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FULL COMMITTEE HEARING ON 

THE PRESIDENT’S FY 2010 BUDGET 

AND MEDICARE: HOW WILL 

SMALL PROVIDERS BE IMPACTED? 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

MARCH 18, 2009 

Small Business Committee Document Number 111-011 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

PARKER GRIFFITH, Alabama 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

PARKER GRIFFITH, Alabama 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

PARKER GRIFFITH, Alabama 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, Pennsylvania, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

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

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Heyman, M.D., Joseph M., Chair, Board of Trustees, American Medical Association, Amesbury, MA ........................................................................................ 3 

Harris, M.D., Jeffrey P., F.A.C.P., President, American College Of Physicians, 

Millwood, VA ........................................................................................................ 5 

Preskitt, M.D., John T., F.A.C.S., Board Of Regents, American College of 

Surgeons, Baylor University Medical Center, Dallas, TX ................................ 7 

Hannon, Edward J., President and CEO, The Mcdowell Hospital, Marion, 

NC, on Behalf of The American Hospital Association ...................................... 8 

Moffit, Ph.D., Robert E., Director, Center for Health Policy Studies, The 

Heritage Foundation ............................................................................................ 10 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 32 

Graves, Hon. Sam .................................................................................................... 34 

Heyman, M.D., Joseph M., Chair, Board of Trustees, American Medical Association, Amesbury, MA ........................................................................................ 36 

Harris, M.D., Jeffrey P., F.A.C.P., President, American College Of Physicians, 

Millwood, VA ........................................................................................................ 42 

Preskitt, M.D., John T., F.A.C.S., Board Of Regents, American College of 

Surgeons, Baylor University Medical Center, Dallas, TX ................................ 53 

Hannon, Edward J., President and CEO, The Mcdowell Hospital, Marion, 

NC, on Behalf of The American Hospital Association ...................................... 63 

Moffit, Ph.D., Robert E., Director, Center for Health Policy Studies, The 

Heritage Foundation ............................................................................................ 70 

(V) 

(1) 

FULL COMMITTEE HEARING ON 

THE PRESIDENT’S FY 2010 BUDGET 

AND MEDICARE: HOW WILL SMALL 

PROVIDERS BE IMPACTED? 

Wednesday, March 18, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 2360 

Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairman 

of the Committee] presiding. 

Present: Representatives Vela ́zquez, Shuler, Dahlkemper, 

Schrader, Kirkpatrick, Ellsworth, Sestak, Bright, Griffith, 

Halvorson, Graves, Westmoreland, Luetkemeyer, and Thompson. 

Chairwoman VELA ́ ZQUEZ. This hearing of the Small Business 

Committee is now called to order. 

In the last few years, this Committee has heard from countless 

entrepreneurs who say healthcare costs are crippling their businesses. For many small firms, rising premiums have become a barrier to growth and success. So it was not surprising when the 

President used his February speech on the budget to make the case 

for reform. As he later put it at the White House Healthcare forum, 

‘‘the greatest threat to our nation’s balance sheet is the skyrocketing cost of healthcare.’’ 

As part of its budget for the coming year, the new Administration has made healthcare reform a top priority and with good reason. The current system is bankrupting businesses and costing our 

country $2.4 trillion a year. On a per capita basis, Americans spend 

250 percent more than any other advanced nation. Clearly, the system is broken, and we cannot continue down this path. 

For decades, this country has been waiting for comprehensive 

healthcare reform. Now that it is finally becoming a reality, we are 

going to see some very real changes in the system, especially for 

small businesses. This afternoon, we will review many of those proposals, and hear from the individuals who will be handling them 

day in and day out. Their views will give us the insight we need 

to start determining next steps. 

Healthcare reform affects entrepreneurs on many levels. To 

begin, it helps ease the burden of rising insurance costs, which 

have jumped 129 percent in the last eight years. With premiums 

growing four times faster than wages, the need for change has 

never been greater. 

2 

Small medical providers, who are the core of our healthcare system, will also have a critical role in reform efforts. Small businesses makeup nearly 70 percent of all healthcare practices and 

they recognize that the current system is simply not working. 

These are the entrepreneurs who will be implementing change, and 

they are the people spearheading the process. 

A key component of reform is an increased emphasis on efficiency. That includes streamlining the system and modernizing it 

through a greater use of Health IT. Additionally, it means cutting 

expenditures such as Medicare overpayments and hospital readmissions. As a result of these measures, Americans should see an estimated $316 billion in savings. Those savings will go a long way in 

ensuring that every American has access to quality, affordable coverage. 

The budget provides a clear outline for reform. However, President Obama has said he is not rigid in those plans, and welcomes 

innovative ideas from all around the country. After all, our 

healthcare system touches the lives of every single American. Rather than taking a one-size-fits-all approach, reform should account 

for a broad range of interests. This is particularly true when it 

comes to the unique needs of entrepreneurs. 

Like all other business owners, the providers here today are 

stakeholders in the movement towards greater healthcare coverage. 

They are also the men and women in the trenches, making sure 

that the system works for everyone. Their input will be an invaluable asset to the reform process, and I look forward to hearing 

their suggestions for next steps. 

I would like to thank today’s witnesses in advance for their testimony. And I am glad you were able to take time out from running 

your businesses to discuss this important issue. 

With that, I would like to yield to Ranking Member Mr. Graves, 

for his opening statement. 

Mr. GRAVES. Thank you, Madam Chairwoman, thank you for 

holding this hearing on the changes to Medicare that are proposed 

in the President’s budget. Thank you for delaying the hearing just 

slightly. 

I want to thank our witnesses for all being here. You all are very 

much experts in the area of healthcare reform and I know some of 

you have traveled a ways and I appreciate you being here. 

We are a nation that is certainly concerned about healthcare. 

Forty-five million Americans are with health insurance. For those 

who do have insurance, and can afford to pay the premiums, the 

costs are rising. And for small businesses, the problem is even 

more challenging: how to operate a small company in a worsening 

economy, while continuing to attract and retain the best employees, 

which means offering competitive salaries and benefits. 

Small businesses are committed to offering healthcare to their 

employees, but many are concerned about the proposals in the 

President’s budget. The budget recommends spending $634 billion 

over the next 10 years to create a reserve fund to help finance 

healthcare reform, although some estimate the cost of universal 

coverage and other reforms could actually $1.2 trillion. 

That $634 billion reserve fund comes from several sources. First, 

it comes from raising taxes on individuals earning more than 

3 

$200,000 a year and couples earning more than $250,000 a year; 

many of whom are small business owners, and who tend to return 

any profit back to their businesses. Second, it comes from cuts or 

changes to Medicare or Medicaid payments. But even the budget 

itself notes that the sum will be insufficient to accomplish 

healthcare reform and is a mere ‘‘down payment.’’ Exactly how 

much more will be needed, and the source of these additional funds 

is not disclosed. 

To its credit, President Obama’s healthcare budget recognizes the 

significant problem with unsustainable growth and entitlement 

spending. However, the budget also includes an enormous expansion of costly entitlement programs. This is at a time when spending levels on our current entitlement programs, such as Medicare 

and Medicaid, are simply unsustainable. 

Small business issues—you know, the fact is, small business 

issues are non-partisan. We can all support strengthening America’s small companies, which are the job creators of our economy. 

We can all support the goals of increasing access to affordable 

health insurance and increasing the quality of outcomes. We must 

also, however, ensure that America’s small business owners have 

the tools they need to grow and lead our nation’s economic recovery, and are not unfairly burdened with the additional taxes, mandates or regulations. 

Again, Madam Chair, I want to thank you for holding the hearing and I look forward to what the witnesses have to say and I appreciate you holding up just a little bit. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Graves. I welcome the 

first witness, Dr. Joseph Heyman. He is a Board-certified 

obstetrician/ gynecologist, practicing for over 30 years. He has a 

private practice in Amesbury, Massachusetts. Dr. Heyman has 

been a member of the American Medical Association Board of 

Trustees since 2002 and is currently serving as chair. The AMA 

represents the American medicine industry and serves as an advocate for the physician, the patient, and the profession. 

Welcome, sir. You have five minutes to make your statement. 

STATEMENT OF JOSEPH M. HEYMAN, M.D. 

Dr. HEYMAN. Thank you, Madam Chairwoman. My name is Joe 

Heyman and I am Chair of the Board of Trustees of the American 

Medical Association, also a gynecologist in solo practice in 

Amesbury, Massachusetts. The AMA thanks you, Chairwoman 

Vela ́zquez and Ranking Member Graves, and members of the Committee for your leadership in holding this hearing. 

America’s seniors, the physicians who care for them, many of 

whom, like me, are small business owners, and Congress, all face 

an annual Medicare problem. The current Medicare physician payment formula, known as the Sustainable Growth Rate, or SGR, ties 

physician payments to the GDP. Yet, while the economy is going 

down, the healthcare needs of seniors are going up. The SGR is not 

reality and has threatened steep cuts every year since 2002. 

Over the last six years, Congress and the physician community 

have had to scramble to achieve multiple eleventh hour interventions to ward off these cuts and preserve patients’ access to care. 

And now, due to the SGR, a 21 percent cut is scheduled for JanuVerDate Aug 31 2005 09:22 Apr 09, 2009 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48123.TXT DARIEN
4 

ary 1st, with cuts totalling 40 percent projected in the coming decade. These cuts, if not stopped, will impair patient access. The vast 

majority of physician practices are small businesses and cannot absorb these steep losses. No small business could survive under a 

business model that dictates steep cuts year after year. A solution 

is needed now. 

The Administration’s budget provides a big part of the solution. 

It assumes a new baseline in forecasting future spending on Medicare physician services. This is known as rebasing. And we strongly 

support it. With rebasing, the Administration uses a new baseline 

to reflect the realistic assumption that Congress will continue to 

preserve seniors’ access to care by stopping future SGR cuts. After 

all, the primary purpose of the budget baseline is to provide policymakers with the clear forecast of projected spending and taxpayer 

obligations. 

In previous years, budget forecasts have inaccurately assumed 

that the projected 40 percent in physician cuts would occur. In reality, Congress has interceded six times since 2003 to legislatively 

ignore the physician payment baseline and provide temporary payment increases. 

Rebasing is imperative for several reasons. It would pave the 

way for Congress to repeal the SGR. Congress could then establish 

a new Medicare physician payment system that allows annual updates that accurately reflect increases in medical practice costs 

with appropriate incentives for utilization, efficiency, and quality. 

This two-step process, that is, rebasing along with repeal of the 

SGR, will preserve access to high-quality, cost-effective healthcare 

for our senior and disabled patients. 

And since projected SGR cuts exacerbate on-going physician 

shortages, rebasing and repeal of the SGR will favorably affect the 

future supply of physicians. Further, adopting a new baseline and 

repealing the SGR means physicians and Congress can focus on 

other important reforms like health insurance for the uninsured, 

adoption of health information technology, and investment in quality improvement and prevention programs. 

Finally, a new baseline and positive physician updates would bolster our economy. It would help sustain the jobs of nearly three 

million employees and benefit millions of patients and physicians 

across the country. For example, if the 40 percent cut takes effect, 

New York would lose $17 billion by 2016 for the care of elderly and 

disabled patients. And Missouri would lose $4 billion. And every 

state represented on this Committee similarly would stand to lose 

billions. The stakes are too high to continue this cycle of eleventhhour, temporary SGR fixes. 

We urge the Committee and Congress to support adoption of a 

new baseline in the Fiscal Year 2010 budget resolution and pave 

the way for a new Medicare physician payment system that best 

serves patients and employees across the country, as well as our 

entire healthcare system. 

Thank you very much for the opportunity to be here today. 

[The statement of Dr. Heyman is included in the appendix at 

page 36.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Heyman. 

5 

Our next witness is Dr. Jeffrey Harris. He has practiced Internal 

Medicine and Nephrology since 1977 and is currently a faculty 

member of the University of Virginia Medical School. He is representing American College of Physicians where he serves as President. The American College of Physicians is the largest medical 

specialty organization and the second largest physician group in 

the United States. Welcome. 

STATEMENT OF JEFFREY HARRIS, M.D. 

Dr. HARRIS. Thank you, Chairwoman Vela ́zquez and Ranking 

Member Graves for allowing me to share the American College of 

Physicians views regarding the President’s healthcare budget for 

Fiscal Year 2010. 

As mentioned, I’m Jeff Harris, President of the ACP. Until recently, I practiced in a rural community with a population of 

40,000. The office in which I practice focused on the delivery of primary care and Nephrology. I have practiced Internal Medicine for 

nearly 30 years. This year I have the good fortune of being President of the American College of Physicians, representing 126,000 

Internal Medicine physicians and medical students. The ACP is the 

largest physician specialty organization in the United States. 

Smaller physician practices are an essential part of the system 

of care in the U.S. Congress has a historic opportunity to adopt a 

budget that will help physicians in small practices provide the best 

possible care to patients by (1) eliminating payment cuts from the 

Sustainable Growth Rate, known as SGR, and accounting for the 

true costs associated with providing updates that keep pace with 

the practice of medicine and its costs; secondly, increasing Medicare payments to primary care physicians to make them competitive with other specialties and career choices; and thirdly, funding 

programs to support and expand the patient-centered medical 

home. 

Over the past several years, one of the College’s main priorities 

has been urging Congress to reform the SGR, Medicare’s flawed 

physician payment formula. This formula has led to scheduled annual cuts in physician payments for each of the past seven years. 

This coming January, as Joe mentioned, physicians face a 21 percent Medicare payment decrease unless Congress intervenes to 

avert the cut. 

Since this is a hearing of the Committee on Small Business, the 

following analogy may help illustrate the problem. Imagine you 

work for a small business and imagine that your boss told you that 

your wages would be cut by 10 percent this year. Later, your boss 

announces that your company will not cut your wages, but that the 

only way the company can afford to stop the 10 percent cut would 

be to pretend to reduce your wages by 20 percent the following 

year. You were told not to worry though. They would just do the 

same thing the next year, prevent the 20 percent cut by pretending 

that the costs will be cut of your wages by 40 percent the following 

year. You were told though that the company has no intention of 

ever allowing a 40 percent cut to happen. They just have to pretend 

they will do so so the accountants will allow them to stop the immediate pay cut. And on and on it would go. 

6 

No small business would actually run its payroll budget this way. 

Yet, this is how Washington has handled costs associated with 

stopping the SGR, up until now that is. President Obama’s budget 

is a marked departure from past practices because it acknowledges 

what we all know to be true which is that preventing pay cuts to 

doctors will require that the Medicare baseline spending be increased accordingly. Once the true costs are accounted for in the 

budget, Congress and the Administration would enact a long-term 

solution that will permanently eliminate the SGR as a factor in updating payments for physician services. 

Instead, payment updates should provide predictable increases 

based on the cost to practice of providing care to Medicare patients. 

This is especially important for physicians in smaller practices. 

Also, the primary care shortage is escalating at a time when the 

need for primary care physicians is greater than ever. Our aging 

population further increases the demand for general internists and 

family physicians. 

Congress should enact Medicare payment reforms so that the career choices of medical students and young physicians are largely 

unaffected by considerations of differences in earnings potentials. 

Currently, primary care physicians, on average, earn 55 percent 

of what non-primary care specialists earn on average. Is it a wonder then why only two percent of fourth-year medical students plan 

to go into general Internal Medicine, one of the two specialties that 

adults depend upon for their primary care. 

The College believes that a reasonable goal would be to raise primary compensation to the 80th percentile of the compensation of 

other specialties. This will require that Medicare and other payors 

increase primary care reimbursement by seven to eight percent per 

year over the next five years. Such an investment in primary care 

will result in better health and lower cost of care. To illustrate, a 

recent study in the American Journal of Medicine found that a 

higher ratio of primary care physicians in areas was associated 

with fewer hospital admissions, emergency department visits, and 

surgeries. Congress should allow for some of the aggregate savings 

from reduced utilization associated with primary care to be used to 

fund payment increases for primary care. 

The patient-centered medical home enjoys support of a wide 

range of healthcare stakeholders. Policymakers view it as a promising reform model with Congress authorizing the Medicare medical home demonstration project through a 2006 law and 

supplementing it with a dedicated funding and increased ability for 

expansion through a 2008 law. The current Medicare medical home 

demonstration, which is limited to eight states, should be expanded 

to a national pilot with increased funding to allow for such expansion. 

ACP is grateful for the opportunity to share its views regarding 

the President’s budget and looks forward to working with you to 

improve the quality and lower the cost of our healthcare system. 

Thank you. 

[The statement of Dr. Harris is included in the appendix at page 

42.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Harris. 

7 

Our next witness is Dr. John T. Preskitt. He is a general surgeon 

in private practice at Baylor University Medical Center in Dallas, 

Texas. He also serves as head of surgical oncology in Simmons 

Cancer Center. Dr. Preskitt is a member of the American College 

of Surgeons and currently serves on the Board of Regents. With 

more than 74,000 members, ACP is the largest organization of surgeons in the world. Welcome. 

STATEMENT OF JOHN T. PRESKITT, M.D. 

Dr. PRESKITT. Chairwoman Vela ́zquez, Ranking Member Graves, 

and Members of the Committee, thank you for holding this very 

important hearing on Medicare policy proposals included in the 

President’s budget and their impact on small businesses. We very 

much appreciate having our practices considered as small businesses which they certainly are. 

I’m John Preskitt. I’m a general surgeon. I’ve been in private 

practice at Baylor in Dallas since about 1981. I’m in a group of 

seven surgeons, five of whom work downtown. As stated before, 

we’re very honored to represent the 74,000 members of the American College of Surgeons, the largest surgical organization in the 

world and to testify regarding the President’s budget. 

There are five issues I’d like to briefly touch upon. Certainly, 

Medicare has been discussed and I won’t repeat the very eloquent 

review of the SGR and its impact, but surgical practices do receive 

about 38 percent of their revenue from the Medicare system, which 

is a broken system as has been emphasized. I’m thankful for this 

Committee and the Congress for passing MIPPA 2008 which rolled 

back the proposed cut that would have occurred last July. And we 

very much appreciate the emphasis the President’s budget has set 

on resetting the budget baseline for that SGR. 

Quality improvement is also an extremely important issue for the 

American College of Surgeons. And I will just say that Dr. Harris 

and I both refer to our organizations as the College, so I apologize, 

but it’s easier than saying the whole thing. But we stand for patient safety, assuring high quality, effective care and providing 

healthcare value for our patients. The American College of Surgeons has established the National Surgical Quality Improvement 

Program with the acronym NSQIP which was developed from the 

very highly successful Veterans Affairs program. It provides statistically-valid, 30-day, risk-adjusted outcomes. In the VA system, the 

NSQIP program allowed for a 27 percent reduction in 30-day mortalities by simply looking at these outcome measures. 

Currently, it is in use in 220 academic and community hospitals. 

The Joint Commission includes a merit badge next to the profile 

of all ACS NSQIP hospitals. 

Physician ownership in specialty hospitals and ambulatory surgery centers, though an area of legitimate concern raised by the actions of a few entities, has also in many cases, including my own 

State of Texas, complemented the community hospitals and these 

facilities have received very high quality scores in patient satisfaction. Nonetheless, the American College of Surgeons feels the owners of those facilities should function under the following principles: 

accept payment without regard to means of payment by the patient; select patients based on their actual expertise of the facility, 

8 

and not extend care beyond that. All surgeons involved in such endeavors should continue to provide emergency coverage in their 

community hospitals. The issue of having an ER in a specialty hospital should remain a matter of state law and community need. 

And as important as the rest, physician investors should always 

disclose their financial interests to any and all patients. 

The supply of surgeons, especially general surgeons is diminishing. As we’re getting older, some of us are getting much older, 

it’s been documented in the text the College would propose the following measures and these are applicable to all medical specialties: 

Preserve Medicare funding for graduate medical education; eliminate residency funding caps; extend the funding through initial 

Board eligibility; include surgeons under Title 7 of the Health Profession Program, including the National Health Service; alleviate 

the burden of medical school debt through loan forgiveness programs that stipulate work in rural and undeserved areas; extend 

the medical student loan deferment to the full length of that training; and consider supporting the physician workforce and Graduate 

Medical Education Enhancement Act, H.R. 914, which Congressmen Burgess and Green have proposed to establish interest-free 

loan for programs in hospitals starting new residency training programs. 

In summary, the College greatly appreciates this opportunity to 

testify regarding the budget and its impact on the surgical practices and patients’ access to surgical care. 

Thank you very much, Chairwoman. 

[The statement of Dr. Preskitt is included in the appendix at 

page 53.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Preskitt. And now I 

recognize Mr. Shuler, for the purpose of introducing your next witness. 

Mr. SHULER. Thank you, Madam Chair. It’s an honor and a privilege to introduce a constituent, Ed Hannon. He is the President 

and CEO of McDowell Hospital in Marion, North Carolina. He is 

here today on behalf of the American Hospital Association. 

In his role, he oversees a rural hospital, home health agency, 

rural health clinic, and physician services. He has over 20 years’ 

experience in hospital and healthcare systems and outpatient services. 

Mr. Hannon, thank you so much for your participation in the 

hearing today. 

STATEMENT OF EDWARD HANNON 

Mr. HANNON. Congressman, thank you. Madam Chairwoman, 

thank you, and I appreciate the opportunity to address you all 

today. 

I am Edward Hannon. I am the CEO of the McDowell Hospital 

in Marion, North Carolina and chairman of the American Hospital 

Association’s Governing Council on Small or Rural Hospitals. It’s 

a pleasure to be here today, to speak to you on behalf of the nearly 

5,000 members of the American Hospital Association. 

McDowell Hospital is a 65-bed rural, not-for-profit hospital located in the foothills of the Blue Ridge Mountains of Western 

North Carolina. While the recession has touched us profoundly in 

9 

our area of the country, we are steadfast in our commitment to reform healthcare, which should start with expanding coverage for 

all. And we commend President Obama for making healthcare reform a top priority. 

Hospitals have been early and ardent supporters of efforts to 

make healthcare more affordable. We have worked to increase the 

focus on wellness and prevention, better coordinating care, utilizing 

comparative effectiveness research, moving towards the adoption of 

information technology, creating alternative liability systems and 

reducing administrative costs. 

However, we urge Congress to carefully consider the impact that 

it will have on all hospitals, including the small and rural facilities. 

There are three main characteristics that differentiate the small 

and rural hospitals: our small size and volume, our geographic isolation, and the type of population that we serve. First, lower patient volumes in rural hospitals mean that our financial position is 

more volatile which complicates our abilities to position ourselves, 

develop accurate long-range financial plans and contingency plans. 

As a result, we’re less able to weather the financial fluctuations, 

especially in today’s economy. 

Next is geographic isolation. Rural communities across the country are self-contained and far from population centers and other 

healthcare facilities. In my case, the closest hospitals are more 

than 30 miles away to the west of us, across the mountains, and 

25 miles to the east of us. Moreover, public transportation is practically non-existent. For many rural residents preventive, postacute, and other services may be delayed or forgone, ultimately increasing the overall cost of care. 

Finally, America’s rural areas tend to have higher proportions of 

Medicare patients. For example, Medicare accounted for 58 percent 

of the discharges from my hospital in 2008. Any payment change 

to this program would therefore hit us especially hard. Our lower 

revenues and tight margins means we’re less able to subsidize any 

losses. 

Now that you have a better picture of the challenges faced by 

small and rural hospitals, I’d like to outline how the President’s 

proposed budget would affect U.S. The President’s budget proposed 

reducing payments to hospitals where high numbers of patients are 

readmitted within 30 days. However, any policy that assumes that 

most hospital readmissions are preventable raises concerns. Determining preventable readmissions is complex because the causes behind each readmission are unique. Such a policy requires thorough 

analysis of both the patient’s hospital experience and the care prescribed for that patient after they’re discharged. Further, some readmissions are planned and appropriate patient care, such as for 

chemotherapy patients. Any provision that does not recognize these 

legitimate reasons for readmissions may become an obstacle to patient care and patient safety. 

The budget outline also proposes to bundle payments for hospitals and post-hospital acute care. While we welcome a careful and 

thoughtful approach to bundling, we first need to evaluate existing 

demonstration projects and gradually phase in implementation 

with appropriate tools and infrastructure for coordinating care and 

managing these risks. Some hospitals and healthcare systems alVerDate Aug 31 2005 09:22 Apr 09, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48123.TXT DARIEN
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ready are organized in such ways that this would facilitate the 

bundling of payments, but many are not. Many of the bundling 

pilot projects focus on care that is not even commonly provided in 

rural hospitals such as coronary artery bypass graft surgery. A 

thorough understanding of the unique obstacles of rural health 

must be undertaken before any of these new programs are put into 

place. 

It is critical that we shape a fair payment bundling system. 

The President’s budget also proposes linking a portion of the inpatient hospital payments to performance on specific quality measures. Providing incentives for quality is a laudable goal that we 

certainly support. The fact is hospitals more than any other provider type have a history of linking quality measurements and improvements to payments. However, we are concerned about this 

proposal because it cuts payments up front. We believe that overall 

savings can be reached by improving care that leads to fewer medical visits. The current pay-for-performance proposals use a standard set of measures which may involve procedures not performed 

commonly at small and rural hospitals. A way to address low volume situations must be included in any pay-for-performance proposal. 

Before I conclude, I do want to offer the AHA’s full support for 

several provisions of the President’s budget outline. The President 

proposes to permanently fix the Medicare physician fee schedule, 

and to invest $330 million to address the shortage of healthcare 

providers in medically-undeserved areas, which would enhance our 

ability to recruit and retain physicians. In addition, we strongly 

support the President’s inclusion of a ban on physician self-referrals to hospitals in which they have ownership interest. We look 

forward to working with the Administration and Congress to 

achieve this goal. 

Let me end by saying that hospitals are more alike than we are 

different. Together we form America’s healthcare safety net no 

matter the size of our staff, the size of our budgets or location. Our 

mission is always the same, to treat everyone the best of our ability 

each and every day. Thank you for your time today and I appreciate the opportunity to be here. 

[The statement of Mr. Hannon is included in the appendix at 

page 63.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Hannon. Our next witness is Dr. Robert E. Moffit. He is the Director of the Heritage 

Foundation Center for Health Policy Studies. Dr. Moffit has been 

a veteran of Washington policymaking for more than 25 years. In 

the Foundation, he specializes in medical reform, health insurance 

and other health policy issues. The Heritage Foundation was 

founded in 1973. Welcome. 

STATEMENT OF ROBERT E. MOFFIT, Ph.D. 

Dr. MOFFIT. Thank you. Thank you very much for the opportunity to talk with you today. It’s an honor and a privilege to appear before the Committee. The views that I express today are entirely my own and should not be construed as representing the 

views of The Heritage Foundation or its officers or its Board of 

Trustees. 

11 

President Barack Obama has outlined an ambitious and farreaching healthcare agenda, including major changes to the Medicare program. I would only observe at the outset that the decision 

to start with $634 billion worth of financing in a reserve fund without a clear understanding of what exactly it is that would be financed beforehand is at the very least an unusual approach. I 

would just make two observations in this connection. While the 

President may believe that there is enough of an agreement to 

jump start the process by putting the money upfront and hammering out the details later, it is a common experience in this area 

of public policy, in particular, that it is the details that drive broad 

policy agenda. It is not always the broad policy agenda that drives 

the details. 

Secondly, with funds already committed to the project, there is 

always the danger that existing stakeholders, the representatives 

of a very powerful class of special interests that dominate this sector of the economy, will view this entire effort as merely a way to 

expand existing public and private institutional arrangements with 

additional taxpayer dollars, rather than the process of securing a 

real structural change in the healthcare system, the creation of different ways of improving the financing and delivery of healthcare 

for the 300 million Americans who are going to be the beneficiaries 

of reform. 

All together, the President is proposing a dozen Medicare-related 

changes. In the limited time available to me, I would like to focus 

my remarks on just a few key Medicare-budget policy proposals. 

The President wants to change the Medicare Advantage system 

and this change will result in a substantial savings over the first 

ten years of this implementation. He wants to replace Medicare Advantage payment with a system of competitive bidding. 

Ladies and gentlemen, much would depend on exactly how this 

legislation is crafted, the details of the process, and what the Administration specifically means by competitive bidding. It is a 

phrase that can, in fact, have very different meanings. If the process is a way for the government to pick winners and losers among 

health plans, something akin, for example, to a Department of Defense procurement process, it would be incompatible with personal 

choice and market competition. It is well to recall that the provision of that opportunity, particularly for seniors in rural areas is 

one of the major reasons why Congress enacted the Medicare Advantage program in the first place. If, however, it is a way of establishing a much more rational benchmark for Medicare payment, 

and allowing persons to pick richer plans and pay for the extra 

benefits, if they wish to do so, or picking less expensive plans and 

keeping the savings of their choice, the President’s proposal could 

be a significant improvement over the current system. 

The President would also make wealthy seniors pay higher premiums for prescription drugs. According to the press reports, the 

seniors enrolled in Medicare Part D would pay higher premiums 

just as seniors do in Medicare Part B. All together, certainly as an 

alternative to cutting provider reimbursements, income-relating 

medical subsidies is a sound alternative. The President’s position 

makes a great deal of sense. 

12 

The President is calling for a re-evaluation of the current provider payment system. That is welcome. He is promoting pay for 

performance in accordance with government guidelines, tougher enforcement for Medicare payments to doctors and other medical professionals to reduce waste, fraud, and abuse in the system. It 

should be noted that Medicare savings have previously been proposed as a way to finance comprehensive healthcare reform. President Clinton proposed that in 1993, promoting a shift of approximately $124 billion over six years to finance his healthcare reform. 

If the President’s changes, however, simply results in additional 

reimbursement reductions at the end of the day, they would aggravate the current level of cost-shifting from federal entitlements to 

individuals and families in the private sector. Shifting tens of billions of dollars on to the private sector does not add one red cent 

to the value of healthcare in the United States. 

I am pleased to hear that there is renewed discussion of the current tax policy governing health insurance. This could open up a 

new opportunity to forge a bipartisan consensus in healthcare policy. Senator Max Baucus has proposed capping the current tax exclusion on health insurance, the benefits of health insurance, and 

creating an opportunity for tax credits or perhaps a voucher program for low-income people to get insurance. This could be the 

basis of a serious bipartisan cooperation on solving one of the 

greatest single problems facing the American people. 

Madam Chairwoman, I’m going to conclude my remarks, but I’ll 

be very happy to answer any questions. 

[The statement of Dr. Moffit is included in the appendix at page 

70.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Dr. Moffit. 

Dr. Harris, can you talk to us how will the practice of medicine 

be impacted if Congress fails to fix the Medicare physician payment 

system? 

Dr. HARRIS. If they fail to and continue simply doing what’s been 

done, namely masking the problem, all we’re doing is putting off 

the inevitable. I mean this year, as you mentioned, we anticipate 

a 20 percent cut if it is not resolved. That will be 40 percent the 

next year. If you carry that to its logical extension, if Congress continues simply to apply a patch, that means by 2012 all the medical 

practices in this country are to be cut by 160 percent. I mean that 

is obviously utterly absurd. 

So we, even today, if you were to cut it by 20 percent, I think 

you can say and this is not hyperbole, I don’t thinkany primary 

care practice in this nation could survive a 20 percent cut in those 

revenues. 

Chairwoman VELA ́ ZQUEZ. Thank you. Dr. Heyman, the Medicare 

Advantage program costs the federal government about 14 percent 

more to provide benefits than traditional Medicare. The President 

believes the funding could be put to better use. Can you tell me 

where the medical community sits on this issue and I would like 

to hear from Dr. Harris and Dr. Preskitt and even Mr. Hannon. 

Dr. HEYMAN. Well, at the American Medical Association, our feeling is that these are enormous subsidies in payment to Medicare 

Advantage plans. We’re not opposed to Medicare Advantage plans 

13 

and we certainly are not opposed to people having the choice of regular Medicare or a Medicare Advantage plan. We just feel that if 

a Medicare Advantage plan was as efficient as Medicare is, then 

Medicare Advantage plans would be able to exist without those 

kinds of subsidies. And so we think an efficient Medicare Advantage plan is a wonderful idea. We just are opposed to giving them 

extra money to provide the same services. 

Chairwoman VELA ́ ZQUEZ. Dr. Harris? 

Dr. HARRIS. The American College of Physicians would echo that 

sentiment. Again, we’re not opposed to Medicare Advantage, what 

we would like is the various Medicare options that patients have 

on a relatively level playing field. 

Dr. PRESKITT. The American College of Surgeons also has no 

issue, per se, with Medicare Advantage plans. The intent from the 

outset was to use a business model for the insurance industry, as 

I understand it, to provide more efficient care for Medicare recipients. We can’t demonstrate that that has necessarily occurred. The 

President’s budget proposal talks about comparative effectiveness 

research and sets aside money to do this, to figure out what is a 

value-based purchasing. And hopefully, Medicare Advantage plans 

will be driven to demonstrate a value in this purchasing. I don’t 

believe we’re there yet. And I would have to agree with my colleagues. 

Chairwoman VELA ́ ZQUEZ. Mr. Hannon? 

Mr. HANNON. Madam Chairwoman, as small rural hospitals, we 

don’t see the effects of the Medicare Advantage program in our 

communities as much as our urban counterparts do. As hospitals, 

it is not necessarily the program that’s administered to us that 

makes a difference. It is where is the money being put to use? If 

it is, in fact, an efficient program, whether it’s the Medicare Advantage program or any other one, our efforts are to ensure that patients get safe, appropriate care efficiently and that the money is 

going to help assume that the patient is getting the care and not 

to the insurance companies. 

Chairwoman VELA ́ ZQUEZ. Thank you. Dr. Harris, the ACP supports incentives for physicians who adopt HIT. However, there is 

concern of possible penalties for small and rural providers. Given 

the unique needs of these practices, how do you think we should 

address the issue of HIT? 

Dr. HARRIS. This is a major issue. I would just preface it by saying that 82 percent of all the office visits in the United States are 

to practices with five or fewer physicians. I mean these are huge 

issues for small businesses. And HIT, the cost of it, is just an enormously steep hill to climb. As most of you are aware, the cost currently for a physician to add this technology to his or her office is 

about $35,000 to $50,000 per doctor. And then after that, it’s another $5,000 per doctor per year to maintain the software. So obviously, with these groups of five or fewer, it’s just a huge sum of 

money to try and find someone to loan you the money to go out and 

try and purchase the system which is so utterly essential if we’re 

going to make the seamless connection which we believe ultimately 

will help reduce healthcare costs. 

Chairwoman VELA ́ ZQUEZ. Thank you. Mr. Graves? 

14 

Mr. GRAVES. Thank you, Madam Chair. When it comes to the IT 

system, I’m very interested in this because I have a medical IT 

company in my District, but I’m very curious as to if we can afford 

this. And I’m worried about particularly, and Mr. Hannon, I’d be 

curious too, because I represent a very rural District with very 

rural hospitals. And they seem to be as worried as anybody as 

about how they’re going to implement this. 

My question too is the point where all these systems are going 

to communicate with each other. I know there’s different systems 

out there and being able to talk to one another is something that 

concerns me, but the bottom line is can we afford it right now? I 

mean we’ve got so many things on our plate with increasing 

healthcare costs and I’m just worried about that, where this thing 

is going. I’d like for you all to comment, but Mr. Hannon, I’d like 

to hear you first. 

Mr. HANNON. Thank you, Mr. Graves. Congressman, the hospitals believe that we are early adopters and seek new technology. 

And it is our belief that health information technology is important 

for us to the future. You have hit on the important points. How is 

it we’re going to be able to afford it, especially in our small, rural 

hospitals, many of which are running at negative margins today. 

The money needs to come from somewhere upfront and our ability 

to fund those upfront costs is certainly concerning to the small and 

rural hospitals. 

We believe that long term, the best thing we can do is to bring 

technology in. And it is our belief that over time we will see some 

returns on that and we can lower the cost of healthcare for all 

Americans if we had technology. If we’re able to share information 

with our physicians even between communities and with other hospitals so we’re not duplicating tests, and we are seeing what prescriptions patients are on, we believe that we can improve the care 

of the patient, provide a safer environment for our patients, and assist our physicians in caring even faster for those patients. 

As we look at issues of how are we moving those patients from 

acute care facilities to post-acute care facilities, a part of what the 

President’s budget proposes, that sharing of information is critical 

if we’re going to reduce the cost of healthcare. 

Mr. GRAVES. Dr. Moffit. We can just go backwards. 

Dr. MOFFIT. Will health information technology save money? Will 

it be a way to significantly reduce healthcare costs? I don’t think 

anybody really knows. Congress passed a health IT investment of about $20 billion in 

the stimulus bill. You didn’t have many hearings; in fact, I don’t 

recall any hearings on that proposal when it was passed. I know 

that within the medical profession, evidenced by columns by members of the medical profession in some prominent newspapers, including The Washington Post this week, that there is grave doubt 

about whether, in fact, health information technology will save 

money. 

One concern is that with the government superintending the development and the dissemination of healthcare, information technology, we may end up creating a regulatory straightjacket in this 

area which could undermine innovation in one of the areas of the 

economy where innovation is a daily occurrence. 

15 

As I say, I think the jury is out on this. 

Mark Pauly, at the University of Pennsylvania, a top-ranked 

economist, has made the point on several occasions, and I think before Congress that the success of all this is kind of a ′′what-if′′ proposition; that is to say, what if you don’t get the kind of cooperation 

from all of the members of the medical profession you need? Or the 

cooperation you need from different sectors of the healthcare industry to accomplish all of this? I mean there are a lot of factors here 

that go into whether or not this will actually bring about the kind 

of savings that many people hope will come about. I have no strong 

feelings on it. I think the jury is still out. 

Chairwoman VELA ́ ZQUEZ. Would the gentleman yield? Let me set 

the record straight. We not only conducted one, but several hearings, this Committee on HIT and the impact on solo practitioners 

and small business practitioners. 

Dr. MOFFIT. I was only— 

Chairwoman VELA ́ ZQUEZ. I would invite you to read the record 

because it could be very enlightening. 

Thank you for yielding. 

Mr. GRAVES. Dr. Preskitt. 

Dr. PRESKITT. Thank you very much, Just to add to this, health 

information technology certainly is important and we appreciate 

the President considering it and elevating its importance into the 

record. I don’t know that the issue is just the cost savings with 

health information technology, but it is also improvement of patient care and safety. The President pointed out in one of his statements about the senior citizen who must remember his or her history at every doctor’s office he or she may attend. 

My father is 89, has Parkinson’s. He’s sharp, but he doesn’t talk 

so fast. Things are going to be missed. If health information was 

part of the system where as Ranking Member Graves said, the 

interrelated pieces communicate, this should improve safety and 

secondarily the efficiencies. But I think improving patient care and 

making care that more efficient is as important as the money 

saved. 

Dr. HARRIS. Mr. Graves, increasing access to health information 

technology is absolutely essential. When Congresswoman 

Vela ́zquez a moment ago talked about how much more expensive 

it is here than abroad, including in those numbers is the fact that 

we have the dubious distinction of having the highest administrative costs on a per capita basis of any of those industrialized countries. It’s 7.3 percent of all the healthcare dollars go there. So 

health information technology becomes potentially a critical way to 

reduce those costs. 

Now more explicitly to your question about how do you pay for 

this, we believe that’s what essential in paying for all of this is a 

dramatic expansion of the primary care base in this country. The 

data from the United States, from Barbara Starfield or Hopkins or 

the Dartmouth Atlas folks, are absolutely compelling. And the 

study that we did comparing us to 12 countries overseas and their 

healthcare systems is equally as compelling. As you expand the primary base, you see a reduction in costs as well as an increase in 

quality. 

16 

I would just leave you with one study that I think reflects this 

and I might add parenthetically and I know it’s in your data, we 

just published an annotated version of 100 studies in the United 

States which make this point. But the one that comes to mind is 

one that’s often cited from The American Journal of Medicine, just 

a couple of months ago, a fellow named Kravitz was the lead author. And they concluded that if you had a community of 775,000 

or three quarters of a million, and they had about 35 percent of the 

physicians there were primary care physicians, in the country now, 

it’s about 30 percent. Overseas, it’s 50 percent, the ones that do it 

so much less expensively and better. But if you could just increase 

this community from 35 percent of its workforce to 40 percent, 

what you saw was a reduction of about 1500 hospitalizations per 

year for a savings of $23 million per year. You saw 2500 fewer visits to the emergency room. You saw 1500 fewer surgeries, by simply increasing primary care 35 percent of your workforce to 40 percent. 

We believe that expanding healthcare coverage in this country 

and expanding the base of primary care physicians are absolutely 

inseparable. 

Mr. GRAVES. And we’ll come to that. I agree with that. I’m trying 

to figure out how to get—when it comes to IT, because I’m worried 

about these small hospitals and how we’re going to get there. I 

think it’s important, particularly in the rural areas to bring technology because it adds some resources that we don’t necessarily 

have. I just don’t know how we’re going to get there and how we’re 

going to pay for it in an environment where it’s increasingly—the 

costs are going up all the time. 

Dr. Heyman? 

Dr. HEYMAN. I have some personal experience with this. I’ve had 

an EMR in my office and used no paper since 2001. The EMR that 

I purchased still is the same one. It’s a lot more robust now than 

it was when I purchased it in 2001. But there’s no question that 

in my practice it definitely saves money. It definitely makes me 

more efficient. It definitely prevents mistakes. And it’s very, very 

effective. 

We kept hearing about how the federal government wanted to 

have more IT, but for the first time there’s actually some money 

here and that’s very important. 

The other thing I would say is that there are a lot of barriers 

to this. In my community, we’re very fortunate because we had a 

grant where every physician in my community now actually over 

the last three years has actually been able to have their own EMR 

in their office and we’re supposed to be starting a help information 

exchange. Now one of the barriers is that the standards are not 

there and we have six different EMR vendors in our community. 

The physicians are supporting this health information exchange. 

All of these are CCHIT-certified vendors which means that they’re 

supposed to be able to talk to each other and yet in each and every 

case, we have to come up with an interface of making them talk 

to each other and it’s very expensive and we’re not sure how we’re 

going to be able to make that exist in the future. 

I would also point out to you that physicians are always the first 

people to accept new technology. They’re the first people to use cell 

17 

phones. They’re the first people to use robotics in their practices. 

There are all kinds of technologies that physicians have used. 

There has to be a reason why physicians have not adopted this 

technology. 

And the last thing I would say is that when physicians are incorporating this into their practices we found in our community that 

in spite of the fact that it was free, they got the hardware and the 

software for nothing, it was still very costly for those who were 

changing work flows in their practice to be able to incorporate this 

stuff into their practice. 

So we definitely support the idea of increasing health information technology. We think it’s inevitable in medicine, but there are 

barriers. We need those standards done by the end of this year and 

we think that it really will improve healthcare in this country if 

we do this. 

Mr. GRAVES. I thank you all. And I think it will improve it too, 

but we still haven’t figured out how to answer the question. The 

money is there, at least a little bit of it at the moment, but still 

how do we pay for it is the question that I have. If it’s the result 

of savings, it would be good, but just encourage you all to think 

about that. We have to figure out how to pay for this. 

Thank you, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Ms. Kirkpatrick. 

Ms. KIRKPATRICK. Thank you, Madam Chair and thank you to 

our panel. I represent a vast, sprawling District in Arizona that’s 

very rural and for over 20 years of my private law practice I represented the regional hospital and many physicians’ groups, including our emergency physician group, so I thank you for being here. 

Healthcare reform and provision in rural areas is very, very important to me. 

My first question is for Dr. Heyman and Dr. Preskitt regarding 

the SGR being tied to the GDP. And I’d like to know if there are 

other factors that you think would provide a more accurate baseline? So maybe we’ll start with Dr. Preskitt and then go to Dr. 

Heyman. 

Dr. PRESKITT. Well, I hope there are other factors that provide 

a more accurate baseline. My life, my expenses, my house payments, they don’t follow the GDP. They seem to follow some other 

issue that might be related to consumer price index. I don’t want 

to belittle the complexity of the math, but I just have to say there’s 

one thing we’ve proven; tying payments to the SGR and how that 

relates to the GDP just isn’t taking care of the process. It’s not 

keeping up with any form of expense increase. 

What we pay our employees in these small businesses, there’s no 

way a single parent could have a job and be employed in a practice 

that followed the variation in salary if it followed the SGR. I think 

establishing a fixed base as the President has recommended is the 

place to start, but of course, that still means we have to fix the formula. I’m not giving you a direct answer, but we know that the 

current system is so incredibly broken that it’s harming people. 

Ms. KIRKPATRICK. Dr. Heyman, thoughts about that? 

Dr. HEYMAN. Well, of course, there’s the medical economic index 

which is an evaluation of the cost of providing care. That would 

certainly be a better index, if we’re going to use indexing. 

18 

Ms. KIRKPATRICK. Who prepares that index? 

Dr. HEYMAN. Is that from the CMS or the—I believe it is, but 

I’m not positive. 

Ms. KIRKPATRICK. I’m a new member, so please bear with me. 

Dr. HEYMAN. The other thing I was going to mention is that you 

know, if we rebase, we’re really not changing anything as far as the 

amount of money that we spend. We’re spending the same amount 

of money. The only difference is that we’re being honest about how 

much money we’re spending. 

The previous system of going to the end of the year and then 

having this dance that we did every year is actually gimmickry. It’s 

trying to pretend that we’re spending less money than we are. So 

at least let’s have some transparency and rebase and predict the 

true cost of the medical care that we’re providing to our seniors 

and disabled. That’s where we need to start. 

I would also say that there are a lot of imaginative and innovative ways that people are discussing about physician payment, and 

we’re not opposed to any of them. We’re interested in trying to find 

the right solution and the right way to do it and we’re hopeful that 

we’ll be successful in that. But the first thing we have to do is 

rebase. That’s absolute necessity because otherwise it looks expensive to change the SGR when in truth it doesn’t cost any more than 

if we didn’t rebase. It’s the same price that we’re all paying. 

Ms. KIRKPATRICK. Thank you. One of the things that I’ve noticed 

over the years is the increasing complexity of the reimbursement 

process and since we’re talking specifically today about Medicare, 

I’d like to hear from Dr. Harris and also you, Mr. Hannon, from 

your standpoint. If you think that reducing that complexity somehow streamlining the reimbursement process might actually help 

deliver better healthcare, and provide a better cost basis. 

Dr. Harris, we’ll start with you. 

Dr. HARRIS. As you know, we favor eliminating the SGR, but we 

feel that certainly a need, Congresswoman Kirkpatrick, for payment reform. Now the model that is talked about most now is the 

patient-centered medical home. First, we would suggest that it be 

expanded from simply the eight states to convert it from a demonstration project to a pilot project. It will be much more meaningful data if it involves far more than the 400 physicians that are anticipated to be involved. That’s number one. 

Number two, that we need to explore other models. I mean no 

one knows the answer to your question how best to do this. But we 

need to get on with trying other ideas. So we would encourage this 

Committee. We would hope that you would encourage that HHS 

would have the authority to test other models so we could see 

which accomplishes what you’re after. 

Lastly, to the issue of simplifying things, everyone would applaud that. I mean with hundreds of insurance companies, no two 

doing things similarly, it just takes enormous numbers of personnel 

just to keep this huge ship afloat. We believe that the patient-centered medical home though holds promise for simplifying that. And 

that if there is some component of reimbursements that’s based 

upon bundling as in for a team-based approach where physicians 

and for the payor they know that there is a bundled payment. 

They’re not looking as much for cause for pre-certification or to jusVerDate Aug 31 2005 09:22 Apr 09, 2009 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48123.TXT DARIEN
19 

tify because they don’t really care. That would make it much easier. 

Ms. KIRKPATRICK. I realize I’ve exceeded my time, Madam Chairwoman. I welcome your response in writing. I don’t want to take 

any more of the Committee time, but thank you very, very much. 

Chairwoman VELA ́ ZQUEZ. Mr. Luetkemeyer. 

Mr. LUETKEMEYER. Thank you, Madam Chair. I think Dr. Moffit 

hit it a while ago when he said the devil is in the details. I think 

one of the things you’re trying to do today is how a small provider 

is being impacted by what’s going on and until we know a little 

more in detail about what’s going on with the budget, we’re kind 

of throwing darts with a blindfold on here, I think. It’s difficult to 

get our hands around this issue. 

I certainly appreciate all of you being here today and giving us 

your concerns and your input because within the day we have the 

finest healthcare system in the world. We’ve got to find a way to 

keep it in place and be able to pay for it. That’s our struggle. 

I just have one quick question. Just to follow up on Mr. Graves’ 

initial question about the IT stuff. In talking with some of my doctors --and this is directed at Mr. Heyman here when he made the 

statement-- it saves money and it’s easier to access and do things. 

The doctors in my District—I’ve got one large practice or a large 

group of them-- and they’re telling me that most of them that do 

it have found it rather cumbersome from the standpoint of it takes 

time and the longer it takes to do this, the fewer patients they see; 

therefore, in essence, it doesn’t necessarily save a lot of money from 

the position that obviously the fewer patients they see, the less 

money they make. So can you address that? Are they wrong or so 

we just got a learning curve here, we’re not up to speed? What are 

your thoughts? 

Dr. HEYMAN. I think you just hit it on the head. It is a learning 

curve. There’s no question about it. In my first two weeks of doing 

this, I was seeing one patient every hour just so that I could learn 

this system. There’s no question that there’s a learning curve. But 

after you’re familiar with the software that you’re using, and almost all of the really good software is the same way, once you’re 

familiar with it it becomes very, very easy to just—it’s like talking 

almost or typing. You just get used to it. But it takes a while. 

There’s no question about it. 

And the other problem for a practice like you described, is that 

it isn’t just in my case because I’m using it I have only a single 

employee, so I have only one person I have to teach. In the practice 

you’re describing, they not only have to teach all of the physicians, 

and all of the ancillary people that are actually providing the care, 

but on top of that they have to teach everybody in their practice 

how to use this thing. And it slows everybody down. It’s not just 

the provider, it slows everybody down when you first start using 

it. 

So I would agree with them. 

I’ll tell you another barrier is that people know that eventually 

they’re supposed to talk with each other, all these different software products. And a lot of people feel that they’re not talking to 

each other now, so maybe it’s a good idea to wait until they are 

talking to each other and that they know that they have the final 

20 

version. I don’t happen to agree with that, but I sure understand 

that. If it were me, today, and I were in that situation and I didn’t 

know about the software, all of these major products will eventually talk to each other. 

But I would be holding back myself. 

Mr. LUETKEMEYER. I think you’ve got another point that I was 

going to get to shortly also with regards to being able to integrate 

the different software programs because I know even within some 

of the hospitals that I’ve been talking to you have different areas 

of the hospital that can’t even talk to each other because their software programs don’t connect. That is a tremendous inefficiency 

within the hospital itself. So it’s a huge barrier for care. It’s a huge 

barrier for being able to do the kind of job that they’re really supposed to be doing. 

I guess my comment would be, ′′how do we get past that?′′ I know 

with the advances in software, you’re going to continually, in my 

business world back home, we have new software changes every 

three years. We just rotate one in and rotate the other one out 

after three years. I mean, if this is the case here, how do we keep 

up? You’re talking about a long learning curve here. Are we going 

to be that inefficient from now on? 

Dr. HEYMAN. I believe that it will increase efficiency. I believe 

that any physician that does this, once they’ve been doing it for a 

while they would never go back to paper. 

Mr. LUETKEMEYER. Dr. Preskitt, you’ve got your hand up there? 

Dr. PRESKITT. Yes, thank you very much. I agree with Dr. 

Heyman. Just for disclosure, I don’t have an electronic medical 

record. I am in a group that is looking at them for primary care. 

That may be why you sat me next to him, but health information 

technology is extremely important for surgical practices because we 

rely on hospitals and hospitals rely on us. Most of what we do is 

done in a hospital. And any health information technology I have 

in my office must speak to the hospital system, be able to relay information as well as radiology results and x-rays. So the interrelation not just between hospitals and small business practices, but 

between these practices and the hospital systems until it does that, 

it probably won’t be worth the expenditure. 

Mr. LUETKEMEYER. Thank you. Thank you, Madam Chair. I yield 

back the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Mr. Sestak. 

Mr. SESTAK. Thank you, Madam Chair. May I ask just a question 

of Dr. Moffit? You had, in your testimony, you had been open to 

the issue of I think pay-for-performance and hospital readmissions, 

the policies, how well it’s done it seems to be what your question 

is. 

On the hospital readmission, in President Obama’s budget there 

seems like there’s both the carrot and the stick. It isn’t just a stick 

and I’d appreciate it, sir, if you could comment upon this because 

your testimony indicated there was more of a stick there rather 

than any carrot. 

So how would you construct it to make sure, sir, if it was done 

well? He kind of bundles his payment with the 30-day afterwards 

with acute provider, so there’s a little carrot there and a little stick 

21 

with a little less payment if they have to come back. What would 

you do to make sure this works? 

Dr. MOFFIT. I’m not certain. I am not certain. I like— 

Mr. SESTAK. You’re not opposed to the idea. You’re just not certain how to execute it? 

Dr. MOFFIT. No, as I said in my testimony, I think the objectives 

of this are very, very good. 

Mr. SESTAK. Does a proposal of comparative research help in this 

area? 

Dr. MOFFIT. It might. Well, comparative effectiveness focuses primarily on medical treatments. The President is addressing what is 

probably one of the weakest links in the American healthcare system: the sickness or spells of illness that happen to the elderly 

where they end up in hospital intensive care units, usually for a 

week or two. They’re there for a while. Oftentimes, there’s a great 

deal of confusion. You have the young people coming to see their 

parent and they’re trying to find out exactly what their medical situation is. They’re there for a spell of time and then they’re sent 

from the hospital emergency room or from the intensive care unit 

to some skilled nursing facility. 

Mr. SESTAK. Right. 

Dr. MOFFIT. And they’re there for a while, I’m afraid too often, 

there’s a breakdown in the continuity of care. And they’re there for 

a while and then they’re sent back to the hospital. Clearly the 

President’s objective here is exactly right. 

Mr. SESTAK. He’s got the right idea. 

Dr. MOFFIT. Yes. 

Mr. SESTAK. It’s not dissimilar to a Vet getting out of the Department of Defense and trying to find his way through the VA. 

Dr. MOFFIT. Right. 

Mr. SESTAK. I’m quite taken, if I could, and ask you, sir, how 

might you do it. You were a little more concerned, I think, that 

you’re going to get a little less cost if it comes back to you to pay. 

The reason I am is the question that’s come up here several times 

is how do pay for all this? 

Dr. MOFFIT. Right. 

Mr. SESTAK. And every research that I’ve done, the way we pay 

for this is efforts like yours, Doctor, the preventive care if you really do go to these patient-centered medical homes. If the savings 

that they can bode or the savings that we can get out of this payfor-performance or how we do it, that in my mind is the real pay, 

almost simultaneously we need to do HIT and other things. 

Do you disagree with that approach? 

Dr. MOFFIT. No, no. 

Mr. SESTAK. Sir, how would you do this? 

Dr. MOFFIT. I think there are two things here. Pay-for-performance is a separate issue, I think, from the hospital admission issue. 

Physician pay-for-performance is a separate issue. But I like in 

principle the idea of ′′bundling the payment′′ to the hospital for 

spells of illness in certain cases. I think if we start paying for results that is where we ought to go. 

Mr. SESTAK. I agree. I need to move over. Results in the terms— 

Dr. MOFFIT. Results in terms of outcomes. 

Mr. SESTAK. Preventive care. 

22 

Dr. MOFFIT. Not just preventive care. When we have people in 

the emergency room, when we have people in the intensive care 

unit, we don’t want them to be ′′frequent flyers′′ from the skilled 

nursing facilities back to the hospital. 

Mr. SESTAK. I understand. If I could just move—and I know that 

you’re a special case in the sense that your data is less and that, 

but how would you set this very important critical area up? 

Mr. HANNON. Certainly hospitals look forward to doing the bundling. 

Mr. SESTAK. Less data because hospital— 

Mr. HANNON. Our concern is oftentimes as you look at the path 

of treatment for patients, especially in rural communities, it may 

start in a physician’s office, come to a hospital for a part of the admission, and for diagnostic testing, and then get transferred to another facility to have some level of care performed and then the patient or their family requests that that patient be moved back to 

the rural community to be closer to home. 

And so as we bundle that, how are we going to come up with the 

proper way in which to make sure that all of the parties who are 

taking care of the patient are properly paid? In rural communities, 

more often have limited number of partners in which to pair with. 

For instance, in our community, there are only three home health 

agencies, only one of which takes Medicare patients today and only 

one of which has a physical therapist as a part of that home health 

agency. 

So as we bundle care, and that patient needs to go to home and 

that care is bundled under that payment, there may be some delay 

in getting care to that patient because of the limited resources in 

rural communities. And so that is the concern. It’s not that we’re 

opposed to it. It is that we want to make sure that it is done fairly 

and appropriately. 

Mr. SESTAK. I’ve run over my time. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Thompson. 

Mr. THOMPSON. Thank you. Having just come out of rural health 

for the past 28 years and in the Fifth Congressional District of 

Pennsylvania which is the most rural District in Pennsylvania, we 

have lots of hospitals, small hospitals, some healthcare providers, 

rural access hospitals. This is a very important issue and certainly 

my public policy involvement came out of the fact that we have a 

healthcare system today that’s built on regulations from 50 years 

ago, many of them, which is probably step one with healthcare reform, bringing the regulations into the 21st century. 

Mr. Hannon, first question, we’re talking about the President’s 

budget, Medicare impact and small providers. Many hospitals in 

my experience and some of you concur, and healthcare agencies 

rely on charitable contributions for investment and capital expenditures, new equipment, diagnostic equipment, sometimes treatment 

intervention equipment and that’s driven through charitable contributions. And any thoughts on how the President’s proposal to 

eliminate the charitable tax deduction for some taxpayers may impact that? 

Mr. HANNON. Thank you for the question. While I haven’t studied that with the American Hospital Association, I am certainly 

very concerned about that. Having come out of Pennsylvania myVerDate Aug 31 2005 09:22 Apr 09, 2009 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\48123.TXT DARIEN
23 

self prior to going to North Carolina, a great deal of how we survive, how we grew, how we provided technology was through philanthropy. Even today as we look in North Carolina, for example, 

with the economic times that we are in, we’ve already been told by 

some of those philanthropic organizations that we’re likely to have 

less opportunity and a greater competition for the few dollars that 

are going to be available to us. Their contributions are down in 

those agencies and therefore their ability to hand that money to 

hospitals is also down. 

We used to rely on it and I’m sure many of my colleagues across 

the country would agree that we can sustain our day-to-day operations from the revenue that we get from patient care. The ability 

to expand, the ability to bring new technology, the ability to replace 

our aging plants is really done by those contributions. 

Mr. THOMPSON. Thank you. I want to take that tax proposal 

within the budget next step to kind of open this up to all those who 

are representing the physician providers just to see what do you 

see as the impact on small healthcare providers, specifically those 

physicians whose practices may be organized as LLCs or S Corporations with a proposed, the President’s proposed tax increase 

rate for those who are in that $200,000 or $250,000 and higher? 

Dr. HARRIS. I confess I don’t know enough to answer your question about the tax code and so forth. I couldn’t give you a meaningful answer. 

Mr. THOMPSON. Any thoughts? I certainly encourage you to go 

back and take a look at that in terms of those physicians that you 

have that are organized in those ways that they are going to be impacted pretty significantly, perhaps, by that. 

Next question, actually back to Mr. Hannon, I know one of the 

things in rural—it’s good to hear you came from Pennsylvania. 

Sorry you left. In rural Pennsylvania, one of the issues that I hear 

all the time and I experienced myself had to do with the Medicare 

wage index and how that drives reimbursements. And in terms of 

the differences, how does the wage index in your opinion, the wage 

index payment system impact rural providers versus urban providers? Any opinion on that? 

Mr. HANNON. I do have an opinion on that. I have found that 

over the years, and most of my career has been in rural healthcare, 

that as the rural communities, especially those adjacent to more 

metropolitan areas are competing for that labor force, we’re at a 

significant disadvantage. We can’t compete with the wages of our 

urban counterparts. It is harder for us. We all compete for labor. 

There is a shortage of labor. There’s no question about that, whether it be x-ray technicians or nurses or physicians. As we recruit, 

it is much harder for us with that wage index formula. 

Mr. THOMPSON. Okay, great. I have just a short time left, but I 

throw one question out that really I don’t think has been addressed. The looming crisis in healthcare, as I see and experience 

is the lack of qualified physicians, nursing and allied health as a 

result of the baby boomer retirements, specifically, especially in 

rural America. Any thoughts what the impact of this will be, not 

just fiscally on our healthcare, but certainly from a workforce perspective on those that you may represent? 

24 

Mr. HANNON. I’ll be happy to start. We have 420 employees, 311 

full time employees. Seventy of my employees, 70 of the 400 are 

over the age of 60 this year. We will have a significant problem trying to recruit technicians, especially, to that area. As we look at recruitment of physicians to our community we are finding that the 

group of physicians that we’re able to recruit to our community are 

actually those who are nearing retirement, because those coming 

out of residency are not interested in coming to rural parts of the 

country. 

Dr. PRESKITT. Thank you very much. There’s no question, general surgical workforce is aging as all health professionals are. 

Twenty years ago, 39 percent of general surgeons were in the 50 

to 62 year of age group. Now it’s 50 percent. Now don’t get me 

wrong. I think that’s a very blessed age group to be in. Frankly, 

these surgeons and physicians are probably at their prime, but 

they are looking for that. 

We are finding that folks are retiring earlier. However, this recent economic change may change that. I think one of the key 

things is the assistance with graduate medical education. I had a 

young partner who moved to the suburbs. He had $150,000 of medical school loans to pay back and that’s about what a house would 

cost when you’re starting out. When I graduated from medical 

school in ’75, that’s 1975— 

Chairwoman VELA ́ ZQUEZ. We have an opportunity with other 

members. You will have an opportunity to expand. Time is expired. 

Dr. PRESKITT. Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Madam Chair. We could be holding 

these meetings every day until we fix this problem and the Committees definitely should. 

Dr. Moffit, I appreciate your comments. I don’t disagree at all 

with you about naming the price first and in a former life, we built 

a building in my county. They put a $35 million price tag on it and 

you guess how much it cost? Right at $35 million. So I agree with 

you. 

Dr. Harris, what I heard you say in a more eloquent way is that 

for the first time in a long time, President Obama was being honest 

about what the cost is and that these things belong in the budget 

and no different than the war in Iraq and Afghanistan ought to be 

in the budget and people ought to know. 

I heard a Member say one time that sure, our budget is smoke 

and mirrors, but it’s a hell of a lot more honest of smoke and mirrors than their side. That’s not what the American people expect 

and it’s not what they want us doing here. 

I think we can stipulate that this system needs an overhaul. I 

think everybody at the table has said that already. What I see in 

my short time here in Congress is the different groups come in and 

many of those at your table come into our offices and talk about 

what your particular organization or alliance needs for their portion. And what we’re not getting is I’ll get some groups come in, 

they’ll beat up on the HMOs and the insurance companies. The insurance companies come in and beat up on the docs, the hospitals, 

doc-owned hospitals beat up on the hospital association and vice 

versa. 

25 

We’re going to have to throw everybody in the same room at the 

same time. We don’t do this stuff for a living like you do. You know 

this stuff. We make the rules based on your suggestions, and all 

have very convincing arguments. I think we have to all get together. 

One, can we do this one spoke at a time, or is it going to have 

to be a comprehensive healthcare reform, everybody in the room, 

lock everybody in until we come out with a finished product? Or 

can we do it a spoke at a time so we don’t keep kicking this can 

down the road and just take a yes or no if we can do that, because 

I have a couple of other questions. 

Can we do it comprehensive? Or is it going to be a spoke at a 

time? What do you see? 

Dr. MOFFIT. I don’t think that you can pass a comprehensive bill. 

I don’t think that Congress has the political machinery to do that, 

and maintain the kind of consensus you will need to make it work. 

I think this is one area where Americans, as I pointed out, have 

a broad agreement on the goals. I don’t know of any person that 

I deal with in the healthcare policy community that thinks that all 

Americans should not have health insurance coverage. I don’t know 

anybody who feels that way. 

I don’t know anybody who thinks that we should not control costs 

in an efficient way or improve the value that we get from the dollars that we’re spending on this $2.4 trillion system. But when you 

get into the details that is where the consensus breaks down. I’m 

not trying to rain on this parade. All I am saying is that this process, if it is really going to work, is going to have to be a process 

where we work together. It has to be bipartisan-a real bipartisan 

process- of coming to agreement on this. And we’ve got to focus in 

on those matters that we can all agree on. 

There are two areas where I don’t think there is much debate. 

One is that low-income people who do not have access to health insurance, access to private health insurance, ought to get some direct assistance in getting it. That is one clear area where I think 

Republicans and Democrats agree. The other thing to remember is 

that the United States is a country of 300 million people in very 

different states where the healthcare systems actually differ a 

great deal. The health insurance markets in Massachusetts and the 

health insurance markets in Utah are not the same. And we have 

to recognize therefore that we’re dealing with a very diverse thing. 

It’s not one single system. So we have to be careful. I think we 

have to move discretely, and we have to debate every provision. 

This is not to slow things up. It’s just to make sure that we understand what we are doing because this is an area where the law of 

unintended consequences can go berserk. 

Mr. ELLSWORTH. Mr. Hannon? 

Mr. HANNON. Mr. Thompson, I would say the simple answer, yes, 

I agree with you that we do need to get together, and in fact, there 

is a group meeting together of all of the players here at the table 

and well beyond in an effort to bring health for life to this community. AHA is a member of that effort as are the other members who 

are here at this panel and many more who are coming together to 

fix this issue. We do believe in the healthcare reform and it’s important. 

26 

Mr. ELLSWORTH. Dr. Harris? 

Dr. HARRIS. Mr. Ellsworth, we need a major overhaul of the 

healthcare delivery system in this country and it will require all 

the stakeholders. The reality of it is everyone is going to have to 

give up something to make this system work. 

Mr. ELLSWORTH. Ten seconds? Thank you. Like you said, I think 

you’re right, Dr. Moffit, we’re going to have to compare apples to 

apples on these policies, what coverage people get and we have to 

look at end of life issues, what’s the percentage, is it 68 percent, 

I’ve heard, in the last two weeks of life, nobody wants to talk about 

it, but you all may have a statistic that I haven’t heard that 68 

percent of healthcare cost is spent in the last two weeks of life. Is 

that accurate? Okay, okay. Thank you very much. I yield back, 

Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Ms. Dahlkemper. 

Ms. DAHLKEMPER. Thank you, Madam Chair. I come out of a 

healthcare background. I was a dietician for 24 years, so this is always great for me to hear all of you out there that I have worked 

with so many of you over the years. 

I am also from Pennsylvania. I actually—my District borders Mr. 

Thompson’s District and we have very similar issues when it comes 

to rural healthcare. Most of the hospitals in my District are really 

in much more rural areas and even the ones in the most urban 

area deal with the wage index. I’m like Mr. Ellsworth, being lobbied by every single group and the issues do differ, so I thank you, 

Mr. Ellsworth, for bringing up your point. I think it’s a great point 

to make. 

As we go forward here, we’ve got to put everybody in the room 

and we’ve got to come to consensus and there’s got to be give and 

take. 

I did have a question, Mr. Hannon, for you regarding the bundling issue and particularly small rural hospitals because as I’ve 

looked at this, I see this as such a challenge and I think maybe 

it’s because of my current experience, my 80-year-old parents and 

the issues they’ve had over the past few years. And just looking at 

this goal to reduce healthcare costs and when you are in a more 

rural area or an area even as I am in Pennsylvania where many 

people will go to Cleveland and Pittsburgh to have their other procedures done or continued healthcare done. 

What can you give me as specific examples of the types of challenges that you think that hospitals are going to face as we look 

forward to this? And it kind of goes back to, I guess, Mr. Sestak, 

and we have to have a model for this. 

Mr. HANNON. Right. I think some of the challenges that we will 

face is different in every community. The resources, in particular, 

in rural America are different from those in our urban areas. As 

I mentioned, we’re blessed to we have three home health agencies 

in my community, but only one takes Medicare patients. So if we’re 

going to be bundling and we’re going to be looking for partners 

where we can come together to provide the most efficient, cost-effective care, how will we measure that? What are our choices? 

In our community, getting access to assisted living facilities is 

often the challenge. Patients in rural communities may complete 

their care in a hospital and we wait to find an available bed in a 

27 

skilled nursing facility. That doesn’t help us reduce the cost of 

healthcare in those areas. Those are some of the challenges that we 

have. 

So much of healthcare also involves mental health coverage. In 

rural communities, the limited number of mental health providers 

and the social workers, to assist the family with the challenges of 

taking care of especially an elderly person, a tremendous weight on 

the hospital. We are looked to as the source for that care when we 

ourselves don’t have those resources. 

Ms. DAHLKEMPER. I guess I would like to hear from any of your 

physicians’ organizations regarding the bundling issue and where 

you see the challenges in terms of your specific groups? 

Dr. PRESKITT. Well, from a surgical standpoint, risk adjustment 

and looking at those models, the NSQIP program we have uses 30- 

day risk-adjusted mortality. I think there are three of you from 

Pennsylvania. I’ve not heard the Geisinger system mentioned, but 

they’ve proven that with a model population where it’s homogeneous, that in fact, you can develop statistics and data and figure 

out what it costs to provide care within a system. The Geisinger 

system, as I understand, also utilizes the advanced medical home. 

I think done with proper data, bundling can occur that would involve surgical services within that 30-day period. Currently, we’re 

personally bundled in a 90-day period for most of these cases. 

Ms. DAHLKEMPER. Dr. Harris? 

Dr. HARRIS. Yes. I noticed of bundling physician services with 

other physicians, with other hospitals, with hospitals, is among 

those options that we feel need to be studied more. And in truth, 

don’t have enough data on to answer specifically how it would 

work. 

The one bundling though that we believe there are good data on 

is bundling of service in that patient-centered medical home because the current payment system which as you know is based 

largely on a fee-for-service type of thing, the only thing that that 

uniformly achieves is that people are rewarded for seeing more patients or doing more procedures. So bundling is the notion that obviously you would like to fund a team, including nurse practitioners, PAs, dieticians, I mean people to help you by taking a portion of the load. We believe that’s a much more effective way to reform the healthcare system, the financing of it. 

Ms. DAHLKEMPER. Thank you. Dr. Heyman, did you have anything you wanted to— 

Dr. HEYMAN. Well, I would just say if by bundling you mean 

combining physicians and payments with hospital payments, I find 

a certain irony there because when you’re talking about accountable healthcare organizations, that kind of thing, on the one hand 

we hear of this tremendous resistance to physician-owned hospitals 

and yet on the other hand we’re proposing all kinds of ways to 

make physicians and hospitals work together and have the same 

incentives and it doesn’t make any sense to me that the same people are talking about both things. It seems to me that this is a 

great argument for physician-owned hospitals. 

Ms. DAHLKEMPER. Thank you. My time is up. 

Chairwoman VELA ́ ZQUEZ. Mr. Griffith. 

28 

Mr. GRIFFITH. I thank the panel for being here and Dr. Harris, 

I think that with the shortness of time I think you’ve identified the 

problem, is the lack of primary care. I believe that we recognize 

that two percent of our classes are going into primary care and our 

primary care providers are aging and moving off the stage, so to 

speak. 

The obvious to me is that why aren’t we using our nurse practitioners, our PAs, more aggressively and why aren’t we empowering 

them and each state to be our primary care providers because if we 

started today it would be a decade or maybe more even if we could 

incentivize the primary care provider to go into primary care, so to 

speak, and if we could incentivize them to be distributed properly, 

it would be a long time coming. 

I believe that the American College and the AMA and the American College of Surgeons could go a long way as far as our 

healthcare problem is concerned, if we could identify the restrictions that are centuries old on what someone can do for a patient, 

whether it be order a mammogram or an x-ray or work up that patient. And the other thing that we’re not saying is is that physicians are trained with an emergency room mentality. And we know 

that half of all of our deaths for the next century are going to be 

lifestyle-related deaths. And trained physicians are very poorly 

trained to take care of the young family, advise the mother on nutrition, walk through them a holistic type approach and I believe 

that that’s where we’re going to fall down as far as our obesity, diabetes, hypertension, neonatal care, and many of us from rural 

areas have seen this over and over and over again. And it appears 

that we’re training these well-trained PAs, they’re taking care of 

our men and women in Iraq right now. They’re in every U.S. embassy, but yet we don’t allow them to practice in the United States. 

Dr. HARRIS. Mr. Griffith, the American College of Physicians 

couldn’t agree with you more that we need a team-based approach 

to healthcare. And modeled again in the expansion of primary care 

with offices with a team of people including nurse practitioners and 

PAs. 

We met with many of the leaders of the nurse practitioner organizations just last July to talk about how we could work collaboratively to try to improve the quality of healthcare. We just published a paper that said that we believe in the CMS demonstration 

projects, that they should also consider looking at nurse practitioner led medical homes. As you know, that’s controversial, but 

the reason we did that is it would be utterly pragmatic. I think I’m 

right about this. Twenty-eight, if I have the number right, of the 

states, plus the District of Columbia, allow nurse practitioners to 

practice without physician supervision. And of the remainder that 

require physician supervision, only one requires that the physician 

be on the premises. Thus, it makes sense to look at that model. 

Now the second part of your question about essentially scope of 

practice, that is defined by each state and it differs from state to 

state. We applaud the notion of people practicing within this scope 

of practice, but not exceeding it. We still believe that the best medical home is one headed by a physician, and particularly, particularly, with the chronically ill patients in this country. Twenty-three 

percent of every one on Medicare has five or more chronic illnesses. 

29 

We believe they certainly fit into the scope of practice of a welltrained physician, primary care physician. 

Mr. GRIFFITH. Well, I appreciate that and I would say to Dr. 

Moffit that in every physician’s exam rooms is a plaintiff’s attorney, so if you’re wondering why those patients are readmitted from 

a nursing home or an intermediate care facility, it’s because the 

family is there and the physician is there and he is basically saying 

to himself, I really don’t have a choice. I know I shouldn’t readmit, 

the patient is terminal, but there’s the plaintiff’s attorney lurking 

there somewhere. I think that is an issue that we haven’t discussed, but has to be addressed. 

Dr. MOFFIT. There’s a good case for medical malpractice reform. 

Chairwoman VELA ́ ZQUEZ. Time has expired. Ms. Clarke. 

Ms. CLARKE. Thank you very much, Madam Chairwoman and 

Ranking Member Graves for holding this hearing today on a topic 

that is so critical to my District, and indeed, to our nation. As Congress works to finalize the FY 2010 budget, we must closely examine Medicare, Medicaid. The Obama Administration proposes 

changes to these programs that may impact small healthcare providers and the success of healthcare reform. 

Medicare/Medicaid are nationwide programs that provide 

healthcare coverage for over 43 million elderly and disabled Americans. These programs, particularly Medicaid, is vital to many lowincome New Yorkers—I’m a New Yorker—who rely on this program for primary care. The examination of the President’s budget 

proposal and how it may impact small healthcare providers is an 

imperative for the success of our emerging healthcare delivery system and the growth of its economic viability within our local communities. 

My first question is to Dr. Harris. You stated in your testimony 

that the Institute of Medicine reported that the additional primary 

care physicians are—that additional primary care physicians are 

now needed to meet the demand in currently undeserved areas. I 

just learned that in total over 1.9 million Medicare enrollees currently live in areas with inadequate access to primary care physicians including Flatbush, Brooklyn which is located in my District. 

As a matter of public policy, what do you think that Congress 

should consider to address the currently underlying shortage in 

available primary care resources and what could we do to attract 

these physicians to undeserved areas? 

Dr. HARRIS. Madam Clarke, as you suggest, there is a shortage 

now, even with 46 million uninsured people, we’re 16,000 short, according to the Institute of Medicine and the Health Affairs projects 

it’s going to be a 40,000 shortage, that’s even allowing for the nursing issue. So it is an enormous issue. 

I think two things come to mind. One, part of the patient-centered medical home demonstration projects has to do with Medicaid. As I recall, there are 25 states in the United States which 

are now trying Medicaid demonstration projects to see if the patient-centered medical home concept can help reduce the cost and 

improve the quality for those who are on Medicaid in those 25 

states. 

The second issue gets to your point of the distribution of physicians. A very difficult issue. I mean the practical one that one can 

30 

do now, we understand that Congresswoman Allyson Schwartz, I 

believe, is introducing legislation that will propose loan forgiveness 

for kids of about $30,000, $35,000 a year to help overcome their 

debts from medical school in exchange for time that they will spend 

in undeserved areas. 

What the College would say and encourage you is when you’re 

defining these undeserved areas, think about primary care in 

undeserved areas, not all physicians because that truly, as your 

District is where the need is so utterly acute. 

Ms. CLARKE. Can you, Dr. Harris, can you determine how primary care physician availability may be affected by possible hospital closures? Do you know if most area hospitals can accommodate displaced ambulatory care resulting from a reduction in primary care? 

Dr. HARRIS. No, I mean you would have two dreadful things happening simultaneously. You would have a shortage of the primary 

care physicians who ostensibly could follow people in an outpatient 

setting and provide preventive care, their acute illnesses, their 

long-term chronic care. 

Then you would have the hospitals to which many of them now 

turn, absent primary care physician, particularly for the acute care. 

So it would simply compound the problem, but you know, at the 

risk of beating a dead horse, we believe therate limiting factor and 

if I can add, if I may, for the Committee just parenthetically, the 

American College of Physicians championing this notion of primary 

care is not as self-serving as it sounds. Half of our membership is 

subspecialists. This is a difficult message we have to convey to 

them. But we have tried to do it in an objective fashion and the 

data again, in this country and overseas, utterly compelling, that 

the best way to reduce costs and improve quality coast to coast is 

trying to get our 30 percent of that workforce up closer to the 50 

percent as all those other 12 countries have which have everything 

so much less expensively than we do and with better outcomes 

than we do. 

Ms. CLARKE. Thank you very much, Madam Chair. Thank you to 

all of you for your testimony today. It’s been quite compelling and 

I’m sure we’ll be relying on your expertise going forward as we look 

at what we do with our healthcare system for the 21st century. 

Thank you very much, gentlemen. 

Chairwoman VELA ́ ZQUEZ. Mr. Thompson, do you have any other 

questions? 

Mr. THOMPSON. First of all, I thank the Chairwoman for this. 

This is—more dialogues like this, the better. I want to thank my 

colleagues, Mr. Griffith, Ms. Clarke by following up on the workforce issues. This is about, a lot about access of healthcare. We’re 

all concerned with access, affordability and quality. But we can’t 

have access when we don’t have qualified providers out there. So 

the fact that we’ve gone down that road, I appreciate your responses. If we don’t have qualified providers, it doesn’t matter what 

the reimbursement system is. It doesn’t matter how we’re structured and so the supply side of healthcare is something we need 

to attend to as well. So I just appreciate the panel’s expertise and 

input this afternoon. Thank you. 

31 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Thompson. I want to 

take this opportunity to thank all of you for being here today, for 

being part of this discussion. I just want to make sure that small 

businesses are represented at the table because a lot of medical 

solo practitioners are small businesses and given the challenges 

that we face in terms of healthcare costs, our budget, the fact that 

47 million are uninsured without any type of health coverage in the 

richest country in the world, inaction is not an option. 

I feel very optimistic that we’re going to get it done, but we have 

got to do it right and that is why it’s so important to continue this 

type of discussion until we have a bipartisan comprehensive legislation that truly addresses the most dramatic issue of the rights of 

healthcare costs and the fact that still so many do not have access 

to quality healthcare coverage, including our children. So with that, 

I thank you all and I ask unanimous consent that Members will 

have five days to submit a statement and supportive materials for 

the record. Without objection, so ordered. This hearing is now adjourned. 

[Whereupon, at 2:59 p.m., the hearing was adjourned.] 

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