an output of our Impact Intelligence software, which accomplishes the required risk adjustment 

across the total cost of care. The annual bonus payment to a practice is determined in a manner that has been described as a ‘‘tournament’’ system, simply said, practices need to perform better than 

other practices in the network to achieve their optimal payout. 

Our initial data for the EPC program was based on a population 

of only 12,000 members. We are fortunate that the Commonwealth 

Fund has provided a grant to an external evaluator, Dr. David 

Bates of the Brigham and Women’s Hospital, to evaluate our 2012 

experience. These data will become available in the latter half of 

2013. 

CDPHP has also been active in the development of alternative 

reimbursement models for certain specialist and hospital partners. 

While we have yet to develop the experience that we have with the 

EPC program, we firmly believe that all components of the delivery 

system need to engage with us in payment models that align financial incentives with the needs of our communities. 

Thank you for inviting me to be here today, and I look forward 

to your questions. 

[The prepared statement of Mr. Nash follows:] 

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Mr. PITTS. Chair thanks the gentleman, and now recognizes Dr. 

Bronson for 5 minutes for opening statement. 

STATEMENT OF DAVID L. BRONSON 

Mr. BRONSON. Good morning. I am David Bronson, President of 

the American College of Physicians, the Nation’s largest medical 

specialty organization, representing 133,000 internal medicine specialists who care for patients in primary and comprehensive care 

settings, internal medicine subspecialists, and medical students 

who are considering a career in internal medicine. I reside near 

Cleveland, Ohio. I am Board-certified in internal medicine and 

practice at the Cleveland Clinic on the downtown campus. I am 

also President of Cleveland Clinic Regional Hospitals, and a Professor of Medicine at the Cleveland Clinic Lerner College of Medicine of Case Western Reserve University. Thank you very much for 

allowing us to share our perspective. 

This morning, instead of rehashing all of the reasons why the 

SGR must be repealed, I will focus on the innovative solutions 

being championed by ACP and others—others at the table, I might 

add—within the medical profession. 

First, ACP recommends that the patient-centered medical home 

model of care be supported for broad Medicare adoption. Patientcentered medical home is an approach to providing comprehensive 

primary care in a setting that focuses on the relationships between 

patients, their primary care physician, and other health care professionals. This care is characterized by the following features: a 

personal physician for each patient, physician-directed medical 

practice where the personal physician leads a team of individuals 

trained to provide comprehensive care, and a place where the treatment team can assist the patient in meeting their specific health 

care needs. The patient-centered medical home practices provide 

increased access to care to prevent avoidable emergency room and 

hospital use, processes to facilitate care coordination amongst all 

physicians, and address chronic illnesses present within the Medicare population, including patient self-management education. 

These, and other features of the medical home, contribute to the increasing quality of care and reducing avoidable costs to patients 

and health systems. 

Patient-centered medical homes use quality management tools 

such as registries and outcomes reporting to proactively manage 

the health care of a whole practice’s population. There is an extensive and growing body of evidence on the medical home’s effectiveness in improving outcomes and lowering costs. To cite just one example, in Genesee County, Michigan, the Genesee Health Plan in 

collaboration with local physicians and hospitals formed the 

Genesys HealthWorks. This model, which is built upon a strong, redesigned primary care infrastructure, has demonstrated both significant cost savings and improved quality. 

Many large insurers, including United Health, WellPoint, 

CareFirst, and Blue Cross Blue Shield affiliates, are in the process 

of scaling up their efforts in the medical home to thousands of primary care physician practices in tens of millions of ruralities across 

the country. In my practice at the Cleveland Clinic, all the primary 

43 

care practice physicians taking care of adults are certified by the 

NCQA at the highest level as medical homes. 

In the public sector, CMS Innovations Center is in the process 

of enrolling practices in its Comprehensive Primary Care Initiative. 

Primary care practices enrolled in this initiative will receive new 

public and private funding for primary care not included—primary 

care functions not included in the fee-for-service payments and will 

have the opportunity to share net savings generated through the 

program. Fifty-four commercial and State insurers are joining with 

Medicare and support approximately 500 participating practices in 

seven markets. 

The bottom line is that the medical home is no longer just an interesting concept, but a reality for millions of Americans and thousands of practices. The commercial insurers are driving these innovations in many markets. This can also become a reality for Medicare patients. 

To accomplish this, Congress needs to accelerate Medicare’s 

adoption of the medical home model by providing higher payments 

to physician practices that have achieved recognition by deemed 

private sector accreditation bodies consistent with the standards to 

be developed by the Secretary. In a subsequent stage, performance 

metrics could be added and incorporated into the Medicare payment policies. 

By supporting the PCMH, Medicare will accelerate the national 

adoption of this innovative approach to improving the health care 

system. The goal should be to promptly implement the payment 

policies to steadily grow physician and patient participation in 

medical homes over the next several years. 

Second, Congress should enact payment policies to accelerate the 

adoption of the related medical home neighborhood. This concept is 

essential to the ultimate success of the medical home. It recognizes 

that specialty and subspecialty practices and others that provide 

treatment to the patient be recognized and provided with incentives to work together in a collaborative manner. With the patientcentered home neighborhood program, primary care physicians and 

specialists work together to proactively reduce duplication, enhance 

quality, and reduce preventable hospitalizations. 

Specifically, ACP proposes that Congress help increase non-primary care specialists’ participation in the medical home neighborhood project by offering higher payment levels for those services. 

In my practice, PCPs and cardiologists specializing in heart failure 

have developed coordinated early intervention programs that have 

improved quality and reduced preventable admissions, and saved 

health care dollars. 

Third, Congress should establish Medicare incentives to physicians to incorporate evidence-based guidelines in national specialty 

societies and to share decision-making with the patients. We think 

that is a vital step that is important to get there. 

And finally, ACP believes that additional steps should be taken 

now to help physicians to move toward models aligned with value 

for patients, as well as awarding those who have taken leadership 

and risk in participating in new models, like medical homes and 

ACOs. Even as new models are being more thoroughly developed 

44 

and pilot tested, physicians could get higher updates for demonstrating they successfully participated in such programs. 

In conclusion, ACP believes that for the first time in many years, 

we can begin to see a vision for a better future where the SGR no 

longer endangers access to care, Medicare recognizes and supports 

the value of primary and coordinated care, and where every person 

who is enrolled in Medicare has access to a highly-functioning primary care practice through certified medical homes and other 

promising care coordination models. The current system disincents 

the use of modern practice approaches that are proven to improve 

quality, prevent hospitalization, and save lives. 

Thank you for your time, and I am pleased to answer questions. 

[The prepared statement of Mr. Bronson follows:] 

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Mr. PITTS. OK. Chair thanks the gentleman. Dr. Hoyt is recognized for 5 minutes. 

STATEMENT OF DAVID B. HOYT 

Mr. HOYT. Chairman Pitts, Ranking Member Pallone, and members of the committee, I wish to thank you for inviting the American College of Surgeons to discuss the role of quality and improving the Medicare physician payment system. My name is David 

Hoyt. I am a trauma surgeon and the Executive Director of the 

American College of Surgeons. The ACS appreciates your recognition that the current Medicare physician payment system and its 

sustainable growth rate formula are fundamentally flawed. We 

wish to be a partner in the effort to develop a long-term solution 

that improves the quality of care while helping to reduce costs. My 

comments today will focus on the College’s efforts in the area of 

quality improvement and the use of an ACS program to propose a 

Medicare physician payment proposal called the Value Based Update, or VBU. 

Our belief is that any new payment system should be part of an 

evolutionary process that achieves the ultimate goals of increasing 

quality for the patient and reducing growth in health care spending. Over the past year, we have improved our quality improvement principles into the VBU, a Medicare physician payment reform proposal. Our proposal is predicated on Congress finally eliminating the current SGR formula and fully offsetting the cost of permanent repeal. I will caution you that this is still a draft proposal. 

We look forward to working with Congress and other stakeholders 

to continue to develop this option. 

In developing the VBU, we took the lessons learned in the American College of Surgeons National Surgical Quality Improvement 

Program, or NSQIP, and other quality improvement efforts and 

sought to expand them into the larger provider community. At the 

outset, we had a number of key concepts in mind. To be practical, 

we felt that the proposal must be patient-centered, politically viable, responsive to the changing needs of the health care system, 

and inspired by quality. Specifically, our proposal first compliments 

the quality-related payment incentives in current law and regulation, while making necessary adjustments in the current incentive 

programs to facilitate participation by specialists. Secondly, it incorporates the improvement of quality and the promotion of appropriate utilization of care into the annual payment updates. Third, 

it accounts for the varying contribution of different practices to the 

ability to improve care and reduce costs, and finally, it creates a 

mechanism to incentivize the provision of appropriate services that 

primary care can bring to the management of increasingly more 

complex medical populations. 

The VBU accomplishes these goals by allowing physicians who 

successfully participate in CMS quality programs to choose quality 

goals for the specific patients or conditions they treat. Rather than 

basing compensation on overall volume and spending targets, the 

VBU bases performance on carefully designed measures. The VBU 

is designed to break down the—of care among physicians and to 

begin to measure service lines of care. 

73 

The central component of the VBU is the Clinical Affinity Group, 

or CAG. Each CAG will have its own patient-oriented, outcomesbased, risk-adjusted quality measures designed to foster continuous 

improvement and help lower costs. These measures will be crafted 

in close consultation with the relevant stakeholders, including the 

specialty societies, who in many cases are already developing measures and other quality programs on their own. Providers will select 

their Clinical Affinity Group, but will have to meet certain eligibility requirements, based on patients they see and conditions they 

treat. Physicians whose specialties would work in concert to meet 

specific quality measurement goals which have met would improve 

care and help drive down the cost of care. Physicians would be 

measured against benchmarks that both occur at a national and a 

regional level, allowing for continued innovation with medical communities. Finally, once implemented, physicians will have the opportunity to select their CAG on an annual basis. Goals can be adjusted regularly to ensure that the quality of care provided to the 

patient is continuously improving. Annual updates would then be 

predicated on this quality improvement. We believe this kind of a 

system will take 5 to 7 years to fully implement. 

The College strongly believes that improving quality and safety 

offers the best chance for transforming our health care system. 

Cost reduction alone cannot be the primary driving force of change. 

Change must instead be driven by quality measurement. The ACS 

has a rich history in quality improvements, and we have distilled 

what we have learned into four basic principles: first, set appropriate standards; second, build the right infrastructure to deliver 

the care; third, use the right data to measure performance; and 

fourth, expose yourself to external verification through peer review. 

The ACS NSQIP program is built on these principles, and is the 

prime example of how properly structured quality improvement 

leads to cost savings. Participating hospitals have been seen to reduce expensive complications, and it is these same principles that 

we are, in this program, promoting for a Medicare physician payment system. 

Our next payment system should focus on individual patients 

and patient populations, and rely on physician leadership to 

achieve improved outcomes, quality, safety, efficiency, effectiveness, 

and patient involvement. Improving outcomes in care processes and 

slowing the growth of health care spending are, in fact, complementary objectives. 

Thank you again, Mr. Chairman, for the opportunity to participate in this hearing. 

[The prepared statement of Mr. Hoyt follows:] 

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Mr. PITTS. Chair thanks the gentleman, and now recognizes Dr. 

Patel for 5 minutes for opening statement. 

STATEMENT OF KAVITA PATEL 

Ms. PATEL. Thank you, Chairman Pitts, Ranking Member 

Pallone, and members of the Health Subcommittee for inviting me 

to testify today on this important topic. My name is Kavita Patel, 

and I am a fellow at the Engelberg Center for Health Care Reform 

at the Brookings Institution, and a practicing primary care physician. 

Industries are often challenged with redefining what their business models are, and how they produce value. Health care is at this 

crossroad now. As a country, we are presented with an opportunity 

to make care and how we pay for it more rational, more productive, 

and better able to meet the needs of the American people. I would 

like to highlight the following key points, and then elaborate with 

a couple of clinical examples to illustrate a pathway forward in the 

near and short term, away from our current fee-for-service system. 

One thing that is very clear is that our current reimbursement 

system does not incentivize the type of clinical practice efficiency 

that promotes value in care. We have heard from my other panelists, and as all of you have testified yourselves, this is a fact. 

Number two, innovations in clinical practice must be paired with 

timely and usable data from CMS and other payers, robust quality 

metrics and transparent measurement that is consistent. The timeliness and transparency of this is essential. Receiving data a year 

or even 6 months after your clinical practices are going on is not 

going to help physicians and other clinicians change the way they 

deliver care in that moment, and this has been an often criticized 

setback from a multitude of payers. 

Third, over the next several years—not decades, not even more 

than 5 years—I would say over the next several years we must migrate towards a model that deals with coordination of care, as 

other panelists have outlined, but more importantly, sets a sight on 

translating that coordination of care into a larger, episodic or more 

globally-based payment model that takes into consideration the 

very flexibilities that we need for different types of clinical efficiencies. One size does not fit all, and we must therefore allow for 

flexibility in this transition. In this process, however, the importance of taking what we are currently doing right now and translating that into something that is more coordinated towards the 

path of flexibility is the way to move forward today from our current system. 

For example, the American Board of Internal Medicine Foundation has already called upon a number of specialties to say what 

are we doing right now that we do not need to be doing? This is 

something that the professional societies have corralled around to 

say, ‘‘Here are the top five things we each know that we do not 

need to be doing.’’ This is a perfect basis from which we can take 

current reimbursement and translate that by clinically evidence-informed models into a different form of payment towards that pathway for more coordinated care. 

I will offer you an example in cardiology, since that gives us a 

great way of identifying one, some that the professional societies 

88 

have agreed to. For example, in cardiology, a universal recommendation was to not perform stress cardiac imaging or advanced noninvasive imaging in the initial evaluation of patients 

without cardiac symptoms unless high risk cardiac markers are 

present. Sounds very straightforward; however, this is a very costly 

expense to Medicare today. So translating some of these services 

that have been brought forward by physicians and other clinical 

leaders into a case-based payment could get us on a pathway away 

from what we currently do today. Two practices in very different 

parts of the country are already doing this in cardiology, and have 

found reductions in cardiac spending on the level of millions of dollars, but they can’t get payers to take them up on it. They are simply proposing a novel way to translate how they deliver care to patients with chest pain and with congestive heart failure with communications between primary care physicians, cardiologists, 

hospilists, surgeons, and other specialists. A way to communicate 

through test messaging, e-mail, when we need to have a consult 

with a cardiologist, allowing for primary care physicians to be able 

to readily access that specialist and open an honest, timely delivery 

of data between physicians will allow for this type of care coordination that I described, all with the purpose of helping to teach clinicians how they can better reduce the numbers of services that they 

provide that they have acknowledged that do not provide value. 

That is one example in cardiology. 

The second example, a short one, in primary care and behavioral 

health. We have a critical shortage of psychiatrists and mental 

health professionals in this country, yet depression and other mental illnesses are an overwhelming problem in primary care. Translating some of what we currently do to allow for better collaboration between a telepsychiatrist, for example, who does not need to 

see a patient, and a primary care physician to offer advice for high 

risk management is exactly the type of payment model that can 

move us away from our fee-for-service system. 

I have many more examples with tangible savings that could be 

accomplished today; however, payers, including those that are public and private, need to be responsive to do this, and it can start 

with action by Congress. 

I hope that I have illustrated that not only does one size not fit 

all, but that there are absolutely elements of our current reimbursement system that we must retain in order to improve. And 

that instead when we give providers more flexibility, we can accomplish this in both the short term as well as deal with what we have 

started with the SGR. 

I thank you and welcome any questions. 

[The prepared statement of Ms. Patel follows:] 

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Mr. PITTS. The Chair thanks the gentlelady, and that concludes 

the opening statements. 

I have a unanimous consent request. The chair requests the following statement be introduced into the record. It is a statement 

by Garrison Bliss, M.D., President of Qliance Medical Group, Seattle, Washington. You have seen it. Without objection, it is so ordered. 

[The information follows:] 

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Mr. PITTS. I will now begin the questioning. I recognize myself 

5 minutes for that purpose. 

Mr. Serota, relatively small number of patients, perhaps 10 percent, especially those with chronic conditions and multiple comorbidities may consume the majority of health care services and 

resources. It seems to make sense to target resources toward the 

care of those patients. How do you get physicians across specialties 

to do this? 

Mr. SEROTA. The idea of identifying those high risk patients or 

those high-utilizing patients with chronic conditions is the—essentially the essence of the health informatics that we use for clinical 

care. We work with providers to provide them a comprehensive 

look at their patient populations. All the care that they are receiving, we try to identify those patients which are consuming care, 

and then the genesis or the foundation in a patient-centered medical home is to get the primary care physician to manage all of 

those attributes, all of those providers that are participating in the 

care to ensure that there is a lack of duplication and better coordination of the care that those patients receive. 

Mr. PITTS. Dr. Nash, your model appears to be a form of capitation payment. In the 1990s, capitation arrangements fell into disfavor in many markets because of certain weaknesses. How does 

your model address those weaknesses? 

Mr. NASH. Yes, I stated among many physicians when you bring 

up the ‘‘C’’ word, capitation, there is a reaction, and a lot of that 

is from the experience of the ’90s where many capitations were 

structured around actually putting physicians at risk for services 

that they didn’t directly provide. So they weren’t prepared to handle that financial risk, that is what an insurance company really 

needs to handle. So that is part one. The model we have is really 

only for the services the physician directly provides. 

The second major aspect, though, is capitations of those days 

were really just age/sex adjusted, so that I, as a family doc, you 

know, if I am in my office and I am paid on that model from the 

’90s, if I had a 40-year-old patient come in to see me from a plan 

being paid in that way, a 40-year-old male but I happen to get one 

with diabetes and asthma, I was not paid adequately for that because I was being paid on the average. So this specific model pays 

more for the sicker patient, so we pay significantly more for that 

patient so the doctor can spend more time with that patient. 

Mr. PITTS. Thank you. Dr. Bronson, we hear a lot about how primary care providers are undervalued in comparison to specialists. 

Most people agree that a robust primary care workforce is essential. However, according to the Association of American Medical 

Colleges Center for Workforce studies, there will be not only a 

shortage of about 45,000 primary care physicians; there will also 

be a shortage of 46,000 surgeons and medical specialists in the 

next decade. Yet, in a system with finite resources, how do you increase reimbursement for primary care without reducing reimbursement for specialists, and thereby jeopardizing access to specialty care? 

Mr. BRONSON. Thank you, Mr. Chairman. We strongly believe 

that the patient-centered medical home concept and the value conVerDate Aug 31 2005 09:30 May 08, 2014 Jkt 037690 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 F:\112-16~1\112-16~1 WAYNE
107 

cepts provided here will provide additional funding through shared 

savings opportunities to support those initiatives. 

Mr. PITTS. OK. Dr. Hoyt, how are physicians assigned to the 

Clinical Affinity Groups you described? Do physicians self-assign, 

or are they assigned automatically based on the patients they 

treat? 

Mr. HOYT. You know, we are still having a lot of discussion about 

that, but the general principle you ask about is a physician would 

self-select, and the success of that, we believe, will be in getting the 

types of groups that would be naturally incentivized to work together to lower costs and improve quality would be the premise of 

these groups. 

So you know, there is going to be potentially some conflict in that 

if you are talking about the management of, let us say, coronary 

syndromes, you are going to have specialists that right now are not 

necessarily incentivized to work together, but that is, in fact, the 

concept, that somebody could control what they selected to be a 

part of, whether it is a coronary group or a GI group or oncology 

group, based primarily on what they practice. 

Mr. PITTS. OK. And Dr. Patel, one major criticism of the ACO 

model is that it is overly prescriptive. It may work in one part of 

the country or for certain medical specialties, but not for everyone. 

Providers often complain that they need to make significant 

changes in their practices in order to comply with ACO requirements. How can Medicare incorporate innovative models that are 

more flexible, and therefore, less disruptive to existing practices? 

Ms. PATEL. Thank you, Mr. Chairman. I think Medicare is doing 

just that with trying to introduce, in addition to the Accountable 

Care Organization model, other such models that incorporate other 

payers such as the Advanced Primary Care Initiative and others 

that are going on as we speak. I do think it is worth noting that 

the Accountable Care Organization movement has blossomed and 

we now have over 2.5 million Medicare lives in the currently funded Medicare shared savings programs and pioneer ACO programs. 

So adding that flexibility I know is critical to ensuring the retention of the clinical excellence in those beneficiaries. 

Mr. PITTS. My time is expired. Chair recognizes the ranking 

member for 5 minutes for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. I am trying to get in 

a bunch of questions here, so I am going to ask you to be brief, if 

you can. I am shortening my questions. 

Many members have supported using—this is for Dr. Bronson 

and Dr. Hoyt. Many members have supported using the OCO funding, the Overseas Contingency Operation funding, to offset the cost 

of repealing the SGR. There are even some Republicans who have 

supported it. So I wanted to ask you, would you support using the 

OCO funding as a way to pay for repealing SGR, and if not, do you 

have an alternative suggestion? Mr. Bronson first, I guess? 

Mr. BRONSON. Thank you, sir. 

Mr. PALLONE. Dr. Bronson. 

Mr. BRONSON. We are supportive of using the OCO concept for 

providing this particular funding that is necessary for this program. I will add, we are not experts in funding and are open to 

other idea. 

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Mr. PALLONE. OK, thank you. Dr. Hoyt? 

Mr. HOYT. Yes, we would support use of that for the offset. 

Mr. PALLONE. Thank you both. 

Now Dr. Bronson, there is a consensus that many of the delivery 

reform models discussed today hold promise for Medicare, however, 

it takes time to disseminate those models nationwide. In the meantime, there is clear evidence that there is a problem with the incentives for primary care payment. Are there steps we can take now 

that will help boost primary care and better reward primary care 

practitioners? 

Mr. BRONSON. We very much believe that this is—the first thing 

we need to do is really fix this SGR problem for all practices. Without doing that, we don’t have the flexibility that we need to go forward and improve primary care as effectively as we could. Supporting the patient-centered medical home initiative is very important. My personal practice, more than half of my patients and internists are Medicare beneficiaries. It is hard to reorganize your 

practice into a—fully into a patient-centered medical home if you 

are not getting reimbursed effectively by your largest payer. We 

need to move fast on this issue. 

Mr. PALLONE. Now the July 6 proposed rule issued by CMS creates a new code for care management post discharge. Do you believe that this new initiative is a good one, or is there anything else 

CMS can do to boost primary care? 

Mr. BRONSON. Well absolutely it is a good one, and a necessary 

one, but it needs to be filtered in—more effort needs to be filtered 

into a comprehensive solution that changes the practice paradigm 

to manage populations and prevent unnecessary—I shouldn’t say 

unnecessary, but preventable utilization. 

Mr. PALLONE. OK. Now I am just going to ask a general question. I don’t know what time is left here for anybody. We all talk 

about getting rid of the SGR, but we really mean simply eliminating the forma that provides a global cap on spending unrelated 

to physician performance or quality. The underlying fee schedule 

which payments are based off would likely still remain. You know, 

we have heard from witnesses at this hearing notice that at the 

heart of the fee schedule we have mis-valued codes and payment 

incentives that still aren’t aligned to value, the right care at the 

right time, and of course, primary care remains undervalued. I 

would like to ask any witness, first, whether you support eliminating the SGR mechanism. I think the answer is yes, so let us 

just go to the second, whether you believe that if the SGR mechanism is eliminated, we will still need to retain the fee schedule, 

and assuming there is agreement to retain the fee schedule, what 

needs to be done to better align payment incentives there? So my 

question is about the fee schedule. I guess I will start with Mr. 

Serota and see how far we go with the time. 

Mr. SEROTA. Well I will try to be brief. I think that the most critical element is to link reimbursement with outcomes and quality, 

and to begin to reimburse providers based on the managing of populations, rather than the episodic care. We can’t get there overnight, so I think the elements of a fee schedule will have to remain 

in place for some period of time as we transition to a differing— 

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nated immediately. But I do think we have to evolve away from a 

fee-for-service model at some point. 

Mr. PALLONE. Dr. Nash? 

Mr. NASH. We have eliminated the fee schedule in the program 

that I am speaking about. You know, it has been well demonstrated that fee-for-service just promotes more care, but I think 

the main method I would give is it limits innovations. It is really 

only rewarding for that face-to-face between the doctor and a patient. It really doesn’t reward for team-based care, it doesn’t reward for telephone care, web based care, a whole variety. So if we 

want comprehensive care, we should pay comprehensively. 

Mr. PALLONE. Dr. Bronson, you may be the last one because we 

are running out of time. 

Mr. BRONSON. I couldn’t agree more with Dr. Nash. We have important shortages in several specialties, primary care, general surgery. Adjustment of fee schedule can help, but you know—in a 

proactive way, but we need to go to a more comprehensive solution 

in the long run. 

Mr. PALLONE. Dr. Hoyt? 

Mr. HOYT. Well, we actually anticipate the need for this in our 

proposal by anticipating the need to adjust primary care. But to 

your question, in the future do we need a way to relatively value 

services, I think we still do because background, education, training, commitment to various kinds of efforts is going to lead to a different valuation of some services, and I think the—our proposal 

would be to have physicians still be in charge of doing that. I realize that that seems self-interested, but we feel that, as evidenced 

through committees like the RUC that that is really what the RUC 

has been able to do. Maybe not always correctly in some people’s 

minds, but it is really intended to try and foster that debate 

amongst physicians what the relative value of a particular service 

is. 

Mr. PALLONE. Thank you. 

Mr. PITTS. Chair thanks the gentleman and now recognizes Dr. 

Burgess, 5 minutes for questions. 

Mr. BURGESS. Dr. Patel, you got left off that last sequence. 

Would you care to respond to the ranking member’s question? 

Ms. PATEL. Thank you. I would agree, briefly, that we should 

definitely improve on the fee-for-service elements, and there will be 

a need, as I mentioned, to retain elements such that when we move 

towards these more flexible payment models, we can incentivize 

the right behavior. And I do think it is about helping to recalculate 

what the relative value of those payments are, to make them more 

accurate for what we actually want to achieve, which we don’t have 

right now. 

Mr. BURGESS. And that is why I wanted you to give that answer, 

so I am grateful that you did. 

Moving to a model where fee-for-service no longer exists is, in 

some ways, problematic because it is the world that many of us— 

I practiced medicine for 25 years. It is the world that many of us 

grew up in. We understand it, we can converse easily about that 

world. 

At the same time, if there is—and I will be honest with you, 

there are places in Texas where I don’t honestly see how you do 

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a bundled payment or a value-based purchasing or an ACO model 

in Muleshoe, Texas, where you got one guy. I mean, I don’t know 

how you do that. That person has to have a fee-for-service environment, at least in my limited view of the world. They have to have 

a fee-for-service environment, and if all of our effort with SGR reform is to move away from fee-for-service, what do you do with the 

patients who are seeing the doc in Muleshoe, Texas? 

Ms. PATEL. Thank you for that question, Mr. Vice Chair. I 

couldn’t agree with you more. I am from Texas myself, and understand exactly the kinds of practices that you are speaking of, and 

I can tell you that that is why the element that really helps to link 

a way forward is retaining some of our current system that can 

help to—allow physicians to continue practices such as you pointed 

out, but also, I would say to you that that physician and those of 

us who practice in more isolated settings, or even smaller settings 

in a city, what we are all looking for is a way to coordinate our care 

better and to reach out, just like we did in medical school and in 

training, to other colleagues that we know can help us respond to 

our patient’s needs. 

So I think a step towards something that is different than what 

we have now is to allow the solo practicing doctor to be able to engage in a model for some of their patients that have high risk cardiac conditions that need to go to San Antonio, and coordinate care 

better there and reward that behavior. 

Mr. BURGESS. Right, and most—can we just stipulate for the 

record, since you are from Texas, that Muleshoe, Texas, actually 

exists? I didn’t just make that up. 

Ms. PATEL. I can—I will tell you where it is on a map even, yes. 

Mr. BURGESS. But the—you know, when we talked about this, 

and we have talked about it at the committee level, you know, how 

do you go to a world beyond fee-for-service? It just seems to me we 

are going to have to—whatever we do with SGR, and I know there 

are people who say we need alternative payment models, we need 

a value-based system, we need an ACO model, we need a bundled 

payment model. But honestly, we have got to allow for the rich 

panoply of practices that are out there to continue to thrive, because after all, the name of the game is not just reworking a formula, the name of the game is seniors need access to care. And 

right now, that access is not being—is in jeopardy because of the 

actions taken by Congress that instituted this payment system, 

and then our last-minute rescues every year have been the—have 

put practices on kind of a tenuous financial footing if they have got 

to go to their banker for a short-term note at probably 9 to 12 percent interest to fund because their cash across the counter was reduced by 15 percent because Congress said oh, we will just hold 

your check at CMS until we get back from congressional recess. I 

mean, that sort of activity is just devastating to practices. So I 

want to see us figure that out. 

Now, you talked a little bit about not doing tests that are not 

necessary, and I agree with that, but at the same time, I think 

anyone who has been in clinical practice also recognizes that people 

don’t often always function according to protocol, and I think one 

of the comments you made was in cardiology that there was no 

111 

testing, no dynamic testing unless there were high risk markers 

present. Did I understand you correctly with that? 

Ms. PATEL. Yes, that is correct. That is from the American College of Cardiology. 

Mr. BURGESS. But we have all been in situations where we have 

that patient come in at the end of the day who describes an unnatural fatigue, and you say OK, look. It is the end of the day. I 

am tired, you are tired, we are all tired. Go on about your business. 

But we have all had the situation where we have referred that patient on for testing, and in fact, she has been quite ill with really 

minimal systems and had you not had that little spark of curiosity, 

you might not have referred for the testing. But now if you got 

someone looking over your shoulder saying look, you are a high utilizer for this type of testing and these indications are very soft, who 

is going to help us with the liability side of that question? 

Ms. PATEL. So I will try to respond briefly. 

Mr. BURGESS. No, you can use as much time as you want. The 

chairman is very tolerant. I know him well. 

Mr. PITTS. You may proceed. 

Ms. PATEL. Thank you for that. 

So the first element is that this cannot be something where it is 

a dictum or a direction to providers that you may never—notice 

when the American College of Cardiology participated in identifying that very example around cardiac stress imaging, it wasn’t— 

it is not a ‘‘you must never do this,’’ it was chosen as one of the 

conditions in which the profession can help to teach themselves 

and their own clinicians how to best deal with imaging issues when 

patients present, and that includes the ability to order that test 

when it is necessary, or you do have that spark of curiosity. 

So in the model that I am describing for payment that helps to 

also deal with some of the issues you bring up of liability or feeling 

the responsibility to order something or not order something, it 

would be to take that—we know that there is a proportion of payments that we are delivering in the fee-for-service system right 

now that are being used to deliver those services. Take a proportion of those payments and say to cardiologists, to internists, to 

family practice doctors in Texas and say you know what, we know 

that there are things that you don’t like about the way you practice 

that are responsive to what you think might be issues around liability or things that might spark a curiosity, and you want the 

flexibility to deal with that. But what we will give you—we are not 

just going to give you free reign, you can’t just do what you want. 

What we want for you to do is agree to be responsible by following 

what your own profession and your own colleagues have said are 

the best-informed evidence around an issue. Does that mean that 

it is 100 percent an absolute? No. Does that mean that we would 

need rich ability to measure what we are doing and learn from it? 

I think that is what is essential, and I think that is what physicians are craving. They want to know that they have some flexibility and autonomy to practice the way they want, but also to get 

the information that can help them be better. And that will help 

the very small businesses that are small practices to thrive in a 

newer business model and be more efficient. 

112 

Mr. PITTS. Chair thanks the gentleman and now recognizes the 

ranking member of the full committee, Mr. Waxman, for 5 minutes 

for questions. 

Mr. WAXMAN. Thank you, Mr. Chairman. I want to thank all the 

witnesses. This has been an excellent panel, and I think you have 

given us a lot to think about. 

We want a health care system that works. We want some innovation, experimentation, but no one size fits all, and we have got to 

be open to looking at what makes sense, given the circumstances. 

Of course, the main thing that makes sense at the moment is to 

deal with this SGR problem because it is—nothing else seems to 

work unless we take care of SGR. That is why it is so frustrating 

that we didn’t use the OCO, which is just a bookkeeping thing, but 

the SGR is just a bookkeeping thing, and we are stuck. And we 

ought to solve those two issues, pay for it, get this thing resolved. 

Dr. Patel, I am not sure how closely you have been following 

what has been going on in the House of Representatives, but last 

week, the Republicans brought forward a bill to repeal the Affordable Care Act. Not only does the Affordable Care Act provide countless benefits for families, such as protections against pre-existing 

condition exclusions and lifetime caps on coverage, tax breaks of 

$4,000 a year per family for health care, improve free preventive 

care, lowered out of pocket costs for prescription drugs, but the Affordable Care Act also includes important provisions to drive delivery, reform, in fee-for-service Medicare. One part of the Affordable 

Care Act provides for Accountable Care Organizations within Medicare, or bundled payment programs in Medicare. The law even established the innovation center, which is taking unprecedented 

steps to help providers, payers, and patient groups develop and 

spread new and successful innovations, including through medical 

homes and multi-payer initiatives. 

Obviously, the Affordable Care Act is just one piece of improving 

quality and outcomes for Medicare, but I believe it is an important 

one. If the Republican plan to repeal the Affordable Care Act were 

to become law, what effect would that have on Medicare’s work to 

improve quality and outcomes and realign payment incentives to 

focus on value? Do you believe that would be a setback? 

Ms. PATEL. I do believe it would be setback to turn back all of 

the important work that has been done in the past 2 years and beyond, even before the Affordable Care Act was passed, around savings and Medicare system, the Medicaid system, and then what is 

even more remarkable is that we can’t turn back, even with the repeal, what has already taken place as a result of the important initiatives you mentioned, sir, in the private market. 

So now we have created a very complex web that is starting to 

produce some amazing results, as you have heard today. So a repeal and any setback would really undo valuable work and send a 

signal, I believe, to clinicians around the country who are looking 

for a way to move forward. 

Mr. WAXMAN. It certainly would send a signal to a lot of people 

who don’t have health insurance that they are not going to have 

an opportunity to get health insurance because of the barriers that 

they have been unable to overcome prior to the Affordable Care Act 

being passed and being fully implemented. 

113 

It occurs to me as I listen to the testimony that our health system has hundreds, if not thousands, of groups pursuing reform in 

some way. Each health plan, provider organization, even Medicare 

and Medicaid has a slightly different take on a medical home or 

an Accountable Care Organization, for example. I am wondering 

how we ensure that all of these efforts are complimentary, not contradictory? 

Dr. Patel, in your testimony you mentioned the need to identify 

mechanisms to further multi-payer efforts to transform the delivery 

system. I know that CMS is, as a result of the new authority in 

the Affordable Care Act, is working on some of these multi-payer 

initiatives. For example, the Comprehensive Primary Care Initiative is a collaborative effort between public and private payers and 

primary care practices to reward care management. The Multipayer Advanced Primary Care Demonstration is developing Stateled multi-payer collaborations with primary care practices to improve care. Dr. Patel, could you talk about why multi-payer initiatives are so important; what CMS, through the Affordable Care 

Act, is doing in this area, and what more can be done? 

Ms. PATEL. Multi-payer initiatives are critical because it is very 

hard for clinicians to provide care for only one stream of patients, 

measure quality on those patients, and then have a completely different set of expectations, incentives, and reporting, which is what 

is going on right now. So some of the important initiatives that you 

just mentioned at the State level, in the primary care setting, and 

even the Accountable Care Organization model really send a strong 

signal to other payers, and that started with actions taken in Medicare by CMS as a result of the Affordable Care Act. So do believe 

that the continuing work of encouraging, but then also having a 

way to set forward the actual mechanism for other payers to be involved. And that means, as I said in my testimony, consistent quality measures. We can’t have one set of quality measures that I report to for one payer, which is what I do in my practice now, and 

a completely different set of metrics for another. That is where the 

multi-payer efforts are huge and critical. 

Mr. PITTS. Chair thanks the gentleman. Now recognizes Dr. 

Cassidy, 5 minutes for questions. 

Mr. CASSIDY. As an open question to follow up on Mr. Waxman’s 

affection for the ACA, according to who you listen to, Medicare is 

going bankrupt in 5 to 12 years. I am sure he and his affection 

would love that ACA takes $500 billion in savings from Medicare 

and spends it elsewhere as opposed to shoring up the program. 

That is a feature that Republicans object to, and frankly, it is terrible for Medicare. But that is part of the ACA and I am sure he 

would not want that repealed either. 

That said, as a practicing physician myself, I have observed that 

only fiduciary linkage between patients and physicians seems to 

consistently lower costs. That is a little bit of a theme I have heard 

from you. 

Mr. Serota, I am curious, do you do MA plans, Medicare Advantage programs? 

Mr. SEROTA. We do have Medicare Advantage programs, yes. 

Mr. CASSIDY. What is your—so you have got a very nice system 

where you are getting feedback—each of you described this, Dr. 

114 

Nash, Dr. Patel—where you are giving feedback to the practicing 

physician, clearly, that costs money. What is the MLR, your medical loss ratio, of the MA plans that you have? 

Mr. SEROTA. It is widely variated based on the marketplace. I 

don’t have a single—— 

Mr. CASSIDY. Is it over 15 percent? 

Mr. SEROTA. The medical loss ratio itself? The administrative expense piece of that? 

Mr. CASSIDY. Yes. 

Mr. SEROTA. In some markets it may be. 

Mr. CASSIDY. Now you are contracting with these physician 

groups. I am assuming they have their own MLR—and Dr. Nash, 

you can weigh in as well. Are you doing Medicare Advantage as 

well? 

Mr. NASH. Yes, we are. 

Mr. CASSIDY. So can I ask what you are contracting with the— 

are you directly contracting with CMS or with the Medicare Advantage program? 

Mr. NASH. We—our Medicare Advantage program is directly 

through CMS. 

Mr. CASSIDY. So you are an MA plan? 

Mr. NASH. Correct. 

Mr. CASSIDY. So you get—what is your MLR? 

Mr. NASH. Well, the medical loss ratio is an amount of premium 

that is spent on medical care, so we are roughly about 88 percent 

or something of that nature. 

Mr. CASSIDY. So your administrative cost is only 12 percent? 

Mr. NASH. Correct. 

Mr. CASSIDY. That is pretty good. Some other plans similar to 

yours seem to have higher than that. It has been instructed some 

of the physician groups contracting with the insurance companies, 

the insurance company keeps 12 but then the medical plan itself 

has an additional MLR. Mr. Serota is kind of nodding his head yes. 

It seems that in the aggregate, the MLR is greater than the 15 percent or 20 percent defined by the so-loved ACA. 

Now, if you didn’t have the ability to do your data systems, 

would you be as effective in managing that care? Yes. 

Mr. NASH. Absolutely not. I mean, the data is essential for any 

of this. 

Mr. CASSIDY. That wasn’t a trick question. It seemed so self-evident. By the way, I admire the fact that you as practicing physicians understand there are some things fee-for-service works better 

for. Then again, as a practicing doc, I also see that, so let me just 

kind of compliment you on that model. 

Now, for all of you—Dr. Hoyt, it seems like yours is effectively 

a bundled payment system, correct? If somebody has—I have a 

pain in my neck and it is not from any of you, it is just from a bad 

neck, so if I am grimacing, that is the reason why. It seems like 

you are a bundled system. If somebody has colon cancer, they 

would come to you and contract, if you will, for the management 

of that care, is that correct? 

Mr. HOYT. Well, in our system bundled payments could be accommodated, but the system is really about updates for the overall 

Medicare reimbursement on an annual basis. And it simply puts a 

115 

group of physicians to quality of metrics around a specific disease 

target or something like that. It doesn’t necessarily, per se, bundle 

the responsibility by, you know, that same group. 

Mr. CASSIDY. Let me ask you, because really, this is about finding ways to save enough money and translate those savings into 

doing away with SGR forever, once and for all, and continuing to 

reward patients for appropriate payment, correct? 

Mr. HOYT. Correct, and I think, you know, that is an assumption 

in our model that we have to prove. We are planning to do some 

modeling to actually see if it shakes out, but your comment that 

all of these attempts at cost savings is ultimately where the extra 

money comes from to pay for increased access or individual—more 

individualized care for high risk patients, et cetera, that has to be 

the assumption, that there are some ways that can be—— 

Mr. CASSIDY. Dr. Patel, I really liked your testimony. I like your 

written, and I like the way you delivered it. Let me just compliment you. But that said, everybody has talked about somewhat 

of a big government-type solution. You are going to need a lot of 

structure here. You are going to need this big, overarching overhead. And going back—I will go to Louisiana, FP and Pointe 

Coupee Parish, small place, overworked, underpaid, driven, wife is 

wondering why he is not home on time. And that is too common. 

Now what do you think about the direct medical care model? We 

have the written testimony from Qliance where you pay the doc 

$50 to $100 a month depending on the complexity and age of the 

patient, and she or he manages all the outpatient services, referring to the inpatient setting as separate. It is not totally capitated, 

but it allows a doc to manage the outpatient and then the inpatient 

then goes on another ticket. What are your feelings about that? 

Ms. PATEL. I have had a chance to learn more about the Qliance 

model over a year ago, and have been very interested in exactly the 

way they are able to risk adjust and charge a sliding fee per month 

for beneficiaries and have amazing kind of access points for those 

beneficiaries to e-mail with their doctors, talk to them, and I think 

that that is a great model that would actually fit in nicely with 

helping to offer a flexibility for a primary care physician in Louisiana to do something exactly like that, and that would be a very 

rich way to ensure financial sustainability in their practice—— 

Mr. CASSIDY. Exactly. 

Ms. PATEL [continuing]. All the while really creating models inside that practice that reward coordination. Let the doctors and the 

MAs and the nurses figure out what they need to do. 

Mr. CASSIDY. Sounds good. My last thing, and I am out of time. 

Thank you, Mr. Chairman. 

Mr. Serota, for the record, I will ask you if you would give us 

your MLR for your various MA plans, and what you estimate that 

the MLR is of the group with whom you are contracting, because 

I think that would be very informative to us. 

Mr. SEROTA. We can get that information. 

Mr. CASSIDY. Thank you. 

Mr. PITTS. Chair thanks the gentleman, now goes to—recognizes 

Mr. Dingell for 5 minutes for questions. 

Mr. DINGELL. Mr. Chairman, I thank you. I commend you for 

this hearing. I commend the panel. This is one of the best presenVerDate Aug 31 2005 09:30 May 08, 2014 Jkt 037690 PO 00000 Frm 00119 Fmt 6633 Sfmt 6633 F:\112-16~1\112-16~1 WAYNE
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tations and one of the best hearings I have heard for a while. I also 

want to commend our panelists for their fine testimony. 

These questions will go to Dr. Patel. I want to thank you for 

being here today. Please answer the following questions yes or no. 

Is it fair to say from your testimony that fee-for-services models do 

not promote the highest quality and highest value health care? Yes 

or no. 

Ms. PATEL. Yes. 

Mr. DINGELL. Is it also fair to say that models such as the patient-centered medical home have the most promise to provide our 

citizens with the best and most affordable health care? Yes or no. 

Ms. PATEL. Yes. 

Mr. DINGELL. Is it possible that other benefits from these things 

could occur, such as a reduction in both cost and the rate of growth 

of cost? 

Ms. PATEL. Yes. 

Mr. DINGELL. Now Doctor, I believe that on March 23, 2010, the 

President signed the Affordable Care Act into law. I am sure you 

are aware that ACA provides a shared savings program through 

Accountable Care Organizations that serve 2.4 million Americans, 

is that right? 

Ms. PATEL. Yes. 

Mr. DINGELL. Now Doctor, ACA is legislation that includes the 

authority to embark on many innovative paths. I believe that is a 

desirable thing, is it not? 

Ms. PATEL. Yes. 

Mr. DINGELL. Now Doctor, are you aware that CMS programs 

such as innovation advisors, and innovation challenge grants that 

seek to promote groundbreaking work in health care, would you 

say that is useful? Yes or no. 

Ms. PATEL. Yes. 

Mr. DINGELL. By the way, Doctor, I am sorry to do this to you. 

You are a very good witness, but I have got a lot of questions and 

not much time. 

Ms. PATEL. No problem. 

Mr. DINGELL. Dr. Patel, it is clear from your testimony that you 

understand the importance of excellent primary care. This is an 

area of great shortage in this country, and potentially worse shortage, is it not? 

Ms. PATEL. Yes. 

Mr. DINGELL. Did you know that CMS has a comprehensive primary care initiative that encourages public/private collaboration on 

promoting primary care? Yes or no. 

Ms. PATEL. Yes. 

Mr. DINGELL. Dr. Patel, I think we both agree that CMS must 

do more to reform physician payment systems. Is that your view? 

Ms. PATEL. Yes. 

Mr. DINGELL. And I hope you also recognize that the Affordable 

Care Act is assisting CMS in beginning the important process towards these vital reforms. Do you agree with that statement? 

Ms. PATEL. Yes, sir. 

Mr. DINGELL. Doctor, do you want to make a comment as to how 

that particular process is working? This is not a yes or no question. 

117 

Ms. PATEL. Thank you. Yes, I am happy to just briefly tell you 

that I do know that CMS has been working, even with the most 

recently mentioned physician payment rule that was released last 

week, to add modifications that acknowledge some of the issues we 

discussed today around the relative value of some fee-for-service 

elements, as well as ways to better integrate quality with work 

that is already going on in clinical specialty societies and primary 

care. 

Mr. DINGELL. Does that offer promise for the future in addressing these miserable problems we have—— 

Ms. PATEL. It does, sir. 

Mr. DINGELL [continuing]. With regard to cost increases and 

things of that kind? 

Ms. PATEL. It does, and it also offers insights into what we need 

to do more work in, even outside of the Medicare program. 

Mr. DINGELL. Now how does—how is it that this program is 

going to benefit us in terms of addressing cost increases and the 

rate of increase of costs? 

Ms. PATEL. It all has to do with making sure that what we are 

incentivizing, where we put the dollars, actually matches towards 

the value that has already been identified that we do not attain in 

this country. So it is really about taking resources that we know 

are not going towards valuable care, and redirecting those towards 

things that we know promote value. And those come from the very 

work that we are hearing about that are led by clinicians. 

Mr. DINGELL. Now you just said something very important. How 

do we do that? What are the steps that we take to make that happen? 

Ms. PATEL. The very short-term steps over the next 2 years, for 

example, transferring a proportion of what we do in fee-for-service 

payment right now into this coordinated care model that we are 

discussing. It is even beyond the patient-centered medical home. It 

could be a model that allows for an oncologist, for example, to better coordinate care for a colorectal cancer patient. And then from 

that point, what we can’t do is leave it alone at that step. What 

we must do is transfer and think about how that money, those dollars and care coordination can not only be reinvested back into the 

system, but what savings we create from that can move towards either these larger kind of episode or bundled payments that we 

have discussed, or other mechanisms that other physicians have 

brought up today. 

Mr. DINGELL. Do you believe that the medical profession will 

support that? 

Ms. PATEL. I believe they will, and I believe they have already 

been putting these models forward, sir. 

Mr. DINGELL. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman and now recognizes the 

gentleman from Ohio, Mr. Latta, 5 minutes for questions. 

Mr. LATTA. Thank you, Mr. Chairman, and thanks very much to 

our panel members for being with us today. It has been very enlightening. 

If I could start with Mr. Serota, if I could ask you—it is kind of 

interesting in your first page of your testimony, you state that U.S. 

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timate that 30 cents of every health care dollar goes to care that 

is ineffective or redundant, and those dollars are not being well 

spent. 

Let me ask you, why is that happening and where are those dollars going? 

Mr. SEROTA. Well, I think you have heard virtually everyone on 

the panel answer that question in a slightly different take, but the 

reality is that we are providing care, as Dr. Patel just said, that 

isn’t valuable and we need to redirect that care to things that are 

going to provide better outcomes. Why is it happening? We have a 

system that incents volume and doesn’t incent population management, quality, and outcome. So when you have a system that 

incents volume, you get volume. That is what is transpiring. 

Mr. LATTA. Let me ask, does this include a lot of tests that don’t 

need to be done because folks out there are fearful if they don’t do 

the test that they will be held liable? 

Mr. SEROTA. Certainly. 

Mr. LATTA. And what should we do about that? 

Mr. SEROTA. Well, I think we have to look at the health care system comprehensively, which would include looking at reforming the 

tort system as well. 

Mr. LATTA. Dr. Nash, I saw you nodding your head. 

Mr. NASH. Yes, absolutely correct. I mean, if you speak to physicians, that is the first thing I put forward and was raised even in 

today’s discussion. But the other side of the coin is really the patients and the patients demand for services because of their own 

anxieties and concerns, and both need to be dealt with. 

Mr. LATTA. That is one of the things, you know, that we have 

been talking about around here and that we have to get done, because you can’t really, you know, have meaningful health care reform if we don’t do something about the tort system in this country 

and a lot of these junk lawsuits. 

Let me ask this question. This is to Dr. Bronson. I was just over 

at Cleveland Clinic on Monday for a meeting, and I am from northwest Ohio, but you know, we have been talking a lot about what 

is happening in the health care system here, but let me ask you 

this. We hear a lot about the physician’s role in promoting high 

quality of care and avoiding unnecessary spending, and you know, 

really, what is the role of the patient now that we have to be looking at? 

Mr. BRONSON. Well, the role of the patient is very important, and 

that is why we support initiatives to get patients more actively engaged in shared decision making in an effective manner, and that 

should be supported in practices. I would like to add to the comment on liability reform, that we are very strongly in support of a 

variety of steps for liability reform. You may recall that I came to 

your office and spoke to you about the—health courts is something 

that we should test nationally to see if having impartial judges involved in this type of process, instead of volatile juries could be a 

more effective manner in handling liability reform. 

Mr. LATTA. As we look at that, how do we incentivize those patients to make sure that they can do more, and those people that 

are in the system, to make sure that, you know, they are not—we 

were talking about this the other day about, you know, 20, 30, 40 

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years ago folks couldn’t go to the emergency room as much, you 

know. Folks might have stayed home and taken care of things a 

little bit more. But how do we incentivize those people for making 

better health care decisions on their own? 

Mr. BRONSON. Well, number one, we have to fix the access problem in primary care. My experience is patients really don’t want 

to be sitting 3 to 4 hours in the emergency room waiting to be seen 

for an acute minor problem. They would really rather see their personal physician. Part of the concept of what we are getting at is 

rewarding efforts to enhance access to restructure practices to be 

more effective, to use extenders more efficiently in practices to get 

patients in. We believe that those types of steps will reduce unnecessary utilization, and hopefully avoid preventable omissions and 

expenses. 

Mr. LATTA. OK. If I could, Dr. Nash, ask you this question. You 

know, if the SGR, let us just say, is reduced at the end of this year 

by 27–1/2 percent, how would that affect rural areas in this country, and would they suffer disproportionate hit more than an urban 

area? How would you see that? 

Mr. NASH. If it was not? 

Mr. LATTA. Right, if it—— 

Mr. NASH. If it remained enforced? 

Mr. LATTA. Right. 

Mr. NASH. Yes, it would be devastating, you know. The access 

currently for Medicare patients across the country, particularly in 

rural areas, is threatened even on the current state, let alone if 

that was the outcome. 

Mr. LATTA. Mr. Chairman, I yield back my time. 

Mr. PITTS. Chair thanks the gentleman and recognizes the gentleman from New York, Mr. Towns, 5 minutes for questions. 

Mr. TOWNS. Thank you very much, Mr. Chairman. Let me begin 

by first thanking you for having this hearing, and to thank these 

panelists for outstanding testimony. I think that as has been stated, this is a very serious issue and of course, I think that we need 

to spend as much time as we need to do in order to try and correct 

some of the problems that are going on as we look at access and 

of course, liability and all of these things I think are connected. 

So let me begin with you, Dr. Patel. If we shift away from the 

FFS payment system, what would that transition process look like? 

We have identified the resource base relative value scale, particularly the RVUs as a source of much trouble, direct and focused to 

volume instead of value. So are you proposing we do away with 

RVUs altogether, and how else can we quantify the value of physician services? 

Ms. PATEL. I think it is important to preserve the notion of what 

a value unit is. I think it is what relative value units have been 

that have been the problem, so in a transition, I mentioned that 

even in a long-term vision we would need to keep some elements 

of our current reimbursement system because there are elements 

that work. But I do think that in order to improve the RVU process, as well as how we incentivize some of the fee-for-service services that we cover, in the short term, in the next year or two, we 

need to actually identify what it is that we are not deriving value 

from, and what that amount of dollars are in the Medicare system, 

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and translate that to models that are not necessarily RVU driven. 

That doesn’t mean that we are eliminating all the RVUs, but taking the proportion of RVUs that we know are really not providing 

that very term, relative value, and improving upon them to create 

incentives for care coordination. 

So taking what we have, not eliminating it totally, taking what 

we have that we know does not provide value and translating that 

into dollars and payments that do provide value, and improving— 

meanwhile, I think improving upon the RV system, which is what 

CMS is trying to do right now with the updates to payments in primary care, for example. 

Mr. TOWNS. All right, thank you very much. 

Dr. Hoyt, you mentioned the right infrastructure is absolutely— 

in order to provide high quality care. What do you really mean by 

that? Could you expound on that? 

Mr. HOYT. Well, you know, I think when you describe standards 

for care, you are really describing outcome standards or you are addressing what the ultimate goal of treating a disease is. The infrastructure standards are really the details of the actual physical 

plan, the communications, the essential specialists that need to be 

part of decision making. When you are talking about complex disease, having consensus and then committing to the building of the 

infrastructure is really the second step in the quality process. So 

for instance, if you are going to develop a trauma center, which is 

my background, you have to commit to certain elements. If you are 

going to develop a cancer center, you have to commit to certain elements. And you have to do more than that; you have to actually 

commit to being externally peer-reviewed if you are really going to 

assure the public that what you say you are doing, you are actually 

doing. 

Mr. TOWNS. You know, the term here today that has been used, 

one size does not fit all, what do you really mean by that? I understand what you are saying, but what do you really mean when you 

say one size does not fit all? 

Mr. HOYT. I don’t believe that was my comment, but I will be 

glad to—— 

Mr. TOWNS. Thank you, Dr. Patel. 

Ms. PATEL. I do not think that the very situation that we got into 

with our current reimbursement system was an attempt over time 

to have a unifying kind of standard. Even though we talked about 

relative value unit, what we have ended up doing is really 

incentivizing volume. And to say that one size does not fit all, that 

is an acknowledgment that not every clinical practice, when you 

open the door to see the doctor, is going to look the same, nor 

should it look the same, and that is the kind of payment model 

that Medicare needs to reach, so that we are not actually just saying to doctors—which is what we are doing right now—we will pay 

you more if you do more. That is not a message we should send. 

And so one size fits all means that there are many different models, and we are already seeing some of these in practice, that can 

offer more value and save the system money overall. 

Mr. TOWNS. All right. Thank you very much, and I see my time 

is expired. 

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Mr. PITTS. Chair thanks the gentleman, and now recognizes Dr. 

Gingrey for 5 minutes for questions. 

Mr. GINGREY. Mr. Chairman, thank you very much. I will first 

go to Dr. Bronson and Dr. Hoyt. 

Doctors, you were asked earlier in your testimony and the Q&A 

about the OCO money being used to eliminate the cliff in regard 

to the SGR problem and fixing—eliminating the SGR and, of 

course, paying the $300 billion to get the baseline back to zero. And 

OCO money, for those who might not know—I think everybody 

pretty much does—Overseas Contingency Operation, basically supplemental appropriations that are used on an annual basis to fund 

a war effort, not part of the standard appropriation procedure, 

emergency funding. So if you don’t use that money, if you cut back 

on the war effort and you don’t need it, how can you actually use 

it to pay for something else? And you said you would be in favor 

of using it to pay for something else. Do you want to confirm that 

that is your opinion on that, both of you, Dr. Bronson and Dr. 

Hoyt? 

Mr. BRONSON. I will confirm that. Of course, it is a congressional 

decision, but yes, I would confirm that we support that. 

Mr. GINGREY. Dr. Bronson, do you feel the same way? 

Mr. HOYT. Yes—Hoyt. 

Mr. GINGREY. Dr. Hoyt. 

Mr. HOYT. Yes. Well, we understand the discussion of some disagreement of whether it is real money or not, or whether it can or 

cannot be used. We—if it is available and it exists, we would support using it. 

Mr. GINGREY. If funny money is going to be used, you want it to 

be used to kind of help your situation. I understand. 

Mr. HOYT. If we could put it that way. 

Mr. GINGREY. Let me say this. I support SGR repeal, and I think 

all physicians do. I also understand that because of Obamacare, the 

Affordable Care Act, the threat to physicians is compounded by a 

second SGR known as IPAB. Except in this instance, physician reimbursements will now be used to control cost in all of Medicare, 

not just Part B. How important is IPAB repeal to physicians, and 

do you believe Congress and the President should support the repeal of IPAB, again, Dr. Bronson and Dr. Hoyt? 

Mr. BRONSON. We support the concept of IPAB, but a significant 

change in IPAB. We think IPAB should be an advisory body to 

Congress who, with a straight up and down vote, could deal with 

their recommendations that Congress is accountable to the people 

and should have the opportunity to respond to their advice. 

Mr. GINGREY. Dr. Hoyt? 

Mr. HOYT. We have not supported IPAB in principle because of 

the concern that there is not adequate oversight and participation 

of Congress, but also physicians. 

Mr. GINGREY. Would the two of you—thank you for your answer. 

Would the two of you submit that response to me in writing? I 

would appreciate that very much. Mr. Chairman, thank you. 

Let me go to Dr. Patel. Dr. Patel, I just want to clarify something 

that I heard from my colleagues, Mr. Dingell and Mr. Waxman. 

They made statements that Medicare innovation would go away if 

Obamacare was repealed. Maybe they have forgotten or aren’t 

122 

aware that CMS demonstration projects on payment models was 

begun back in 2005 under President Bush. In fact, the Institute of 

Medicine called for them back in 2001. Obamacare merely copied 

that idea and Republicans would continue reforming Medicare if 

Obamacare is repealed. Would you like to comment on that? Do 

you agree with me or disagree with me on that statement? 

Ms. PATEL. I agree, sir, that the concept of innovation as it has 

been introduced in Medicare started before the Affordable Care 

Act, absolutely. Demonstrations—in fact, it is important demonstrations that occurred, the physician group practice demonstration and some other chronic disease demonstrations that have 

taught us what we need to do better, and also where we did not 

necessarily understand enough about cost savings and the system. 

So I agree, sir, that they did, in fact, begin before the Affordable 

Care Act, but I will tell you that I think would be important to 

keep and preserve absolutely are not just the Center for Medicare 

and Medicaid Innovation, which has a great deal of activity right 

now, but embedded into that language is also a number of authorities that allow the Secretary and the Centers for Medicare to rapidly scale those payments—— 

Mr. GINGREY. Right, and my time is about to expire, but thank 

you very much for that response, because I agree with you that as 

we point out—and there are a number of things were mentioned 

that are popular in the Affordable Care Act. We always hear that 

keeping young people on their parent’s health insurance policy 

until they are 26 years of age, even if they are not still in school, 

is probably a good thing. Eliminating lifetime and even, indeed, in 

many cases annual caps, making sure that children with preexisting conditions—I could go on and on. There are several things 

that just like this innovation that existed before Obamacare, 

PPACA was enacted, these other things that we all like in a bipartisan way could easily be reincorporated into a new plan. 

And with that, I see my time is expired, and I thank the chairman. 

Mr. PITTS. Chair thanks the gentleman, and now recognizes the 

gentleman, Mr. Engel, for 5 minutes for questions. 

Mr. ENGEL. Thank you very much, Mr. Chairman. I just have to 

comment that I have heard some of my colleagues on the other side 

talking about Medicare potentially going bankrupt. The Affordable 

Care Act extended the solvency of Medicare, and I just find it very 

strange that we fought two wars on the credit and we have had 

Bush tax cuts for the wealthy, Medicare Part D unpaid for. We had 

surplus Bill Clinton left office and we could have used that to shore 

up Medicare, so I think that when we kind of look at why we are 

in the trouble we are in, there is a lot of blame to go around on 

all sides. 

First of all, let me thank all of you for excellent testimony. Every 

one of you was really excellent testimony, and I think it is very, 

very important. This is an important subject to have so many questions, and I just have to kind of cut down. 

But let me just say, the SGR is obviously seriously flawed and 

needs to be permanently replaced. I really believe that physicians 

deserve to be fairly and appropriately compensated for the important work they do, and the SGR formula is failing our physicians. 

123 

I think there is nothing wrong with physicians wanting to be adequately and fairly reimbursed. And that is why I want to say that 

the Affordable Care Act appropriated $10 billion in funding for the 

Center for Medicare and Medicaid Innovation over 10 years. I 

think that is very, very important. 

I want to ask this question. Now, all of us recognize the current 

fee-for-service model has resulted in emphasis on procedures and 

quantity over quality of health care provided. I am introducing legislation—one field I am particularly interested in is palliative care, 

and it relies heavily on care coordination and communication with 

patients. I believe they are vital aspects to providing quality care, 

but ones that are not properly incentivized under the current feefor-service system, and yet properly done, I think palliative care 

often saves money, extends life of patients, and gives them peace 

of mind. 

So let me ask Dr. Nash, Mr. Serota, and Dr. Patel, what role do 

you see for palliative care as the health care system undergoes extensive delivery system reforms, and how can we incentivize the integration of palliative care for professionals into coordinated care 

teams? 

Mr. NASH. Dr. Nash. I believe that—yes, palliative care is very 

important, and we have programs within our plan to work with our 

physician community and the community at large in regard to improving care at that phase of life. You know, it is difficult in a few 

minutes to talk about how that should be incorporated into payment models. I think it is a broader dialog in regard on a community level that many communities across the country have been 

successful with. 

Mr. SEROTA. This is an important issue for us, and we do have 

a number of plans that—programs in place to help members with 

advanced illness. As an example, our Anthem Blue Cross Blue 

Shield plan in Virginia has an integrated cancer care medical management model, which is, at its core, trying to provide improved access to palliative care. They—members who receive timely access 

to palliative care generally achieve a better quality of life during 

these end stage, lower cost related end of life treatment and acute 

hospitalizations. They employ skilled care management nurses, decision support tools, medical director support, and it is a comprehensive program. We also have a similar program in Pittsburgh 

with our Highmark plan that, in fact, provides coverage for consultative services to its members with palliative care professions to ensure that that care is appropriate. We think it is an essential element, and often overlooked, so we appreciate your attention to it. 

Mr. ENGEL. Thank you. Dr. Patel? 

Ms. PATEL. So very briefly, the concept of a patient-centered 

medical oncology home is exactly alluding to the kinds of services 

you are referencing, specifically palliative care. Oncologists right 

now are caught up in the same quantity over quality system that 

we all have to be reimbursed in, and moving towards a coordination type fee, oncologists have already put forward ideas and are 

practicing palliative care referrals as well as palliative care medicine in the space of their cancer patients. 

Mr. ENGEL. Thank you. Let me get in one quick question. As part 

of the Affordable Care Act, Medicare started paying primary care 

124 

physicians a 10 percent incentive payment, and it is my understanding that more than 156,000 primary care providers have benefitted from this. Now, I am curious to see what efforts are being 

taken in the private sector to incentivize physicians to practice in 

primary care. Perhaps Mr. Serota, Dr. Nash, can you elaborate on 

how your organizations are working to encourage physicians to go 

into primary care? 

Mr. SEROTA. Sure. We have done similar things. We have increased the rate we pay primary care physicians. An example in 

Philadelphia, our Independence Blue Cross plan doubled base reimbursement to primary care physicians, increased it—paid out nearly $37 million additional dollars in 2011. Anthem Blue Cross Blue 

Shield has announced a major investment in strengthening primary care, increasing revenue opportunities, bumped the fee schedule by 10 percent, including payments for non-visits, essentially 

care coordination, preparing care plans, managing patients with 

complex conditions, and also have shared savings models for quality improvement and reducing costs. 

So the whole concept is partnership with the primary care physicians to improve their access to additional funds, provided the outcomes and the improved safety is present for our members. 

Mr. NASH. Those physicians in our program who commit the time 

and energy to work over the period of time towards the principles 

of the patient-centered medical home, we put on a payment model 

as described which reimburses at a rate that is 20 percent higher 

in this global model than they were receiving fee-for-service, and 

they get another opportunity for 20 percent performance-based 

bonus, which you know, has attracted a lot of attention among the 

physician community. 

Mr. ENGEL. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman. I now recognize the gentleman from Illinois, Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman, and I also want to applaud the panel for being here. I have been a member since January, ’97 I got sworn in, voted for a balanced budget act, amendments, created the SGR. It has been a bane to my existence ever 

since. We did that to preserve and protect Medicare. That is why 

we did it. Every year, we have to deal with this, and for me, it will 

be 16 years now dealing with the SGR. Also, just I am glad—and 

Mr. Gingrey mentioned about the Overseas Contingency Operations. That is not going to happen. Don’t plan on it. We are not 

going to use it to fix the SGR, so get that off the table. That is why 

this panel is important, because if we just use that, then we are 

in the same position. We haven’t reformed, we haven’t changed 

things, we haven’t moved forward. 

I also want to address this. Medicare, by the actuary, says it is going to go broke 2024. It did get extended by the $500 billion cuts 

in—from Obamacare, but the $500 billion also was supposed to go 

to help pay for the Affordable Care Act, the health care bill. We 

had Secretary Sebelius right in the other hearing room. She admitted they double counted, double counted $500 billion. Extend solvency of Medicare, pay for Obamacare. That is what we are living 

under. So those who extol the virtues of that, they are promoting 

the ability of double counting $500 billion. 

125 

Now Dr. Patel, that is not good budgeting processes, is it? You wouldn’t encourage using the same $500 billion to say you are preserving and extending Medicare when you are also using that same 

money to fund the expansion of health care? 

Ms. PATEL. I would not encourage double counting. 

Mr. SHIMKUS. Thank you. I would agree. 

So let us first—and the other issue is we have always talked 

about tort reform. We always talk about insurance—private insurance being regulated by states. The federalism—we are back on the 

federalism bandwagon. I am glad. It helps us talk about this. Now 

we are talking about Medicare, but the tort reform savings, if—are 

significant, but we have got this State issue of tort law and federalism that I like to think—I know the Affordable Care Act did 

provide some money for states for pilot programs, which I applaud, 

and I hope that more states look at that. 

Where am I headed with all this? I am heading with this—I am 

glad to hear what we are doing. I don’t hear much about the individual consumer. I hear about the primary practice physician, I 

hear about—I mean, the fact that we don’t want to incentivize volume. We don’t want overconsumption. We don’t want one size 

doesn’t fit all. Where is the consumer in this? Anyone? 

Mr. BRONSON. The word patient-centered is in this effort, patient-centered medical home. Consumer is really dead set in the 

middle—— 

Mr. SHIMKUS. Where? How? 

Mr. BRONSON [continuing]. And it is key—how? 

Mr. SHIMKUS. Under a government-run program, what is the 

consumer—what skin do they have in the game financially? 

Mr. BRONSON. Well, they have whatever co-pays and other things 

they have to—— 

Mr. SHIMKUS. Significant co-pays really affect change? 

Mr. BRONSON. I don’t know. I honestly don’t know. 

Mr. SHIMKUS. Anybody? 

Mr. BRONSON. Well, I will take that back. I do know. I think we 

are seeing a decline in our business and our market because of 

very high deductible policies, and people are second-guessing questions about services and delaying services. Sometimes it is very effective and appropriate; sometimes it is dysfunctional. I think it 

needs to be looked at and organized in a way that you don’t harm 

the health of the person, but you don’t incent overutilization. 

Mr. SHIMKUS. Let me go to Mr. Serota. 

Mr. SEROTA. Congressman, you put a twist in the question when 

you said in a government-run program. I think that what we are 

doing in the Blues in our markets is a three-tiered strategy, and 

the third tier in that strategy is patient engagement. A critical element of success for us in the marketplace has been arming patients 

with information about costs, about quality, about which providers 

to select, and having them actively participate, and that includes 

actively participate economically, as well as with information. 

Mr. SHIMKUS. My time is expiring, and I appreciate that. I am 

just going to finish up with this observation. If we don’t do that 

type of process—health care costs are going up for everybody, even 

the private sector. In corporate insurance, what are they doing? 

They are incentivizing their workforce through wellness programs, 

126 

they are doing healthy living. They are really pushing people and 

they push it by what, a price signal. And if we don’t do that in a 

government-run health care system and we always expect the Federal Government or CMS or some agency other than the Federal 

Government to do that for them, we are losing the opportunity to 

really reform our health care system. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. Chair thanks the gentleman. I now recognize the gentleman from Pennsylvania, Dr. Murphy, for 5 minutes for questions. 

Mr. MURPHY. Good morning. This is of great concern to me of 

how we handle this. Look, we all get it. If all things being equal, 

if you pay someone by how many widgets they make versus giving 

them a flat salary, they will make more widgets. We understand 

that. The question comes of how we reform this, and we are throwing around a lot of phrases here, you know, quality, patient-centered, et cetera. I really want to get into some of the specifics. 

I think yesterday the U.S. News and World Report annual rating 

of hospitals came out. I don’t know if any of you saw that, big thing 

about Johns Hopkins was bumped out by Mass General and who 

else in the top 10. Are you all aware of how those ratings are done? 

Am I correct they survey thousands of specialists and say who do 

you like best, right? 

Mr. BRONSON. They use objective measures. 

Mr. MURPHY. What are some of the objective measures that they 

use? 

Mr. BRONSON. Some of the CMS measures. 

Mr. MURPHY. Such as? 

Mr. BRONSON. The core measures I believe are being used. I 

would like to confirm that, but there is a combination and it depends on the specialty. 

Mr. MURPHY. Can you give me an example? 

Mr. BRONSON. An example in psychiatry, for example, they use 

almost all reputation as an—— 

Mr. MURPHY. Exactly, exactly. So it is articles they publish, who 

knows who. I look upon it as voting for prom king and queen. 

Mr. BRONSON. Right, right. 

Mr. MURPHY. They do not—because you can’t survey thousands 

of specialists around the country and ask them what hospital has 

the best outcome measures? Who has the fewest surgical complications? Who has the fewest nosocomial infections? Who has the fewest ventilator-assisted infections? Who has longer or shorter than 

expected risk adjustment stay in an ICU? Who has different rehospitalization rates? Yet am I correct in saying that those are the 

kinds of things we need to be measuring? OK. 

Now, I am wondering in that in terms of those—and if there are 

other ideas you have, too, how we change this system from what 

I refer to as the poke, prod, pinch, push, pull and prescribe payment system? That is what we get paid for as health care professionals. We want to pay for quality. In a very specific way, do we 

then attach dollar value to some of these things so if a hospital has 

a decline in the number of ICU days, a decline in the number of 

readmissions, decline in the number of nosocomial infections, how 

do we pay for that? Anybody? Dr. Nash? 

127 

Mr. NASH. As mentioned earlier, we do have experience working 

with our hospital partners, and we are regional plan. But it is really a shared savings approach, not too dissimilar to what Medicare 

is looking at, and that is we identify opportunities where there is 

a chance to improve quality, and instead of just taking all of that 

savings and funneling it back into premium reductions, we are 

sharing some of that with the hospitals for the opportunity for 

them to transform their systems. 

Mr. MURPHY. So I just want to make sure, because I am trying 

to understand this. I am not trying to put you on the spot. I have 

been working this since I wrote the patient bill of rights law in 

Pennsylvania where we are fighting managed care plans who 

would give a global payment to a practice or hospital and say you 

figure it out, and the scandals that came out of there were people 

were told you couldn’t—you had to drive by this emergency room 

because you had to go to this one, because this is the one that is 

covered. Or you were not going to get covered for this, we are going 

to cover you for that. And my worry is that I want to make sure 

we don’t get into those kinds of models where someone is just saying OK, well, we will save money today so we can get paid with 

this year’s fund, and if the patient ends up with the problems next 

year that is OK, they are probably going to be with a different insurance company. How do we avoid that? Dr. Patel, you look like 

you are—— 

Ms. PATEL. Yes. I want to just say that the two things we do to 

avoid that, we shouldn’t have something that is so absolute, like a 

reduction in ICU days or reduction in that unless we know that the 

second piece of information exists, which is that a reduction in ICU 

days is actually proven by evidence to have improved outcome in 

some way. So the scenario that you are describing, I think the way 

to instill-we have all talked in our societies and in our clinical professions about some of the metrics that we are coming up with, 

even as we speak, to ensure that those exact examples don’t happen. 

Mr. MURPHY. What you just said is absolutely golden, and something that this committee actually discussed when we read it was 

knocked out of the health care bill, and that was if we allow the 

societies, the colleges, the specialties in medicine that have their 

own protocols to determine things appropriate as opposed to an 

IPAB board, it is a big difference. An IPAB board takes an act of 

Congress to change what they are coming up with, but you are saying this is something that the various professional medical organizations themselves are constantly looking at? 

Ms. PATEL. Yes. 

Mr. MURPHY. Dr. Hoyt, you were going to say something on that? 

Mr. HOYT. Well, yes. We have spent a lot of time thinking about 

this, and in our model, the updates would really require an annual 

rethinking of what the new target would be, realizing that as a 

group of physicians reach a target, that is no longer going to 

incentivize them to reduce costs, so you are going to have switch 

the target. But I think if the professional societies are charged with 

developing that, they are capable of it. 

Mr. MURPHY. Anyone else want to comment on it? 

128 

Mr. SEROTA. Yes, I guess I would just say that in our programs— 

we call it Blue Distinction—we used professional societies to determine the appropriate quality standards, and we do want to be careful to avoid substituting one piece work measure for another piece 

work measure. So if we are not paying for poking and prodding but 

we are paying for days reduction, we still are not getting at paying 

for outcomes, paying for better quality and better outcomes, which 

is where I think we ultimately have to get. 

Mr. MURPHY. And I think this is one of those things we still have 

to figure out how to do this, because quality is a very nebulous 

term. But I still believe that empowering the professional colleges 

and societies and panels in medicine is more important than having an IPAB board by which, by law, has to be less than half physicians and medical people. 

I yield back. Thank you, Mr. Chairman. 

Mr. PITTS. Chair thanks the gentleman. That concludes the 

members of the subcommittee. We have Dr. Christensen who is 

here to ask questions. Dr. Christensen, you are recognized for 5 

minutes for questions. 

Ms. CHRISTENSEN. Thank you, Mr. Chairman, and no question, 

the SGR has outlived its non-usefulness and we need a new methodology to fairly and adequately reimburse physicians and other 

providers for care. But just to get this off my chest, for the record, 

if the system had been set up to pay primary care physicians for 

what we have always done, provide patient-centered care, spend 

time with patients and their families, and provide comprehensive 

care, whether at home, in the hospital, or in the office, and to coordinate the care with specialists, we wouldn’t be where we are 

today. The Affordable Care Act, though, has done much to lay the 

foundation to change this and add new models of care that are 

being tested that you have been discussing and enable us to once 

again practice the art of medicine and again, for the record, it has 

strengthened Medicaid, it has improved benefits, and it has actually lengthened the solvency, rather than hurt Medicare. 

But this hearing is a really good beginning to move us forward. 

I want to thank the chair and ranking member for holding it, and 

thank all of our panelists for their time, their work, and their 

thoughtful testimonies. 

I want to ask everyone this question. How did the approaches 

that you are recommending take into account physicians and other 

providers of color or who work in poor communities where services 

are very limited, and the patients are sicker with many comorbidities, especially when we are focusing a lot on outcomes? 

How do we take into account where that patient started from, and 

when we are talking about evidence-based medicine when many 

people of color, and sometimes people with other co-morbidities are 

not in the clinical trials that produce that evidence? 

Mr. SEROTA. I guess what I would say is our philosophy is—I 

mean, the term that has been used up here is one size doesn’t fit 

all. We really in the Blues believe you have to meet the physician’s 

practices where they are, and you can’t take a cookbook approach 

across the country and say it worked here, therefore it will work 

everywhere. You have to work with the local physician communities and the local provider communities and develop a program 

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that starts from where they are and provides incentives, information, and data to help them move the needle forward so that from 

wherever they are starting from, you pay and you reimburse for 

improvements from where they are, not measures against some 

mythical standard that exists on a global basis. 

So we really believe that the closer you get to local management, 

the better the outcomes and the better results you are going to get 

from patient-centered medical homes. So that is the way we would 

deal with those issues in all cases. 

Ms. CHRISTENSEN. Dr. Nash? 

Mr. NASH. Yes, CDPHP is our region’s largest provider of managed Medicaid services, and we partner very closely with our federally qualified health centers and other private providers with large 

Medicaid populations. We support them not only by paying them 

more comprehensively, as I have been describing this morning, 

which allows them to sort of deploy those resources as they see fit 

for those patients, but we deploy our own resources and that is we 

created community health workers to work in the communities to 

go outreach the patients to bring them into the doctors who aren’t 

being seen, as well as putting pharmacists and behavioral health 

workers in those practices. 

Ms. CHRISTENSEN. Dr. Bronson, did you want to add? 

Mr. BRONSON. Well, there is nothing more important that we 

learn how to reward practices for improving the health status of 

their patients, and you have to go to where they are at and understand the risk profile of that community, the risk profile of those 

specific patients, and have incentives that make sense for those 

communities. It is well-observed that certain demographic characteristics will not support—people with those characteristics will not 

achieve the same outcomes as others in certain areas, and that is 

very complex. Sometimes is it socioeconomics, sometimes it is other 

issues of disparity that we need to understand. So these have to 

be adjusted appropriately to support those practices. We shouldn’t 

disadvantage those who are helping those in great need. 

Ms. CHRISTENSEN. Thank you. Anyone else want to add? 

Mr. HOYT. Yes, our past president, L.D. Britt, has made the comment that there is no quality without access. And I think that has 

led to us as an organization really trying to profile where we are 

deficient in some of those areas. One of them is in the—sort of the 

systemus of delivery of care is to assure that limited access populations, whether it is geographic or it is economic or color, et cetera, 

that those are overcome by getting adequate data. And so we are 

really making a concerted effort to make sure that the data we collect at a large hospital in a large city is the same as the data that 

we can collect in a smaller hospital or in a more remote or financially challenged area to try and identify those problems, and then 

start to create solutions for them. 

Ms. PATEL. One additional thing that the Affordable Care Act included were provisions for coverage of costs associated with clinical 

trials, such that the very issue you describe with deep disparities 

in clinical trial enrollment, especially in cancer, can be dealt with, 

and that is very important. 

Ms. CHRISTENSEN. I thank you for your answers, and thank you, 

Mr. Chairman, for giving me the time. 

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Mr. PITTS. Chair thanks the gentlelady. That concludes all the 

questions from the members. Again, let me say this has been an 

excellent panel. Thank you for your testimony, your answers, and 

we will send you any further questions from the members—— 

Mr. PALLONE. Mr. Chairman? 

Mr. PITTS [continuing]. If you please respond. 

Mr. PALLONE. Mr. Chairman, I just wanted to—I have heard a 

number of my colleagues mention this double counting issue, and 

I think it is a red herring, so I am asking to insert Secretary 

Sebelius’s letter on the matter into the record. I would ask unanimous consent. 

Mr. PITTS. Without objection, so ordered. 

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Mr. PITTS. I remind members that they have 10 business days 

to submit questions for the record, and I ask the witnesses to respond to questions promptly. Members should submit their questions by the close of business on Wednesday, July 31. Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:07 p.m., the subcommittee was adjourned.] 

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