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S. HRG. 112–777 

ROUNDTABLE DISCUSSION ON 

MEDICARE PHYSICIAN PAYMENT POLICY: 

LESSONS FROM THE PRIVATE SECTOR 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 14, 2012 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

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

Hatch, Hon. Orrin G., a U.S. Senator from Utah ................................................. 2 

WITNESSES 

Safran, Dr. Dana, senior vice president, Blue Cross Blue Shield of Massachusetts, Boston, MA ................................................................................................. 3 

Edwards, Peter, president of provider development, Humana, Louisville, KY .. 4 

Reisman, Dr. Lonny, senior vice president and chief medical officer, Aetna, 

Hartford, CT ......................................................................................................... 5 

Burrell, Chet, president and chief executive officer, CareFirst BlueCross 

BlueShield, Washington, DC ............................................................................... 6 

Cardoza, Darryl, president and chief executive officer, Hill Physicians Medical 

Group, San Francisco, CA ................................................................................... 8 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

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

Prepared statement .......................................................................................... 35 

Burrell, Chet: 

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

Prepared statement .......................................................................................... 36 

Cardoza, Darryl: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 42 

Edwards, Peter: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 48 

Hatch, Hon. Orrin G.: 

Opening statement ........................................................................................... 2 

Prepared statement .......................................................................................... 57 

Reisman, Dr. Lonny: 

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

Prepared statement .......................................................................................... 58 

Safran, Dr. Dana: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 63 

COMMUNICATION

Center for Fiscal Equity .......................................................................................... 71 

(III) 

(1) 

ROUNDTABLE DISCUSSION ON 

MEDICARE PHYSICIAN PAYMENT POLICY: 

LESSONS FROM THE PRIVATE SECTOR 

THURSDAY, JUNE 14, 2012 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 10:08 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden, Cardin, Hatch, Grassley, Kyl, and 

Thune. 

Also present: Democratic Staff: Russ Sullivan, Staff Director; 

David Schwartz, Chief Health Counsel; Karen Fisher, Professional 

Staff Member; and David Sklar, Fellow. Republican Staff: Chris 

Campbell, Staff Director; and Dan Todd, Health Policy Advisor. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. Thomas Edison once said, ‘‘To have a great idea, 

have a lot of them.’’ 

Today, we hold our second roundtable on Medicare physician 

payments. The payment system Medicare currently uses is broken. 

There are a lot of ideas about how to fix it, and today we want to 

hear them. 

We know the sustainable growth rate, or SGR, must be repealed. 

It causes uncertainty. It causes seniors to fear losing access to their 

doctors. It threatens physicians with increasing payment cuts year 

after year. 

We need to take a look at the underlying fee-for-service system 

that Medicare uses to pay physicians. Fee-for-service rewards physicians who do more tests and more procedures, even if those services are unnecessary. It does not encourage physicians to coordinate patient care to save money and improve results. 

We need an efficient system that rewards physicians for providing high-quality, high-value care. Today, we will hear from five 

organizations that have developed innovative physician payment 

systems in the private insurance market. These organizations are 

changing how they pay physicians to create incentives that will improve patient care. They are rewarding the physicians who keep 

patients healthy and cut down on emergency room visits and hospital readmissions. 

2 

These results not only save money, they mean better care for patients. We want to learn how these ideas also can be applied to the 

Medicare program. Medicare needs solutions that will work in a 

range of settings—in cities, rural areas, large doctor groups, solo 

practitioners, specialists, and primary care providers. What works 

in California may not always work in Montana. 

Fortunately, our panelists can describe ideas that have worked 

in many different regions of the country, and we look forward to 

candid, direct suggestions from them as to how to solve this problem. 

Thank you. 

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

The CHAIRMAN. Senator Hatch? 

OPENING STATEMENT OF HON. ORRIN G. HATCH, 

A U.S. SENATOR FROM UTAH 

Senator HATCH. Thank you, Mr. Chairman. I want to thank you 

for convening today’s roundtable as we continue discussing options 

to improve the way we pay physicians and improve quality in 

Medicare. It is critical that we speak to folks in the private sector 

who are successfully lowering costs while providing better care and 

outcome for patients. 

The chairman and I agree that we must find a better way to pay 

physicians in Medicare. We must repeal the flawed SGR system— 

in my opinion, an albatross around the Congress’s neck that must 

be addressed at the end of every year. This is not an easy task, but 

our physicians and patients deserve better. We must establish a 

more stable foundation to pay our physicians who treat Medicare 

patients. 

As we all know, our current fee-for-service system provides little 

financial incentive to manage care properly. Instead, the current 

incentive is to increase the volume of services. Over the years, we 

have learned that more care does not necessarily mean better care 

or better outcomes. 

Today, we have the opportunity to hear from some of the top performers in the private sector. These industry leaders are making 

real advancements in care delivery and physician payment. They 

are showing that you can improve quality and lower costs in a collaborative way that does not alienate the physician community. 

Chairman Baucus, I just want to thank you again for scheduling 

this series of roundtables. I hope today’s provides us with another 

opportunity to learn about the best practices that are occurring in 

the private sector. 

And I do look forward to hearing from our witnesses, hearing 

about their efforts, and thinking about how to relate their experiences to Medicare. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

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

The CHAIRMAN. I am now pleased to welcome our panelists. 

Today, we will hear from Dr. Dana Safran, senior vice president, 

Blue Cross Blue Shield of Massachusetts. Next is Mr. Peter EdVerDate Nov 24 2008 19:21 Jul 05, 2013 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 R:\DOCS\81390.000 TIMD
3 

wards, president of provider development, Humana. Dr. Lonny 

Reisman is senior vice president and chief medical officer at Aetna. 

Mr. Chet Burrell is president and chief executive officer of 

CareFirst BlueCross BlueShield of Maryland. And our last witness 

is Mr. Darryl Cardoza, chief executive officer, Hill Physician Medical Group in northern California. 

Dr. Safran, why don’t you begin? You know our usual custom 

here. Statements are automatically included in the record, and I 

ask each of you to summarize your statements and tell it like it is. 

STATEMENT OF DR. DANA SAFRAN, SENIOR VICE PRESIDENT, 

BLUE CROSS BLUE SHIELD OF MASSACHUSETTS, BOSTON, MA 

Dr. SAFRAN. Thank you, Chairman Baucus, Ranking Member 

Hatch, and members of the committee. I am Dana Gelb Safran, 

senior vice president for performance measurement and improvement at Blue Cross Blue Shield of Massachusetts. 

As this committee considers the important issue of physician 

payment and, specifically, the SGR, I appreciate the opportunity to 

discuss the payment reform model that Blue Cross Blue Shield of 

Massachusetts has been implementing since 2009. 

The model known as the Alternative Quality Contact, or AQC, 

employs a population-based global budget, together with substantial financial incentives on a broad set of quality and outcome 

measures. 

Rates of inflation on budgets are negotiated up front for the 5- 

year contract period, thereby creating much-needed predictability 

in medical spending growth. Budget and quality targets are designed to accomplish our twin goals of significantly improving 

health care quality while, at the same time, significantly slowing 

spending growth. 

The AQC is now our predominant payment model, in place with 

nearly 80 percent of providers State-wide. These organizations vary 

enormously in size, scope, composition, and geography, most of 

them comprised of many small and solo practices united through 

a common leadership. 

With 2 complete years of data, the AQC is on track to cut spending trends in half over a 5-year period. A formal evaluation led by 

Harvard Medical School economist Dr. Michael Chernew found 

that, even in year 1, AQC providers slowed spending growth by 2 

percent, while simultaneously improving quality. These savings 

and quality improvements deepened in year 2. 

Providers are achieving savings both through the use of lowercost care settings and, importantly, through significant changes in 

utilization. In 2010 alone, AQC providers saved more than $10 million by reducing avoidable hospital admissions, readmissions, emergency room use, and high-tech imaging. 

With respect to quality, each and every AQC organization has 

made significant improvements across a broad set of quality and 

health outcome measures. To accomplish these results, AQC organizations are innovating in ways that are truly sowing the seeds 

of sustainability. They are investing in new infrastructure and information systems, deploying new staffing models, and implementing new approaches to patient engagement. 

4 

These early findings offer evidence that a payment model that 

creates provider accountability for medical spending, quality, and 

outcomes is a powerful vehicle for realizing the goal of a highperformance health care system with a sustainable rate of spending growth. 

On behalf of Andrew Dreyfus, president and CEO of Blue Cross 

Blue Shield of Massachusetts, and our leadership team, we look 

forward to working with you as you address these important issues. 

And I thank you for the opportunity to be here today. 

The CHAIRMAN. Thank you, Dr. Safran, very much. 

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

The CHAIRMAN. Mr. Edwards? 

STATEMENT OF PETER EDWARDS, PRESIDENT OF PROVIDER 

DEVELOPMENT, HUMANA, LOUISVILLE, KY 

Mr. EDWARDS. Mr. Chairman, thank you. Thank you for the opportunity to share learnings from our 25-year experience in partnering with physicians on a variety of innovative, value-based models that reward efficiency and effectiveness across a continuum of 

product lines. 

I am Peter Edwards, president of provider development, responsible for Humana’s partnerships with physicians and related 

performance-based model plans. 

Relevant to today’s discussion, Humana is one of the Nation’s 

largest Medicare private plan contractors, with 2.2 million members. Additionally, we own 300 medical centers, run over 250 worksite medical facilities, and contract with nearly 320,000 physicians. 

By year’s end, about 1.8 million of our Medicare Advantage members will get care from physicians in Humana’s network arrangements that include one of our various payment models, and we expect 80 percent of our network primary care physicians will be in 

rewards programs. 

While my detailed written statement is on record, here are a few 

highlights. We believe delivery system transformation is predicated 

on creating physician payment models that recognize the variability in physician practices and engage physicians based on factors 

like practice resources, geography, and patient panels. 

Beginning in Florida in the mid-1980s, we introduced basic capitation payment models. Then we moved to global risk arrangements across all of our Medicare benefits, then added combined 

risk arrangements—shared risk for Part A and full risk for Part B 

and D—and, ultimately, we introduced fee-for-service rewards programs in 2010 in areas where the primary payment model was feefor-service. 

Our rewards program has four variations tailored for differing 

practice structures. There are opportunities to increase payment on 

a graduated basis as program complexity increases. Payment beginning with fee-for-service with an annual bonus rises to quarterly 

based bonuses, then peer coordination fees plus a bonus, and, finally, shared savings and capitation. 

We provide real-time data and detailed reporting of patientcentered costs and quality information to physicians. In some cases, 

such as in rural areas where primary care access is limited, we 

have added nurse practitioners to assist practices. 

5 

As we developed our rewards program, we engaged directly with 

the leading primary care physician societies, and today we continue 

to solicit their suggestions and recommendations. 

During the first 9 months of 2011, our rewards program resulted 

in improved health outcomes, including an over 50-percent increase 

in the number of participating physician practices meeting and/or 

exceeding patient care measures. 

One of the lessons we have learned is that, without incentives, 

costs run 5 to 20 percent higher. Any proposal to modify Medicare 

payment policy should be sufficiently flexible to allow for practice 

variations. A single, uniform, well-established performance measurement strategy is critical across all public and private programs. 

And, lastly, real-time data is a critical component of any payment 

policy initiative. 

As we continue to develop innovative payment models, our focus 

will be on models that reduce fragmentation, improve communication, reduce unnecessary costs, and ensure that patients receive the 

right care at the right time, in the right setting, from the right 

level care practitioner. 

Thank you, again. 

The CHAIRMAN. Thank you, Mr. Edwards, very much. 

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

The CHAIRMAN. Dr. Reisman? 

STATEMENT OF DR. LONNY REISMAN, SENIOR VICE PRESIDENT AND CHIEF MEDICAL OFFICER, AETNA, HARTFORD, CT 

Dr. REISMAN. Good morning. Thank you for inviting me to testify 

today. My name is Lonny Reisman. I am the chief medical officer 

for Aetna. 

Aetna views provider collaboration as key to transforming patient care and building a more effective health care system. Since 

2005, Aetna has invested more than $2 billion to acquire or build 

a variety of capabilities to support and enable provider collaboration models. 

We recognize that there is no single model or solution to meet 

the needs of every health system and patient across the country. 

We need our provider partners at the current state of readiness, 

with a shared goal of moving toward a more effective and patientfocused health care delivery model. 

Our partnerships are designed to support all patient populations, 

qualified providers, and insurance payers, and are not limited to 

Medicare or Aetna members. 

We believe successful provider collaborations incentivize quality 

improvement, give actionable patient information, and use low-cost 

technology solutions that create interoperability between providers, 

patients, and health systems. 

Our provider collaborations provide a model for health care delivery and payment that ties provider reimbursements to improved 

population health and reductions in the total cost of care. 

Our Medicare Advantage care management models provide 

health information technology and nurse case managers embedded 

within participating provider groups. For example, by collaborating 

with Aetna, InterMed’s independent physician association, Nova 

6 

Health in Portland, ME averaged 45 percent fewer acute admits, 

50 percent fewer acute days, and 56 percent fewer admissions in 

2011 compared to State-wide unmanaged risk-adjusted Medicare 

populations. 

New research on medical advances is published frequently. 

ActiveHealth Management has a large team of board-certified physicians, pharmacists, and registered nurses that applies research 

from the most reputable sources to develop and maintain our clinical decision support tool. We alert physicians to errors or omissions in care and opportunities to improve health, resulting in better quality and reduced medical costs. 

In a randomized clinical trial, ActiveHealth Management’s technology was found to lower average charges by 6 percent compared 

to a control group in 1 year. 

Regarding fragmentation of care delivery, people with chronic 

conditions, such as diabetes and/or high blood pressure, often receive care from many different providers. For these high-risk patients, it is especially important that physicians are able to effectively coordinate care and information. 

Aetna’s Medicity technology lays the foundation to securely exchange patient health information. Medicity accomplishes this regardless of which electronic medical record is being used. 

Michigan Health Connect, MHC, engaged Medicity to help them 

tackle the referral process, which was a significant pain point for 

physicians, involving filling out and faxing forms, as well as numerous phone calls between providers. 

Within 120 days, MHC rolled out the iNexx e-referrals application to 100 practices, including 21 specialties, and is adding practices to the e-referral network at a rate of nine practices per week. 

These practices are now able to replace the multiple phone calls 

and fax exchanges with secure electronic team networks that enable e-referrals. 

We share the committee’s goal to transform the health care delivery system and believe Medicare can benefit from our innovative 

care solutions. 

Aetna has achieved positive results through our provider collaborations. We are making it easier to pull meaningful health care information out of silos and act upon it more quickly to improve patient care. We believe that these models can be applied more broadly to improve population health and create a sustainable care delivery system. 

Thank you. 

The CHAIRMAN. Thank you, Doctor, very much. 

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

The CHAIRMAN. Mr. Burrell? 

STATEMENT OF CHET BURRELL, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CAREFIRST BLUECROSS BLUESHIELD, 

WASHINGTON, DC 

Mr. BURRELL. Thank you, Mr. Chairman, Ranking Member 

Hatch, and other members of the committee. I am Chet Burrell. I 

am the CEO of CareFirst BlueCross BlueShield. We cover the area 

of northern Virginia, DC, and all of Maryland. We also are the 

7 

major carrier for the Federal Employee Program, covering some 

620,000 FEP members here in the Capitol area. 

Several years ago, we started our own patient-centered medical 

home program, and the way we approached it was, we asked primary care physicians in this area who are in active practice, of 

which there are about 4,000, to form small, what we call medical 

care panels, teams typically of eight to ten primaries as a team. 

This includes solo practitioners who are in rural areas, who themselves form teams with others in those rural areas. These are selfchosen teams. 

There are 300 such panels in this region now. There are 1 million CareFirst members being served by these panels. What we do 

is a blended capitation fee-for-service system. And I would say that 

the most important thing we have learned is how important payment reform is. 

But this model, I think, is distinct in the sense that it offers the 

benefits of global capitation. We establish global expected cost of 

care for each panel’s population of patients. Each panel serves 

about 3,000 members of ours. 

Three thousand members could be expected to run up $12 million 

a year in health care costs for something like 50,000 service encounters. What we do is, we project what that cost would be, and 

then we ask them to better that; and, if they can, we share the savings. We pay them during the course of the year on a fee-for-service 

basis, because we can get the data better that way, and we can 

track the services better that way. And if, at the end of the year, 

they have bettered the expected cost of care on a global basis, we 

share the savings with them. This can often provide major incentives, bonuses, if you will, to these physicians. 

We also have extensive quality measures during the course of the 

year to see to it that there is not a gain by under-serving the population of patients in the panel. We have 1 year of full operating experience under this, through which nearly $3 billion worth of 

claims flowed, and here is what we found in the first year: that 

about 60 percent of the panels, of the 300 panels, actually beat the 

targets, and they beat them, on average, by 4 percent, and that is 

a big number. 

And, of the panels that did not, the 40 percent that did not, they 

exceeded it by 4 percent. And so there was an 8-percent spread. 

And what has happened as a consequence of that is that the ones 

that won have become more interested in what they can do better, 

and the ones that did not now want to find out what they can do. 

And so it has established a great deal of interest in the physician 

community. Over 80 percent of all of the primaries in this area are 

in the program. 

So in essence, that is the way we have approached it. We are 

looking to get Medicare into the program through a waiver from 

CMS to bring Medicare fee-for-service patients into the same design, same incentives, same structure. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Mr. Burrell. That was 

very interesting. 

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

The CHAIRMAN. Mr. Cardoza? 

8 

STATEMENT OF DARRYL CARDOZA, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, HILL PHYSICIANS MEDICAL GROUP, 

SAN FRANCISCO, CA 

Mr. CARDOZA. Chairman Baucus, Ranking Member Hatch, members of the Finance Committee, I appreciate your invitation to join 

you today and share the experience of Hill Physicians Medicare 

Group in managing our physician payment system. And thank you 

for holding this roundtable on what is a very important topic. 

Hill Physicians Medical Group has operated for more than 25 

years in northern California, serving people insured by commercial 

plans, the Medicare Advantage prescription drug program, and 

Medicaid. We now serve 300,000 people through our network of 

3,500 physicians, most of whom are independent and self-employed 

in small practices ranging from one to several physicians. We are 

paid prospectively through capitation and compensate our physicians for their services to these patients through our own compensation plan. 

I have submitted to the committee written comments about our 

experience for your reference and consideration, and I appreciate 

your including my comments in the record for this roundtable. I 

will offer these brief opening thoughts. 

For 30 years, I have been boots-on-the-ground embedded with 

practicing physicians helping to organize them and develop tools 

and systems to build a value-oriented delivery system. There is remarkable consensus in what you have heard today and in your first 

roundtable. 

We get what we pay for. And with fee-for-service, we pay for volume. As a practical matter, it would be difficult to entirely abandon 

fee-for-service, but Hill Physicians would encourage payment strategies that move away from fee-for-service to those that are population-based, enabling proactive approaches to care management 

and more intelligent resource allocation across the continuum of 

care. 

Hill Physicians has had success in compensating physicians to 

reflect performance-based incentives, capitated payments, and case 

rate payments. Hill Physicians has succeeded by prospectively defining desired outcomes, measuring and reporting on individual 

physician performance, achieving those outcomes, and supporting 

our physicians in their efforts to continuously improve their practice performance. 

Medicine is delivered today in increasingly sophisticated environments. An affordability crisis has long been anticipated, we 

thought, due to an aging population. While true, we did not anticipate the larger cause, which is the explosion of medical technology 

and know-how. 

Marcus Welby could not make it in medicine today. There were 

precious few tools in his medical bag. Today, he could not carry his 

tools in a wheelbarrow, and he would not be capable of using them 

all on his own. Yet, the reimbursement model used today was built 

when Dr. Welby was in his prime. 

We at Hill Physicians have worked for over 25 years to build a 

large, accountable organization of physicians, supported with information systems and care management programs designed to support our physicians to optimize value for our patients. 

9 

How we pay our physicians is important, but no payment strategy alone will be enough to achieve the objectives we all share to 

optimize affordability and quality. Hill Physicians has been successful because of our consistent organizational engagement and 

support for our physician network for over 25 years. The organizational framework for these collective efforts has been essential to 

our success, and I will encourage you to consider strategies that 

foster organization and system development for the physician sector. 

I hope that sharing our experiences will be helpful to your efforts, and I thank you for inviting me to join you today. 

The CHAIRMAN. Thank you very much. 

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

The CHAIRMAN. This is a bit different, how we are going to conduct this hearing today. It is not really a hearing. I like to call it 

kind of a roundtable; that is, everybody just participates informally. It is like around the kitchen table. If somebody wants to say 

something, say it. If someone says something that kind of makes 

sense, reward that person. If it does not make sense, speak up and 

say why, and so forth. That applies to both sides of the table, that 

is, with Senators, as well as for all of you. 

So feel free just to jump in, if you want to, and I say that to my 

colleagues too. Just jump in if you want to. 

I will just ask the first question, and then we will let it rip. 

I am very intrigued with what you are doing, Mr. Burrell, and 

I am wondering about your system. I guess you start out fee-forservice, and savings are then rebated back to the participants, and 

you set a target at the outset, as I understand it. 

Mr. BURRELL. Yes. 

The CHAIRMAN. So one question I have is, how do you set that 

target? And then, what lessons does that have for the target that 

is in SGR, because, in each case, there is a target? One is statutory, and one is set by yourselves. And you said you asked for a 

waiver to apply your approach under the Medicare payment system. 

It would be helpful, to me anyway, if you could tell us the degree 

to which you think SGR can be modified to maybe follow some of 

your practices or what have you learned that could help us decide 

what we are going to do about SGR. 

Mr. BURRELL. Well, let me start with a description of the way we 

do it, which is very similar to the way premiums are established. 

So, they will think of it this way. You have a particular panel, as 

I described, let us say, 10 doctors, 10 primaries. 

The question is, how many patients do those primaries have? 

Who are the patients who are attributed to them, who actually go 

to them? And then the first question we ask is, once we know that, 

what are the claims experiences of those particular patients? 

It reflects their age, their sex, their illness or health, it reflects 

everything about the local aspects of health care, when health care 

is intrinsically local. And when I said it would be typically the case 

that 3,000 members would be in a panel of ours, they would be expected, just on historical experience, to have about $12 million a 

year today in health care expenditures. 

10 

So we take that base, whatever it was, and—— 

The CHAIRMAN. And that is the target? 

Mr. BURRELL. No, that is the base. In this case, we use 2010, an 

unmanaged base before the program started. 

We look at the illness burden of the population that is in that 

panel, and we take that into account and changes in that illness 

program, and then we apply what we call an overall medical trend 

factor, which reflects what we believe are the overall trends in 

health care in this region. We apply it to the base. And we then 

come out with the expected cost of care. 

What we are expecting is that, as panels perform and attempt 

to beat that number—when I said that 60 percent of the panels actually were 4 percent under that number, in this region, that number is between 7 and 7.5 percent. So to be 4 percent under it, you 

are at 3.5 percent. 

And what we do is, we track that trend over time. We do 1 full 

year of prospective trend going forward. Then, as the next year 

comes, it is 50/50 prospective of what actually happened. By the 

third year, it is two-thirds/one-third, one-third prospective, twothirds retrospective. 

So, as the cost curve bends by action of the panels, we think it 

moderates the cost curve, and what happens is the panels have 

harder and harder targets to beat. But, by the time that occurs, 

they are more and more experienced in what it takes to beat them. 

And so much of the cost is driven by chronic disease that we believe that the essential thing that they must focus on is how to 

manage the chronic disease patient. 

That means they have the ability to identify them, set up a care 

plan for them, follow them through the community, watch for the 

breakdowns. So we assign a nurse to help them do that with each 

case, and we do not expect the primary to do it all by themselves. 

The CHAIRMAN. To what degree, though, could this approach be 

applied to Medicare? 

Mr. BURRELL. The same exact approach could apply to Medicare. 

So you could say—this was for our under-65 population—but you 

could, say, take Medicare members, beneficiaries in this region who 

are in those very same practices, and establish Medicare expected 

cost of care in a similar manner, Medicare fee levels. 

In other words, we establish a credit system. Expected cost of 

care is a credit to the panel. Debits are the fees themselves. And 

what we would say to the panel is, ‘‘You manage the Medicare patients in the similar manner to the way you manage the CareFirst 

patients, and you look particularly for chronic disease, and Medicare is the chronic disease capital.’’ 

Senator CARDIN. Mr. Chairman, what Mr. Burrell is doing at 

CareFirst is popularly received locally. So it has credibility to it. 

And I think one of the main features is that there is help given 

to the primary care provider through nurses to manage the more 

complicated and more costly patients, which I think gives confidence that this is not an effort to deny care to people in order to 

reach the target, but to manage the cost of high interventions in 

a more cost-effective way. 

This is the question I would have for you, Mr. Burrell, or anyone 

else on the panel. You mentioned that you do oversight to make 

11 

sure that quality is maintained. But there is always a fear that the 

bonuses are based upon dollar amounts; so, therefore, are we just 

denying people needed care rather than providing the quality? 

How do you assure that the necessary care, in fact, is given? 

Mr. BURRELL. We have five different ways, five different categories of quality measures that each physician in the panel is 

measured on, and the panel as a whole, relating to access, gaps in 

care, appropriateness of care, and we have one category we call engagement. And this is the degree to which the physician is actually 

engaged in the care of a chronic disease patient. 

Are they too busy? Do they take the call-backs? Will they deal 

with the nurse? Are they engaged? You cannot get an outcome incentive award in our design unless you have overall quality scores 

that indicate that you are providing quality services and you are 

engaged with the patients who need you the most. 

In an under-65 population, less than 10 percent of all of the patients consume 65 percent of the medical spending, and these are 

typically people with chronic disease or the exacerbation of chronic 

diseases. They need differential attention. 

So we ask the primary care physician to do that. If there is evidence that they are not doing that, they are disqualified from then 

forward. 

One further statement on this. It is meant to be a multi-year 

award. So we look for consistency of performance over time, not a 

quick hit. And the reward goes up as the consistency occurs. 

So if Mary Smith, the patient, has multiple chronic diseases, 

take care of her over time. The only way you can win is to actually 

stabilize her, improve her outcomes—less breakdown, less readmission, ER visits, that kind of thing—and track that. 

Dr. REISMAN. And I would suggest there are two elements to 

quality. One is a kind of retrospective analysis based on measures 

articulated in HEDIS or the National Quality Forum. 

But I think an important issue to raise is the fact that many of 

these practices do not have an intrinsic capacity to manage patients as well as they would like to. They do not have complete information. So, as patients see multiple doctors in a community, 

particularly those with chronic diseases or multiple chronic diseases, the information is not coordinated. 

We have played a role in actually not being removed relative to 

these practices and simply paying claims, but becoming an integral 

part of the actual delivery of care. 

So, to the extent that we can use our health information exchange capabilities to create an aggregate organized record for 

presentation to the physician or practitioners, that has been a huge 

help. 

The second issue relates to decision support. The good news 

about having complete data on a patient is you have complete data 

on the patient. The bad news is there is quite a bit of it. And, given 

the constraints of time, it would be hard to analyze all of that data 

on the patient and relate it to what has been, in fact, published in 

the literature or what represents the safest levels of care. 

So the ability to distill massive amounts of information using 

clinical decision support into actionable activities that can be purVerDate Nov 24 2008 19:21 Jul 05, 2013 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 R:\DOCS\81390.000 TIMD
12 

sued by the physician in concert with a team ends up being an important issue. 

And the third point I would mention—we could talk about it 

more as we go forward—is the role of the patient. For all the best 

intentions of doctors, patients are frequently not adherent with 

therapy. 

We have done a lot to, in fact, motivate and provide incentives 

for patients, but I would urge the committee to consider the role 

of the patient in all of this as we tackle the issues of total costs. 

Dr. SAFRAN. I would like to add in, because your question is such 

an important one, that, as we move to models that create accountability for total medical spending, how do we ensure that quality 

does not get sacrificed along the way? And the approach that we 

have taken to that, which is proving to be very successful, is to pair 

those incentives for total medical spending with a very broad set 

of quality and outcome measures with known targets that represent a continuum from good to great care. 

So for every measure—and there are 64 quality and outcome 

measures in our portfolio of measures that these organizations are 

accountable for. For every measure, there is a range of performance 

targets from good to great, with great being a number that tells us 

the best that can be achieved for a population of patients by an organization. 

And what we see these organizations doing is embracing those 

measures with the data that we provide to them and the substantial incentives that are on the table to do well with these measures 

and, systematically, over their 5-year contract period, moving quite 

aggressively to improve care for patients. 

And because the measures include not just clinical process, that 

is, following evidence-based care—that is important—but also 

measures of health outcomes and measures of patient care experiences, these practices have to engage their patients in a new way, 

because you cannot accept accountability for patient health outcomes without thinking about what happens to that patient when 

they are outside of your four walls living their life, working on 

issues of adhering to chronic disease and managing their health. 

So these practices are innovating new ways to actually understand individual patients, what their lifestyle is, what their constraints are around managing their condition. And what we have 

seen, even in the first 2 years of their performance, is, on the outcome measures, them moving to the highest level of performance 

that our data tell us is possible to achieve for a population. They 

are achieving very important advances in health outcomes, at the 

same time that they are managing overall medical spending. 

Mr. EDWARDS. And I would like to add to that. Our rewards program, it moves along a continuum. Starting with the fact that they 

are all based on HEDIS measures. So in order to receive—— 

The CHAIRMAN. On what measures? 

Mr. EDWARDS. Health employer data information. Set measures. 

And you have to achieve six out of nine of the various ones, and 

they include cancer screening, glaucoma screening, body mass 

index. There are various ones. And when they hit six out of those 

nine, they receive a reward for that. 

13 

And each of the programs will then layer on other factors on top 

of that, such as generic dispensing rates or readmission rates, improving readmission rates. And the payments for all of those move 

up as you move along the continuum of the reward program. 

And the reward program is important because it works in all 

areas, including rural areas. We have found that this reward program—just for instance, we have two practices in South Dakota 

this last year that are going to receive $102,000. These are PCP 

practices. We had four in Montana, with over $144,000 coming to 

them; eight in Utah for over $492,000. And these are practices receiving rewards for quality outcomes for their patients. 

The CHAIRMAN. Senator Grassley wants to pipe in here. 

Senator GRASSLEY. Yes. I want to bring up an issue that might 

be a little bit different. 

Mr. Edwards, you mentioned Humana uses different approaches 

to account for variation in practices, and I want to ask about delivery of health care in rural America, because that is, obviously, 

where Iowa fits. 

Could you expand on what Humana does differently in rural 

areas, what challenges you encountered, and what you have found 

to be successful? 

Mr. EDWARDS. Sure. A couple of things. Recently, we have 

partnered with a company called GenCare. These guys opened, so 

far, 13 clinic-based primary care centers that provide coverage to 

seniors and primarily low-income and under-serviced neighborhoods and rural areas. And this group will grow to add 40 centers 

over the next few years. 

The second thing is, we have created in this reward program a 

program we call PODS, for Physician Organization Delivery System. And what we have done is, in rural areas, where you have a 

small patient panel and the administrative burden may be a little 

bit hard for them to want to adopt the reward programs, we put 

a team together, which includes a nurse practitioner, to go into the 

office and to help them understand the disease management programs and the things that can be done to help serve the rural population. 

Senator GRASSLEY. You just brought up nurse practitioners—and 

I know it was in your written testimony—and just now touched on 

it for the first time. 

Would there be supervision requirements in the case of nurse 

practitioners? And more importantly, I am interested in what type 

of response you have received from the physician community regarding the idea of using nurse practitioners. 

Mr. EDWARDS. We have had no issue, because they are coming 

in with—the key thing for the rural providers is they are absent 

actionable data, data that they can use to help them manage their 

patients. 

So the nurse practitioner comes in, in a soft way, with data and 

can show them what they can do to improve the health of the patients that they are seeing, and they have a team of other folks 

who go with them. 

They have the ability to contact a doctor and take a doctor with 

them, if they need to. But we have had no issue with the nurse 

practitioner walking in and sitting side-by-side with a physician. 

14 

Dr. REISMAN. May I comment on a couple of issues with regard 

to rural care? One is, as we think about reforming the payment 

mechanism, it actually behooves the physician to have the sort of 

support that a nurse practitioner can provide. 

So, in the non-fee-for-service environment, it actually ends up 

being more cost-efficient and perhaps more lucrative for the primary care physician. That is the experience we have had. 

The other challenge—we have not spoken much about electronic 

medical records—that I have heard of a couple of times is the availability of data. One of the challenges in a lot of these smaller practices in rural communities is the expense associated with implementing an electronic medical record. 

And in Michigan, as I mentioned in my testimony, for example, 

we have actually introduced the capability to build effectively a 

light sort of electronic medical record for free that meets meaningful use criteria and can participate in the exchange of data around 

certain patients. 

So in many ways, we are seeing the same level of sophistication 

with regard to availability of data, analysis of data, and the creation of activities that can be pursued by doctors or nurse practitioners, nutritionists, other members of the care team, effectively 

creating an environment that simulates what we have started to 

see in some of the major medical centers around the country. 

So we think there are very real possibilities leveraging technology and payment reform in order to bring some of these models 

to these other communities. 

The CHAIRMAN. But do we not have a long ways to go in health 

IT? 

Dr. REISMAN. We have a long ways—— 

The CHAIRMAN. I have asked an earlier panel to rank, on a scale 

of 1 to 10, how well we are doing, and they all said about a 2. 

Dr. REISMAN. Well, let me be specific about—rather than ranking, let me tell you a couple of concerns I have. One is the notion 

that an electronic medical record is certainly appealing, but the reality is, for most doctors—think about your own experience—they 

know about you. They have a paper record, and the electronic medical record maybe advances their ability to access information 

about you, but does not probably help that much. 

The real issue is your doctors do not communicate with one another. I am presuming that you theoretically see multiple doctors. 

And what would frustrate me as a practitioner was not so much 

what I was doing for the patient, but what others were doing in 

terms of adding drugs or doing tests that I did not have access to. 

So one of the things I do not think we have focused on sufficiently with regard to health technology is the need for health information exchange so, in fact, I can be provided with information 

about you generated by others. 

The other notion which I think has gotten short shrift is this notion of clinical decision support. How do you convert massive 

amounts of information about you into specific activities that will 

correct problems relative to our level of compliance as a team, relative to the medical literature, that are safe and effective for you? 

15 

The CHAIRMAN. I know Senator Hatch wants to speak. But is 

there some way to develop some incentives? There are some bright 

people figuring that out. 

Dr. REISMAN. Well, there are a couple of things. One is—there 

are two things. One is incentives for using electronic medical 

records, with a meaningful use of $44,000. But I would argue that 

a greater incentive would be the ability to assume risk and manage 

a community. So that, if I write a prescription for you, I have the 

capacity through this exchange to know whether or not you have 

actually filled that prescription or to the extent that you have gone 

to another doctor who did a drug test or a lab test that, in fact, 

represents a contraindication to the drug I prescribed to you. 

The CHAIRMAN. So how do we solve that one? I go to a doc, he 

gives me a prescription, and—— 

Dr. REISMAN. So there are two ways. One is by downloading the 

capabilities that I just described; they can e-prescribe so that information is available. And secondly, when you fill that prescription 

at the pharmacy through your pharmacy benefit manager, we can 

access the data to know that, in fact, you have filled that prescription. 

So there are two components. One is, I order the drug. The second is the degree to which you have complied. 

It is a huge issue. Patients frequently do not comply, and one of 

the things we have actually introduced and published recently in 

the New England Journal of Medicine is an experiment where, for 

patients after a heart attack, we gave away drugs associated with 

the management of heart attack for free. 

The good news was that it helped a bit. The bad news is that 

still fewer than 50 percent of the patients took their drugs. But we 

can access those data. 

The CHAIRMAN. I am sorry. I will stop. But I was talking to the 

head of Denver Health, and she was telling me that they had exactly that problem, and their heart mortality or morbidity, whatever it is, was not good. 

Dr. REISMAN. Right. 

The CHAIRMAN. ‘‘Are you taking the meds?’’ they asked. ‘‘Oh, 

yeah, yeah, we’re taking our meds.’’ No, they were not. But they 

acquired or had a tie-in to a pharmacy. So they would check with 

the pharmacy—it was a local, in-house pharmacy, I think—and 

found out that they were not taking the meds. So they went back 

to the patient, ‘‘No, you’re not taking your meds, and make sure 

you take your meds.’’ 

But the point there is some kind of coordination where the—— 

Dr. REISMAN. That is exactly what I am suggesting, and I am 

suggesting that our scalable technologies can be introduced, in 

many cases, for free to address the issues that we are discussing. 

The CHAIRMAN. Sorry. Go ahead. 

Senator HATCH. How do you handle privacy? 

Dr. REISMAN. It is a huge issue. So one issue is that, under 

HIPAA, some of this information applies regarding the operations 

of health plans. 

The most direct way to address privacy issues relates to getting 

permission directly from the member. And, in addition to the priVerDate Nov 24 2008 19:21 Jul 05, 2013 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 R:\DOCS\81390.000 TIMD
16 

vacy issues and the agreement of the member, there are issues of 

security, which are just as daunting. 

Senator HATCH. I take it it is the same thing in relation to overprescribing by other doctors? 

Dr. REISMAN. Yes. And one of the things we can do is ascertain 

that patients are, in fact, shopping—for example, I presume you 

are thinking about opioids like oxycontin. So we, in fact, can accumulate from a variety of electronic records or pharmacies that a 

particular patient is, in fact, accessing excessive amounts of drugs, 

which, obviously, can work to the detriment of that patient. 

That is the sort of information we could then communicate back 

to the treating physician as it relates to the specific patient to warn 

them about this patient’s propensity to ask for narcotics. 

Senator HATCH. We have all said we want to work towards repeal of the SGR formula. However, a main problem we face is, 

what do we do then? 

It seems to me that your organizations, as you testified, have 

moved well beyond where Medicare fee-for-service is today. 

Now, what should we focus on as we are listing goals in the near 

term to improve payment within the fee-for-service system, and 

should we focus on quality measures or data reporting, bundled 

payments, or incentives? What can we do within our existing 

framework—— 

The CHAIRMAN. We need an answer here. 

Senator HATCH [continuing]. That still moves us forward in the 

right direction? 

Dr. SAFRAN. I will take the first shot at it. 

Senator HATCH. I have only given you about seven questions. 

Dr. SAFRAN. So, one of the fundamental problems of the SGR— 

this may be obvious, but has not been stated here—is that it deals 

with individual actors, individual clinicians as actors, but the targets are set based on a whole population of physicians across the 

country whose behaviors it has no influence over. So the individual 

actor has no real incentive around efficiency, no real incentive 

around quality, no real ability to control anything. 

So what you have heard in common across all five of these testimonies is that organizations are dealing with payment in a way 

that relates not to individuals, but to organizations, to organizations that have been willing to accept accountability for both total 

medical spending and for the quality and outcomes of patient care. 

And so one of the most important things, I think, that you can 

do, as you look to fix or replace SGR, is to move toward a model 

that does not deal with individual clinicians and does not set targets based on a population of other clinicians that they do not 

know and never will, but rather to have physicians identify who 

are the organizations they work with and to have those organizations accept accountability for total spending and for quality and 

outcome. 

And, of course, not every physician or every physician group or 

organization around the country is ready for that kind of accountability today. We only saw 32 pioneers sign up. Those organizations 

are ready for that. They are far along. 

What do we do with the others? I think we send a signal that 

that is where we are going and we take the initial step of having 

17 

clinicians identify who is the other set of clinicians that they are 

going to share accountability with. 

And by starting with—what we have done in our case, outside 

of our AQC model, is, for our physician fee schedule, we have had 

for 4 years running zero-percent payment increases, zero percent, 

and the only way to earn additional revenue is through your performance on a defined set of quality and outcome measures. 

So, beginning a path and having every physician in the country 

understand that this is where you are going ultimately, but that 

the initial steps are defining who it is that you are going to share 

accountability with, and starting accountability with quality and 

moving toward accountability for quality on total medical expense—— 

Mr. CARDOZA. It is a terribly important point that I would emphasize as well. As long as we are dealing with the physician community at the granular level, the unorganized level, paying fee-forservice, we cannot get to where we need to get to. 

So what we would encourage you to do is develop policies to foster the organization of physicians coming together into groups, 

large and small, with all the metrics that we have talked about on 

performance so that they have a reason to go there. 

The other point that I would make is, the consistent theme in 

what you are hearing is the emphasis on primary care, because 

that is the gateway to the system. If we had a health care delivery 

system, we would have a robust primary care system. In fact, what 

we have instead is more of a medical rescue system, which is why 

it is dominated by hospitals and high-tech specialists. 

So the unfortunate underlying truth that we have not spoken to 

here is, if you want to manage a chronic care population, you need 

a robust primary care community, and it is going away. 

In California, the primary care community is withering and 

dying on the vine, while hospital edifices are being built with billions of dollars. We have to fundamentally address that issue or we 

will not be able to get to where we need to get to. 

Mr. BURRELL. I would like to reinforce that, if I could. 

The CHAIRMAN. I would too. 

Mr. BURRELL. We organized, as I said, small performance teams 

of primaries, over half of which were in solo practice or practices 

of less than three—not sophisticated practices. By giving them a 

total expected cost of care to beat and some structure, they actually 

pay attention to the quality and, most importantly, they pay attention to who are the chronic patients that run up costs—the 10 percent of the patients who run up two-thirds of the cost. Who are 

these patients and what do they need? 

And we have assigned nurses to them to follow them into the 

community. Where do you break down? At home. Where do you get 

depressed? At home. Where do you fail to comply with your meds? 

At home. And a lot of times, the primary does not have direct evidence of that. 

So we support them by providing home assessments of what is 

happening to these patients at home. Medications are critical. A lot 

of these patients are on 10 or more medications. Nobody ever reviews the full picture. Not only do they not comply, they have too 

many, and they have drugs that interact or make them unstable. 

18 

So we try to get the primaries in small performance teams to understand who among their panel of patients is at highest risk, who 

among them has chronic disease, and are you paying attention to 

them out of the sight of your office. And we try to give them help 

in that regard with nursing support in the community and in the 

home. And, if Mary Smith is the chronic patient and breaks down, 

the doctor is informed immediately. If she is admitted, the doctor 

is informed immediately, and it all builds on primary care and provides strong financial rewards to them. We do not increase their 

fees. We have not increased their fees. We have increased the rewards to them if they get a better outcome for their population. 

Senator HATCH. Are doctors being educated at all on the people 

using dietary supplements as well? For instance, it is my understanding that if you are on, say, Crestor, then it would be very wise 

to take CoQ10, a dietary supplement, to make up for some of the 

deficits that do occur from Crestor. And this is an area that really 

is not very well-defined right now. 

Mr. BURRELL. It is not, and it should be. 

Senator HATCH. But you agree with me on that. 

Mr. BURRELL. I totally agree with that. Here is what we—— 

Senator HATCH. A lot of people do not know that. I mean, they 

will take Crestor and not realize that they may be putting themselves in—I don’t mean to pick on Crestor, but I just use it as one 

example—they may be putting themselves in some sort of jeopardy 

if they do not balance it with, say, CoQ10, which is a dietary supplement. 

Mr. BURRELL. Twenty-one percent of our medical spending is for 

prescription drugs; 24 percent of our medical spending is for inpatient hospitalization. So the drug part of the equation is dramatically increasing. A lot of primaries do not know what drugs their 

patients are on, and, if you ask the patient, they cannot reliably 

tell you. 

So what we do is create a drug profile of the patient, all the 

medications they are on. Sometimes you are on two generics and 

one branded at the same time, and you do not realize it because 

the names are different or a drug was prescribed by a specialist 

and another specialist, and, when you went into the hospital, by 

the hospital, and the primary did not even know you were on all 

these drugs. 

So one of the things we provide the primaries is a view of the 

total drug profile of the patient and say, ‘‘Do you realize that this 

is what your patient is on?’’ A lot of times, they do not, and then 

they start to act and say, ‘‘I didn’t realize that. I will try to revise 

that, and then we will educate the patient better.’’ That stabilizes 

them more, and then you prevent the cycle of breakdown, admission, and readmission, and the ER visit. And that is where so much 

of the cost in the system is. I know that it is true in this region. 

Dr. REISMAN. And, Senator, at the risk of being disagreeable, but 

this, after all, is our kitchen table, right? 

Senator HATCH. Sure. You can be disagreeable. 

Dr. REISMAN. I think we need to spend a lot more time on appreciating—— 

The CHAIRMAN. All families do not all agree on things. 

Dr. REISMAN. There you go. 

19 

Senator HATCH. Just be careful, that is all. [Laughter.] 

Dr. REISMAN. Thank you. I will heed the warning. I have already 

changed my remark, in my mind. I think people are accessing alternative therapies. We are supporting a lot of alternative therapies and ways of supporting patients. 

But bear in mind that we do need to adhere to rigorous evidencebased clinical trials. 

Senator HATCH. Sure. 

Dr. REISMAN. Just as an example of something that I think everybody accepted, vitamin D and calcium to prevent osteoporosis, 

recent literature—it was published this week—suggests that a normal diet in the absence of supplements is probably more than adequate. 

So we need to be careful about what we, in fact, suggest and prescribe, particularly as we become more sophisticated with these decision support tools. We need to ensure that we are quite rigorous. 

On the SGR point, I just wanted to suggest that the real issue 

that we are grappling with is quality and total cost. And perhaps 

what we really need to do is understand that that is really the 

issue here, and we can back into issues like SGR. But considering 

SGR in isolation is not going to get us to the greater issue, which 

is actually transforming and reengineering and providing the right 

incentives for a new health care delivery system. We will just be 

doing the same thing over and over again if we do not address that. 

Mr. EDWARDS. And I would like to add to that just a couple suggestions. Make sure that you vary your programs to allow for practice variations. They are not all the same. So, whatever you do with 

the fee-for-service, you have to make sure you have different programs. 

And developing a hybrid program that maybe begins with fee-forservice, so you are not having to change too much right out of the 

gate, and transitions to payments based on outcomes, are going to 

be a couple of quick hits for you, I think. 

Senator THUNE. Mr. Chairman, I want to come back to the point 

that was discussed earlier with regard to electronic medical records. In some ways, Mr. Reisman, you have said that that is not 

the most important issue to focus on. I agree with that. 

But, Mr. Burrell, you were just talking about all the issues with 

regard to patients who have medications that perhaps are conflicting with what they need, and all that information is out there 

in the universe somewhere, which could be captured if everybody— 

if we had some sort of system—now, I agree with what Senator 

Hatch said about privacy. I think that is an important issue. 

But it just strikes me that so many of these issues of duplication 

and medical errors could be eliminated if we had a system where 

people’s information, medical information, was available sort of irrespective of where they access the health care system. 

And it strikes me—because I was at the hearing the chairman 

referenced where we asked the panel about where we were on a 

scale of 1 to 10—and maybe that is not a good way to measure it— 

but everybody said in that 2 to 3 range. And the issue, I think, is 

these standards of interoperability, which we do not seem to have 

come up with a solution for yet. 

20 

But it just strikes me that everybody talks about this issue in 

anecdotal form, about what it does to add costs in the health system, and it just seems like so much of this could be fixed. 

And I do not know, again, how we achieve that. I know that it 

was discussed a lot, has been discussed a lot in the past, but I am 

very unsatisfied, I guess, with any of the answers I have received 

from anybody whom we have talked to about the subject and the 

progress that we are making toward that. But that is one issue. 

The question I had with regard to—I think it was Dr. Safran. 

You had talked about the program that you have, Alternative Quality Contracts. And last year, in July, the New England Journal of 

Medicine had published an article that reviewed year 1 of that program, and it found that health spending decreases were largely associated with changes in referral patterns rather than with reduced 

utilization. 

And I guess I am wondering, one, if you agree with that assessment; and, if you do, what can we be doing to put downward pressure on utilization, because, to me, that is really the issue. 

Dr. SAFRAN. Yes. It is a very important issue, and, yes, I do 

agree with those findings that in year 1 of these 5-year contracts, 

what most organizations reach for as the most easily achievable 

savings is savings that they can get through moving care to less 

expensive care settings. And they are doing that, I would say, in 

very smart ways that do not disrupt clinical relationships, partly 

because they have accountability for patient experience as well. 

And so they are doing things like moving care related to lab tests 

or imaging or basic procedures, where there are not established 

clinical relationships and where the patient is really happy to go 

wherever their clinician tells them as long as it is convenient. So 

there were significant savings to be realized through that, and 

many groups reached for those savings in year 1. 

The harder job is to change utilization, because to change utilization requires changing how physicians think and then changing 

how they behave. And what we have seen in year 2, and what we 

are seeing now in years 3 and 4, is that those utilization changes 

have really started to take hold. 

So they are putting in place the infrastructure, for example, to 

prevent avoidable admissions, avoidable use of the emergency department, by doing innovative things like having a nurse practitioner in the emergency room to catch the patient as they come 

through and triage and figure out, is this a patient who really 

needs emergency care or does this patient need urgent care, because, if they need urgent care, let us take care of them over here 

where we will not incur the expense of an emergency room visit. 

We will take care of the patient’s needs. They will not wind up 

in a bed, because, when you have a hospital in isolation and an 

emergency room, sometimes you not only get that emergency room 

visit, but you then get an inpatient admission too. 

So they are putting infrastructure in place to make some significant changes in utilization that we see in years 2 and forward 

yielding even deeper savings than they got in year 1 through those 

site-of-service moves. 

21 

But we all have to realize that changing utilization is the much 

tougher task, because it does involve changing how physicians 

think and how they act. 

Mr. EDWARDS. I would like to go back to your data question, because I think I might make you feel a little bit better about it, because I think we are not a 2. I think we have come a long way, 

and, if I was to rank us, we would probably be a 6. 

The CHAIRMAN. Nationwide? I am talking about nationwide. 

Mr. EDWARDS. Yes. 

The CHAIRMAN. Six nationwide. 

Mr. EDWARDS. So here is what—we just purchased a company, 

Anvita, that has a rules engine, and we are able to run every one 

of our 2,200 Medicare members through that engine overnight, and 

it will deliver back to us actionable gaps in care, including issues 

with drugs not being filled or being filled and not refilled over a 

30-day period. 

So the first time we ran it, it identified 355,000 actionable gaps 

in care that we could then turn around and turn over to our teams. 

And, as a result of that, working with the physicians, 31 percent 

of the gaps were converted into actions to improve outcomes for the 

members. 

So this is a brand-new company that we just purchased, and we 

can run, like I said, full data through it overnight. 

Dr. REISMAN. If I can answer that—a couple of things. One is, 

the sort of data that you are referring to, which we take advantage 

of as well, has been available in the managed care world for a long 

time. We can get drug data, we have claims information, we have 

information from laboratories. 

I think the point that you are raising relates to interoperability 

among electronic medical records, where the interest is in richer 

clinical data; what do the radiology tests show, what do the pathologies show, what do the physical exams show? 

And the way we have addressed that is through the acquisition 

of a company called Medicity, which actually does it through brute 

force. So, while we are waiting for standards of interoperability, I 

would refer you to the 850 hospitals and 200,000 physicians who 

are linked to this system. 

A couple of specific examples. One is Carilion in Virginia, which 

is using this capability, and another is the Banner Health Care 

System based in Arizona, which is actually using it to support a 

Medicare pioneer ACO grant. 

So, despite the fact that they have multiple EMRs, the ability to 

couple the traditional data we have always had with interoperable 

data that we have now accessed through brute force could, in fact, 

provide a substrate of information that I think you were referring 

to. 

I would argue that that is not sufficient and you need capabilities, whether it is Anvita or ActiveHealth, to, in fact, convert that 

massive amount of information—after all, it is quite a bit, chiefly 

on complex patients—into activities. 

So, as you think about a patient who is on 10 drugs, by definition, they might have 10 different diseases, hundreds of different 

lab results, how can any physician—and this is where the insecurity came from that drove me as a practitioner to the creation of 

22 

ActiveHealth. I could not keep up with the literature. I did not 

know what other physicians were doing. And the ability to, in fact, 

create this composite of data introduced this interrogation capability with clinical decision support. And then, in fact, to define discrete activities to pursue is really what we are trying to introduce 

around the country. 

Senator WYDEN. Thank you, Mr. Chairman. And my apologies for 

being late. Too many hearings simultaneously. And I know this has 

been a very good panel. 

I want to start with a question that stems from what I have 

heard all of you say, not just today, but repeatedly: that you are 

payers. And when you come before the Congress and talk to us 

about issues, it almost always comes back to information, which 

really means data, and you need access to it; and particularly global data, because you can really only look at what is inside your system. 

And the fact is that, under Federal law, you cannot really get access to the data. Now, Senator Grassley and I want to change that. 

We have a bipartisan bill to open up the Medicare database so that 

it would be possible to look at, I think, what you call global information, be able to compare what you have in your system to others. 

Dr. Reisman and Mr. Cardoza, I think you, in particular—and I 

think it is generally true of all five of you—are really sort of the 

point persons on this question. 

Dr. Reisman, would this be helpful to you, and how would you 

assess the need for this effort legislatively, to open up the Medicare 

database so that you really could get access to this kind of information and use it to drive improved quality and hold down costs? 

Dr. REISMAN. I would suggest that there are two elements of this 

discussion of data. One is retrospective analysis of aggregate data 

to identify trends, to support comparative effectiveness research, to 

understand what really works best, and we think that is enormously important. In fact, we are working with the administration 

and Todd Park, the CTO office, in order to, in fact, take advantage 

of those data capabilities. And one of the capabilities that we bring 

to that is the ability to apply our analytics to ask some of these 

important questions. 

The other element—which is related, but I just want to define it 

as being separate—is the notion of availability of real-time data at 

the point of care to support the physician in regard to taking care 

of the patient who is sitting in front of him. 

So there should be, in fact, the record locator that would allow 

me to identify data about you, analyze those data, and make sure 

that what I am doing for you is, again, consistent with the best 

clinical evidence and is not contraindicated relative to other activities that other doctors are pursuing with you. 

So I think there is the aggregate and there is the real-time, but 

in any case, the availability of information that resides within the 

Medicare database would be enormously important, for a number 

of reasons. 

Mr. CARDOZA. I would second that. I think what there is to be 

encouraged about on this topic is that we are talking about it. 

There is consensus that data matters, and sharing it among clinicians matters. 

23 

It was not very long ago that you could not have that conversation. Physicians are fiercely protective of their medical records. And 

we have seen a sea change just in the last 3 years in working with 

our physicians on this topic. 

They are coming to understand, as I said in my opening comments, medicine is really complicated now, and it takes a team. It 

is not an individual walking into his office in the morning and back 

out at night, and he is all by himself and he is taking care of the 

patient. Those days are past. 

So they know they need to interact with other physicians. They 

understand the importance of sharing data. And by law, patients 

have access to their records, and why would other physicians involved in the team care of that patient not have access to them as 

well? 

We are at the advent of this, but I think it is going to move fairly 

quickly. 

Senator WYDEN. Why don’t I bring the other three of our valuable witnesses into the second topic I wanted to ask, and, if any 

of you would like to elaborate on the question of the Medicare database, certainly we can do that either in writing or as you respond 

to this. 

But the second question I wanted to ask all of you is—since you 

come from the private sector and you watch the Federal Government, and, obviously, the Federal Government, to all of you, sometimes looks like it is moving very slowly and is slow to change and 

slow to adapt and slow to evolve, and traditional Medicare, even as 

we talk today, is still in the sort of demonstration project kind of 

stage—what would be your recommendations for speeding all of 

this up? Particularly, you have the chairman and ranking minority 

member here. We are in a position to look at ways to speed up and 

accelerate these changes so they get out of the demonstration stage 

and can be sped up. 

So why don’t we take our other three witnesses who did not get 

a crack at the first question and have them relay thier counsel on 

how to speed up changes and reforms. 

Dr. Safran, why don’t you start? 

Dr. SAFRAN. Sure. I would say that, over the last couple of years, 

what we have seen actually is quite impressive speed with respect 

to the uptake of the Accountable Care Organizations—— 

Senator WYDEN. Right. 

Dr. SAFRAN [continuing]. And that I would leverage that, because, as we were talking about before, the key is going to be for 

Medicare to be able to move away from a model of payment that 

deals with individual actors yet holds them accountable for the behaviors of every other doctor across the country such that, if others 

are using too much, my rates are going to go down next year, to 

a model where I have a group of peers that I have accepted accountability with and we are working together to manage total 

medical expenses, quality, and outcomes. 

So the fact that you have stood up 32 pioneer ACOs in such a 

short period of time and that the Medicare Shared Savings program is getting underway, I think sort of sets out the beginning of 

a continuum that, to me, actually reminds me very much of the 

way that we waded into the AQC model that I talked about today. 

24 

When we launched the AQC in 2009, we hoped that, by the end 

of that year or possibly the following year, we might have 10 or 15 

percent of our network accepting that broad accountability for total 

medical expenses, quality, and outcomes. 

By the end of year 1, we had a quarter of our network contracted 

that way, and, at this point in time, we have close to 80 percent 

of our network across the State contracted in that way. 

Why did it happen? Why did we have that fast uptake? I think 

there are lessons to be learned for the Federal Government, and a 

big part of it was that it was voluntary to begin. We were not forcing anybody in. We said, ‘‘If you believe this is a better way, and 

you can see that you can earn well under this model by making 

care better and by contributing to affordability over the long term, 

then come on into this contract.’’ 

And then what I think led to the rapid acceleration was a couple 

of things. One, organizations started to see that the initial pioneers—no pun intended—in our AQC model were succeeding both 

at improving quality and at managing their budgets. 

Second, they saw that the fee-for-service system was starting to 

look pretty unattractive. It was starting to look like low or no payment increases, no real opportunities to advance, and that created 

some acceleration. 

They started to understand the kind of support they were getting 

from us as a payer—and I think the Federal Government will have 

to work out similar models—to help them as they transitioned from 

a volume-based system to a value-based system. 

Senator WYDEN. Take that last point, because I think that’s the 

ballgame. 

Dr. SAFRAN. Yes. 

Senator WYDEN. I think that is the ballgame. And that, of course, 

is what we started essentially almost 3 decades ago in our part of 

the world, whether it is Group Health up in Seattle or Providence 

or other kinds of plans in our area. 

What could the Federal Government do to accelerate that transition beyond fee-for-service? 

Dr. SAFRAN. Well, I think there it goes back to your earlier question about the datasets, because from Washington, DC or Baltimore, it will be hard to partner with the provider organizations 

that have the courage to sign up for these new models in the ways 

that we have seen have been critical to their success in our market. 

But imagine that if those who sign up for it are able to partner 

with their private payers, who are also paying them in that model, 

and if those private payers and the providers who come into it have 

all the data to work with, if we could be doing the same rich analytics for the providers in our market that are AQC organizations 

and also Medicare pioneers, this would be enormous assistance to 

them. 

If we could then take those analytics and help them with the performance improvement guidance that we give them on the commercial side, give them that same guidance on the Medicare side, I 

think you would start to see more rapid uptake across the country, 

because fear is one of the rate limiters right now. 

I think folks think, I would not know the first thing about how 

to transition from a system that pays me for every unit I produce 

25 

to a system that is now going to ask me to have accountability for 

overall spending and quality. So you have to help them. 

Senator WYDEN. Mr. Chairman, when a witness says that they 

support the efforts along the lines of what Senator Grassley and I 

are talking about to expand access to this Medicare data, and they 

want to promote a transition beyond fee-for-service, I usually think 

I ought to quit while I am ahead. [Laughter.] 

The CHAIRMAN. You are doing just great. 

Senator WYDEN. I thank you for the time. 

The CHAIRMAN. To follow up on your first point, there has been— 

and you mentioned it, Mr. Cardoza—earlier physician resistance to 

access to Medicare data. 

I assume some physicians are proud of their billing practices. I 

am wondering whether their billing practices will be questioned. 

Maybe there are some medical liability issues there. 

And I am just wondering if you could help us figure out how to 

bridge that gap, because I do think it makes sense for that data 

to be available, but we should do it in a way that is sensitive to 

legitimate physician concerns. 

Mr. CARDOZA. Well, it is a journey. In our setting, we have been 

doing this for 25 years, and our 3,000-plus physicians are in an accountable structure, and they know they are being watched. 

So in areas of the country where there is no transparency at all 

and they just walk into their silo in the morning and out at night, 

yes, there is going to be some trepidation, just that somebody else 

is going to be looking. But you have to go there. 

In response to the question of, how do we accelerate it, how do 

we get there: put the money where you want the systems to go, and 

they will go there. 

So payment reform has to precede delivery system reform. It has 

to enable delivery system reform. So the more we can create population-based reimbursement methodologies along the lines being espoused in Massachusetts, the faster we will get there. 

The CHAIRMAN. So do you suggest modified payment reform 

under Medicare? 

Mr. CARDOZA. Yes. 

The CHAIRMAN. And what would it be? 

Mr. CARDOZA. Well, you just went above my pay grade. [Laughter.] I am much more eloquent describing the problem. I do think 

the underlying principles, as we have all been talking about, are 

to put in place policies that give physicians reason to group up, to 

get connected to organizations so that they have—because I’m telling you, the physicians on their own cannot do this. It is not what 

they were trained to do. It is not what they signed up for. 

The expectations of them now are very different from what they 

thought they were signing up for. They are okay with it, they are 

willing to sign up for it because they understand it is the right way 

to go, but they just lack the skills and wherewithal to do it. 

So organizations like ours, the kinds of organizations in Massachusetts that have been described, are enabling structures for them 

to do what they would like to do, if they could. At the granular 

level, they have no chance. 

Dr. REISMAN. Could I just suggest that we link the data question 

to some of the incentive questions? So if, in fact, we had access to 

26 

these data and the purpose was to say, you are a bad guy and you 

are a good guy, obviously, physicians are concerned about it. 

But suppose we shifted the incentives, and we were talking about 

managing real populations, and we said, ‘‘Gee, there’s a population 

in an adjacent county where, in fact, the number of the coronary 

angiograms done is half as many as you do, and, by the way, the 

incidence of obstructive coronary disease is 3 times higher, suggesting that you are doing angiograms on people who, in fact, do 

not need them.’’ In fact, we could ascertain that as well. 

We could go to that community and say, ‘‘Gee, we’re actually 

changing the payment structure from fee-for-service, notwithstanding the SGR issues, to one where you, in fact, will receive the 

case rate or a global rate for your community, and, by the way, by 

looking at the CMS data, we, in fact, can assure you that by reducing utilization and being a little bit more thoughtful about your use 

of angiography—and we can name 25 other tests, obviously, if we 

care to—you, in fact, could put yourself in a position where you 

could responsibly assume risk, financial risk, without compromising the care of your population.’’ 

So I think for a lot of these issues, we need to think about companion solutions and actually collect and combine some of the 

issues that we have been talking about. 

Mr. CARDOZA. Do not underestimate the power of peer pressure. 

If we can profile these practices and create the data and make that 

data available to people—we had two large cardiology groups in adjacent counties, and the utilization practices in one of those counties was egregious. 

We went to those cardiologists, and we showed them their data 

compared to the next county, and, if we had just sent that out to 

them and not engaged them, they would have thought, ‘‘Well, I 

guess that means we’re doing a better job.’’ 

So instead, we were able to engage them, hold their feet to the 

fire, and now, 2 years later, their utilization practices are exactly 

what the other county is. It was driving toward the mean. 

The CHAIRMAN. Is it working in McCollum, TX? 

Mr. CARDOZA. I do not know. 

Dr. REISMAN. But the incentives are not there. 

The CHAIRMAN. I am talking about peer pressure at least between—— 

Dr. REISMAN. Not at all. 

The CHAIRMAN [continuing]. Particularly El Paso and McCollum. 

I am referring to the Atul Gawande article that—— 

Dr. REISMAN. I know you are, yes. 

The CHAIRMAN [continuing]. Was written several years ago. 

Mr. CARDOZA. Actually, my understanding is that there is some 

movement there since they have been exposed. 

Mr. BURRELL. We are finding peer pressure, to the point—among 

the 300 panels we formed, the small groupings of primaries, there 

is peer pressure within the panel, and then there is peer pressure 

across panels. How am I doing relative to others? 

You could have two physicians in a panel of 10 who are high, 

wide, and handsome, and the other eight have their incentives 

based on how the total panel does, and they start to police themselves. 

27 

Mr. CARDOZA. Doctors hate being an outlier. They just hate it. 

Mr. BURRELL. They do. 

Dr. REISMAN. But they also like making money. I would just suggest—we have peer pressure, plus financial incentives, and it did, 

in fact, create a synergistic relationship. 

Mr. EDWARDS. Any modification to the policy has to make sure 

it is flexible among practice variations, because variations exist 

today. 

The CHAIRMAN. What is the role of medical schools here? 

Dr. REISMAN. I think there is a considerable role. Based on my 

experience recently, these issues are not being addressed particularly well. There is a little bit more of a focus on primary care. I 

think there is a need to further acknowledge the contribution that 

other types of practitioners can make. There is a lot of anxiety, of 

course, about conversation around primary care, but we are not 

doing nearly enough to, in fact, introduce these issues to the curriculum in medical school. 

Mr. CARDOZA. Senator Baucus, I want to go back to a point I 

made earlier. We are not training physicians today to enter into a 

health care delivery system. We are training them to be medical 

rescuers. We are training high-tech, giving them lots of tools, and 

that is where the money is, and that is where the glamour is. 

It is a real problem. So medical schools are not doing what is 

needed today, but so is a lot of this system. 

I am not going to demonize them, but I think if we start setting 

this out there and challenging them, I think they can move in this 

direction. But they are not there now. They are training medical 

rescuers. 

The CHAIRMAN. You touched on this anyway, but it is a little 

tense between specialists and primary care docs. It is my understanding that a lot of the Medicare reimbursement weighting 

schedule is contracted out to AMA, and it is weighted toward specialists, with a disadvantage to the primary care physicians. I do 

not know if that description is accurate. 

But just your thoughts on how we can deal with this difference 

in reimbursement between specialists and primary care physicians. 

I do not want to take anything away from the specialists, but your 

point triggered my thought. We always train to the high glamour 

stuff and technology, and that is where the money is and so on and 

so forth, and it is probably a bit siloed as well. I do not know. 

But I am trying to figure out how we get a little more focus on 

primary care physicians here. 

Dr. SAFRAN. I think the models that you have heard us discuss 

today, while we have not explicitly said it, each of them is primary 

care-centered. So I will speak for our model. 

The only requirement we have of an AQC organization from the 

perspective of what that organization has to look like is, it must 

have primary care at the center. Beyond that, if they want to have 

specialists in their contract, if they want a hospital as a partner 

in their contract, they may, but they do not have to. They still have 

to be accountable for that whole care across the continuum. 

Well that, coupled with the fact that the quality incentives are 

so largely primary care-based, has really changed the dynamic of 

power and resources within these organizations, because these orVerDate Nov 24 2008 19:21 Jul 05, 2013 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 R:\DOCS\81390.000 TIMD
28 

ganizations understand that they cannot succeed at managing total 

medical expense and improving quality and outcomes if they are 

not investing in primary care at the core. 

And so we are seeing them looking to hire more primary care clinicians, physicians, as well as nurse practitioners and medical assistants, investing in the infrastructure in primary care practices, 

rewarding those practices for the success that the organization is 

having at managing their budget and improving quality. 

And it has, interestingly, changed the dynamic with specialists 

in a very important way. Specialists are sitting forward saying a 

couple things. One is, gee, how can we be helpful in this new 

model? How can we be helpful at managing total medical expenses? 

And are there not any measures for us? Are there not any good 

quality measures for us? That is a welcome question, because the 

available measures that are nationally endorsed really are, at this 

point, very much primary care-focused. 

And being able to have accountability for quality of care in the 

specialty environment is very important. 

Mr. EDWARDS. I agree with Dr. Safran. I think the PCP is the 

quarterback and—— 

The CHAIRMAN. Say again, Mr. Edwards. 

Mr. EDWARDS. The PCP is the quarterback of the team, and he 

needs to funnel the care to the efficient specialists that he has. The 

most efficient model we have is where the specialists are capitated 

and the PCP is driving the care to the most efficient specialist that 

he has in the network. 

Dr. REISMAN. I think we need to, again, focus on this team-based 

patient-focused orientation. So suppose I am a specialist doing 

bariatric surgery and Aetna offers a case rate. 

Now, you are the surgeon. Typically, you might ignore the role 

of the primary care physician with regard to the follow-up of that 

patient who had the bariatric surgery. But now, as the surgeon, I 

am at risk if that patient is readmitted with an infection, with metabolic problems, lack of adherence to the drugs, all of the things 

that we have been talking about. 

Suddenly that primary care physician is my best friend, to the 

extent that I do not want to have to see this patient again. 

So, again, as we realign incentives and create dependencies, if 

you will, for the specialists on the primary care physician, in much 

the same way as there is a dependency the other way when the primary care physician refers to the specialist, we, in fact, can, I 

think, restructure those relationships and restructure the reimbursements so the primary care physician is more generously reimbursed. 

The CHAIRMAN. We are going to—I am not going to ask you to 

do this. I think it is a bit much. But an earlier panel consisted of 

former CMS directors, and the subject was SGR. And at the end, 

I decided, why not? So I tasked them to come back to us with recommendations on how to reform the SGR. 

Those recommendations are due tomorrow. I am just trying to 

think. It is too bad we were not all together here to talk about this, 

but anyway—— 

So what should we be looking for when they give their recommendations? What are some of the key points that you would 

29 

think are most important in order to help us advance the ball here 

and to get a reform of SGR in a way that you think makes sense 

given your experience and how you compensate physicians looking 

forward toward a collaborative, patient-centered approach and delivery system reforms, not siloed, et cetera? 

What would it be? What should we be focusing on or looking at 

when we get those recommendations? 

Mr. CARDOZA. Where is the value-based component to the compensation that goes to the physicians? If we are going to continue 

to just pay for fees for the services that they provide, then they are 

just going to keep providing services. So I would look for that as 

one thing, along with the other things that we have talked about. 

Mr. BURRELL. I would echo that; it has to be a global measure 

of the outcome for a defined population of patients and a structure 

of accountability, principally through the primary care physicians. 

It is not the price movement that you are looking for. It is an 

overall cost of care, and the only way you can improve that is to 

have that accountability and the incentives to get better outcomes. 

The CHAIRMAN. How do you measure quality? 

Mr. BURRELL. Largely on outcome. 

The CHAIRMAN. How do you measure outcome? 

Mr. BURRELL. We look at it principally as reductions in the evidence of the fragmentation of the health care system, having fewer 

readmissions, fewer ER visits, fewer drug interactions. That is not 

the only way—gaps in care. 

But we are looking at outcome measures that show the patient 

has been stabilized or their risks mitigated. 

Dr. REISMAN. I think you back out of things that are most fearful 

with regard to particular disease states. So the bad thing about 

being a diabetic is not your sugar, it is that you are going to have 

a heart attack or a stroke or end up in dialysis. 

So the outcome is not, did you test this or test that or get your 

sugar to this or that level? The outcome is, did people, in fact, end 

up having strokes, heart attacks, and end up in dialysis or blind 

or any of the other dreaded complications associated with diabetes? 

The CHAIRMAN. That depends on some kind of follow-up records. 

Dr. REISMAN. Yes, which is a lot of what we are talking about. 

So you need this longitudinal record to see how things have turned 

out, related to some of the questions that Senator Wyden was asking before. 

With regard to the SGR question, I would hope that the answer 

would be more expansive than an immediate reaction to SGR in 

isolation. I would hope there would be companion solutions that are 

suggested, and that those companion solutions are, in their recommendations, a realistic assessment about whether or not many 

practices have the infrastructure, the technological capabilities, 

even the financial wherewithal to manage this new approach. 

The CHAIRMAN. Thank you. 

Mr. Edwards? 

Mr. EDWARDS. I would echo that, but add a couple things. For 

the physicians, I think we have to transfer or get a transition from 

the piecework system that they are in today to one that more appropriately rewards their ability to coordinate care and performVerDate Nov 24 2008 19:21 Jul 05, 2013 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 R:\DOCS\81390.000 TIMD
30 

ance. To me, that is one of the biggest things we need to do with 

the system. 

The CHAIRMAN. Dr. Safran? 

Dr. SAFRAN. I would look for five things. I would look for them 

to give you a model that moves from a focus on individual actors 

to a model that focuses on organizations. 

I would look to them to give you a model that moves from the 

focus on individual services and the fees for those services to the 

global view of total medical expenses and quality and outcomes for 

a population cared for by those organizations. 

I would look for them to have a model that involves data and ongoing support to those organizations as they venture into this new 

world of moving from volume to value. 

I would look for them to have a model that places substantial financial incentives on quality and outcomes, to act as the backstop 

against any incentive to stint on care that a global budget constraint might impose. 

And lastly, I would look for them to help with the further development of better and richer outcome measures. We have good outcome measures today, measures for making sure that the important chronic diseases are under good control and that we are avoiding complications for hospital care. Those are good outcome measures, but they are not good enough. 

And so we need further development of good outcome measures 

to sustain a model that rewards outcomes. 

The CHAIRMAN. Well, that is great. If they are watching, I bet 

they will ask for an extension to modify. [Laughter.] 

Senator WYDEN. Thank you, Mr. Chairman. I thought the point 

you raised, Mr. Chairman, about primary care was particularly important. 

And we have Mr. Burrell here, and he has gotten into this primary care area, I think, in a very interesting way, particularly, 

bringing providers and patients together around prevention, and, to 

me, that is really the ballgame. 

We understand that most of the health care bill in this country 

goes for chronic disease, well over half of it, and we spend it picking up the damage caused by heart disease and stroke and cancer 

and diabetes. And you are trying to figure out a way to bring your 

providers and your patients together and reward the patients, and 

I think that is particularly good. 

Since you and I talked, Senator Portman and I got together with 

the Cleveland Clinic and Oregon Health Sciences University and 

have actually proposed for the first time financial rewards for senior citizens under Medicare to lower their blood pressure or their 

cholesterol and stop smoking or use body mass and the like. 

In the context of the chairman’s question about primary care, tell 

us a little bit about what you are doing to bring together both your 

providers, your docs and others, and the patients to start having 

prevention and behavioral change—empowering the patients—be 

part of your new approach. 

Mr. BURRELL. Well, on the patient side, it starts with awareness 

of risk, which starts with a health risk appraisal, which we offer 

for free. Just a discovery of the risks you have, the awareness of 

the risks you have, has a big effect on behavior. 

31 

We ask them to share it with their primary care doctor. And so 

we automatically transfer it with that consent to the primary. It 

has an effect on the primary’s thinking sometimes. 

We start with financial incentives to the member just to participate, and then it moves to financial incentives for outcome. You see 

that you are overweight, you see that you have hypertension, you 

see the risks that you have. It is one thing to see it. It is another 

thing to actually act on it. 

We want to move to the day where stronger outcomes produce 

stronger financial rewards for the member. But if you are the only 

one who knows it, as a member, and your doctor does not, it does 

not do much good. 

So we give it to our small panels of primaries. It is seen by the 

panel; then we identify the patients at high risk as evidenced by 

health risk appraisals, and we target interventions together with 

those primaries for the patients at higher risk. 

So it is an incentive to the member to participate and be aware 

and to take action, and it is an incentive on the part of the primary 

because it is a global population-based incentive model. If they can 

get a better outcome, they have a financial reward—the member 

does and the physician does—and they are dovetailed together. And 

it is the working together that actually causes, we think, the best 

result. 

Dr. REISMAN. Senator, just at the risk of being a wet blanket in 

this—and I completely agree with what you are discussing. 

The CHAIRMAN. I like you. You are going to bring up contrary 

points of view. That is good. 

Dr. REISMAN. Thanks. So we—and I am not sure you were here 

when I mentioned this—collaborated with Niteesh Choudhry at 

Harvard, and we published a piece in the New England Journal of 

Medicine a couple of months ago where we gave patients who had 

experienced heart attacks their drugs for free. 

So they, in fact, did not have risk factors—they had already experienced the outcome. And, despite getting their drugs for free, 

zero co-pays, less than 50 percent of them were compliant. 

So there is the ability for the doctor to do the right thing. They 

had written prescriptions for all the right drugs. There is the ability to convey information about risk. But the reality of human behavior is that we need to grapple with some of the complexities associated with this. It is very discouraging, but we have a long way 

to go, and we need to understand how to get into the psyche of patients. 

Senator WYDEN. There is no question that there are a variety of 

factors involved here. I think what really swung me to this was the 

work of Dr. Roizen, who is a prevention officer at the Cleveland 

Clinic. And the program that they have put together—which essentially is what Senator Portman and I modeled our approach with 

Medicare on—really does seem to be working, and I think they do 

try to spend the time, certainly, talking with patients, talking with 

families, incorporating in some of the judgments that you are talking about. 

But they are very clear—and Toby Cosgrove and others have had 

a long interest in prevention—they are very clear in their view that 

these financial rewards—and these are, of course, not enormous 

32 

sums of money—but the idea of a few hundred dollars in conjunction with some of these other kinds of approaches has been successful. 

And since Chairman Baucus has given us a chance to kind of be 

around the kitchen table to kick these ideas around, hopefully we 

will be able to make more progress. 

Dr. REISMAN. But it may be that our social networking and sense 

of community, which is something that we are pursuing—— 

The CHAIRMAN. I would like you to focus a little more on patient 

responsibility. 

Dr. REISMAN. Yes. 

Dr. SAFRAN. Well, one of the things that—— 

The CHAIRMAN. Patient responsibility. It is a big issue, huge. 

And your thoughts? How do we encourage it? You talk about probing the internal psyche of people. That is kind of scary. 

Dr. REISMAN. And we have talked about—— 

The CHAIRMAN. How do we get it so we encourage more responsibility? 

Dr. REISMAN. Part of it might be some sort of social pressure or 

social awareness or gamification, taking advantage of new approaches in behavioral health and behavioral psychology and behavioral economics to induce the sort of behavior that we are interested in. 

But the simple-minded notion that I, as a doctor, tell you what 

you need to do and then go farther and say, you can do it for free, 

clearly is not enough, and that is really the point I wanted to 

make. And we need to invoke other considerations. 

The CHAIRMAN. I would agree with that. 

Mr. BURRELL. And just to add one thought here, because I think 

it starts with incentives, but it cannot end with incentives. 

To go back to what I said earlier, we find that the breakdowns 

occur at home. You do not comply partly because you are depressed, partly because of the way you live your life, and so there 

is a psychosocial aspect to it. 

So we found that when incentives and awareness are combined 

with actual follow-on—not by the doctor who prescribes whatever 

the medication is, but often by a nurse following it up—the connection with the nurse has an effect on compliance. 

You cannot do this on every patient, but we are looking at the 

5 to 10 percent of the patients who run up two-thirds of the cost, 

and you can do it for them. It is the combination of all of the above: 

the physician paying attention, the nurse following it up into the 

home where the breakdowns occur. It is so important to getting 

compliance. Compliance is very low. 

Mr. CARDOZA. But you cannot do it in a straight fee-for-servicebased system. There is no money for that, because what you are 

describing is absolutely essential. It is expensive to create the 

structure for it. 

So unless you have that global money to deal with up front—— 

Mr. BURRELL. Correct. 

Mr. CARDOZA [continuing]. It is very difficult to do in a fee-forservice. 

Mr. BURRELL. Medicare does not cover it. 

33 

Dr. SAFRAN. Both that global money up front and an incentive 

that is based on the outcomes of care, because, up until this point 

of creating accountability for outcomes, adherence has been the 

great don’t-ask-don’t-tell phenomenon in health care. 

When doctors give a patient a prescription or advice, they just 

assume and hope that that advice gets followed. And, as Mr. 

Burrell just said, the financial barriers are only one piece of it. And 

starting to systematically address the barriers to adherence is part 

of what health care means, starting to address, did the patient understand, are there cognitive issues that are going to get in the 

way of adherence, are there motivational issues, are there practical 

issues in terms of their neighborhood and what they can do or their 

work life and what they are able to manage? 

The CHAIRMAN. Right. 

Dr. SAFRAN. Addressing those has to become part of what health 

care means. 

Mr. EDWARDS. And that group we brought up earlier that serves 

the low-income and the under-served neighborhoods on patient responsibility, they go and pick up the patient and bring them in so 

they do not miss their appointments, so that they are always there 

when they need to be there. So that has been a big help. 

The CHAIRMAN. There are nine people who are working over 

here. It is called the Supreme Court. How is their decision going 

to affect all of this? What do you do? 

Mr. CARDOZA. I have been asked that question a lot, and I do not 

profess to be an expert on it, but my comment has been, it will only 

affect pace, not direction, because we are all on a burning platform 

right now. We cannot stay where we are. 

I think the Affordable Care Act—I am not an expert in it—I assume that it is flawed, but it is necessary. It gets us to the starting 

gate. And we are going to spend the rest of my career perfecting 

it, but we have to start down that road. We cannot stay on this 

platform. It is on fire. 

The CHAIRMAN. Other thoughts? 

Mr. BURRELL. I would essentially agree with that. I think the 

changes that are underway are unstoppable, regardless of what the 

court decides. 

Dr. REISMAN. The economic imperatives will remain regardless. 

We have been working on this, as I mentioned in my testimony, 

since 2005 at least. We will continue. 

The CHAIRMAN. Do you agree? 

Mr. EDWARDS. Yes. We have been through a lot of changes over 

time, and we are just looking for a more sustainable program. 

Dr. SAFRAN. Absolutely. We cannot stop. 

The CHAIRMAN. Well, this has been a good session here. Thank 

you very, very, very much. You have given us a lot of very good 

ideas and, like most things, we just keep moving forward. Thanks 

a lot. 

The hearing is adjourned. 

[Whereupon, at 11:48 a.m., the hearing was concluded.] 

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