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80–998—PDF 2012

S. HRG. 112–773 

PROGRESS IN HEALTH CARE DELIVERY: 

INNOVATIONS FROM THE FIELD 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 23, 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 

Migliori, Richard, M.D., executive vice president of health services, United 

Health Group, Minnetonka, MN ......................................................................... 4 

Sacks, Lee, M.D., executive vice president and chief medical officer, Advocate 

Health Care, Oak Brook, IL ................................................................................ 6 

Malloy, Marc, president and chief executive officer, Renaissance Medical Management Company, Wayne, PA ........................................................................... 8 

Diaz, Paul, president and chief executive officer, Kindred Healthcare, Louisville, KY ................................................................................................................ 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

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

Prepared statement .......................................................................................... 37 

Diaz, Paul: 

Testimony .......................................................................................................... 9 

Prepared statement with attachment ............................................................. 39 

Hatch, Hon. Orrin G.: 

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

Prepared statement .......................................................................................... 71 

Malloy, Marc: 

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

Prepared statement .......................................................................................... 73 

Migliori, Richard, M.D.: 

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

Prepared statement .......................................................................................... 76 

Sacks, Lee, M.D.: 

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

Prepared statement with attachments ........................................................... 98 

COMMUNICATIONS

AARP ........................................................................................................................ 111 

American Medical Rehabilitation Providers Association ...................................... 119 

National Association of Chain Drug Stores (NACDS) .......................................... 122 

Wisconsin Hospital Association .............................................................................. 127 

(III) 

(1) 

PROGRESS IN HEALTH CARE DELIVERY: 

INNOVATIONS FROM THE FIELD 

WEDNESDAY, MAY 23, 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 Rockefeller, Bingaman, Wyden, Nelson, Menendez, Carper, Cardin, Hatch, Snowe, and Thune. 

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

David Schwartz, Chief Health Counsel; Sara Harshman, Research 

Assistant; Tony Clapsis, Professional Staff; Karen Fisher, Professional Staff; and David Sklar, Fellow. Republican Staff: Chris 

Campbell, Staff Director; and Kristin Welsh, Health Policy Advisor. 

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

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

Albert Einstein once said, ‘‘If you always do what you always did, 

you will always get what you always got.’’ As health care premiums 

were doubling from 2000 to 2010, it was clear we could no longer 

do what we always did. We could no longer tolerate what we always got when it came to our Nation’s health care. We all have 

common goals: to reduce health care costs and improve health care 

quality. How do we do that? Innovation plays a key role. That is 

the focus of our hearing today. 

It is not the type of innovation we normally think about in the 

health care industry; it is not developing a new drug or device in 

a laboratory. The innovation we are talking about transforms the 

way providers deliver care to patients. This innovation means patients spend more time with their doctors rather than talking to 

the insurance companies. This innovation encourages doctors and 

nurses to communicate more with their patients and with each 

other about patient care, and it makes us spend our scarce health 

care dollars more wisely. 

The private sector has always been at the forefront in creating 

innovative ideas. They have to. Now the entire health care community is involved. Employers, health plans, Medicare, and Medicaid 

are committed to innovation, and providers of all kinds are engaged 

to improve the way health care is delivered. 

2 

We will hear about this innovation from our four witnesses 

today. We will hear about how they are working individually and 

working together to lower costs and improve quality. 

Health reform encouraged this innovation, and we must continue 

to build on the progress. Medicare and private payers are together 

sending one message to providers: from now on we will pay for 

quality, not quantity. It is a message that providers have already 

begun to hear and respond to. 

Starting in October, Medicare will start paying hospitals more 

money when they produce better results for patients. Hospitals 

that produce poor outcomes will get less. For the first time, hospitals will be penalized if patients are readmitted too often. Almost 

1 in 5 Medicare beneficiaries is readmitted to a hospital within 30 

days of discharge. We need to encourage providers to do the job 

right the first time. 

I am encouraged to see the private sector aligning with this effort. This year the insurance company Wellpoint will require all 

hospitals it contracts with to be subject to similar programs. These 

incentives provide a common-sense foundation to change behavior. 

The private sector cannot do it alone, nor can Medicare and Medicaid do it alone. The only path forward is through partnerships between the public and private sectors. 

That is why we created the Centers for Medicare and Medicaid 

Innovation, known as the Innovation Center. Medicare and Medicaid are now engaged on the front lines and working with the private sector to find new models of payment in delivery of care. 

The concept is simple: find the best ideas and test them. If they 

work, expand them. If they do not, move on to new ideas. Already 

the Innovation Center has launched more than a dozen new 

projects. These projects involve more than 50,000 providers in almost every State in the country. They try out new payment models 

to reduce costs and make patients healthier. We know that there 

cannot be a one-size-fits-all solution. Health care in Missoula, MT 

is different from health care in McAllen, TX. 

I look forward to hearing about the innovative models our four 

witnesses are developing. Their experience in pioneering new approaches and partnering with Medicare and Medicaid should be instructive to us all. So let us embrace innovation as an opportunity 

to change things for the better. Let us encourage public-private 

partnerships. Let us do this to lower health care costs for consumers and for taxpayers. Let us do it to improve patient care and, 

as Mr. Einstein advised, let us not always do what we always did. 

[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. Well, thank you, Mr. Chairman. I want to thank 

Chairman Baucus for convening today’s hearing. 

Americans are looking for areas of agreement between our two 

parties on health care, and I have been very clear about my opposition to Obamacare, the President’s health care law. This deeply 

flawed law spends too much, it taxes too much, and it does really 

3 

nothing to address the fundamental challenge of rising health care 

costs. 

However, the chairman and I agree on the need for providers and 

payers to work together to provide higher quality, better-coordinated care to patients. Our witnesses this morning all have tried 

innovative methods to achieve that shared goal. According to the 

Medicare Payment Advisory Commission’s most recent report, last 

year Medicare spent over $229 billion on inpatient hospital and 

post-acute care for Medicare beneficiaries. Now, this represents 43 

percent of total Medicare spending. 

Meanwhile, the population of Medicare beneficiaries is exploding. 

Last year, the first Baby Boomer became eligible for Medicare. By 

2031, it is projected that 80 million people will be Medicare-eligible. 

As these retirees enroll in Medicare, government spending is bound 

to mushroom. 

As most health care providers will tell you, in addition to an 

aging population, we face a growing number of patients with chronic illnesses such as diabetes or heart disease. These patients are 

sicker and more expensive to treat. While providers are doing their 

best to manage these patients, too often our health care system is 

not structured for easily coordinated care. 

Currently, we have a system of silos. Patients are seen in a variety of settings: doctors’ offices, hospitals, or nursing homes, and it 

is not uncommon for a health care provider to have an incomplete 

picture of all the care a patient is receiving. 

Furthermore, a fee-for-service system provides little financial incentive to manage care properly. Instead, the incentive is to increase the volume of services. Reducing costs will require that patients receive the right care in the right place at the right time. 

Increasingly it is private payers, on behalf of employers, who 

pressure providers to reduce costs, providing better care and better 

health outcomes. Patients deserve and demand better care. In my 

own home State of Utah, we are privileged to have some of the Nation’s best, most efficient health care providers, but not all providers are created equal. Much of our health care system is fragmented, and often the right hand does not know what the left hand 

is doing. 

Unfortunately, the patient is caught in the middle, with very little coordinated care. We know from our witnesses today, as well as 

other health care leaders, that there is a needed focus on care transitions. Many errors can be avoided when health care providers 

keep this focus. 

Of late, much attention has been focused on the Center for Medicare and Medicaid Innovation, CMMI, and the flourish of activity 

it has created. Like many of my colleagues, I remain concerned 

that CMMI has an enormous budget and very little accountability. 

It is more than a little ironic that an organization touting quick, 

innovative change and efficiency took over 5 months to respond to 

my request for very basic information on its strategic plan and an 

accounting of how it is spending $10 billion of taxpayer money. 

In addition to continued oversight of CMMI, I intend to ensure 

that the pilots and programs they develop actually work for our 

seniors. For example, when CMMI unveiled the Accountable Care 

Organization, or ACO, pilot, most providers felt it simply would not 

4 

work, was unnecessarily burdensome, and did nothing to advance 

the cause of higher quality, lower costs, and more efficient care. 

Many of our witnesses today have very interesting stories to tell 

about how they are transforming care within their communities. 

They identified a problem, knew a solution was needed, and did not 

wait for the government to tell them how to best fix the problem. 

I would have to say innovation has happened in every community 

and in all sizes, and no one knows better the needs of the community than the caregivers on the ground. 

I know this is not easy and often takes years to develop, but I 

congratulate all of you for the great work that you all are doing 

every day. I look forward to hearing from our witnesses and learning about how others can hopefully adopt some of these great ideas 

and achieve positive results in their own communities, and I appreciate you holding this hearing, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

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

The CHAIRMAN. I would like now to introduce our witnesses. 

First is Dr. Richard Migliori, executive vice president of Health 

Services, UnitedHealth Group. Doctor, thank you very much for 

taking the time to come and for your testimony. 

Second is Dr. Lee Sacks, executive vice president and chief medical officer of Advocate Health Care. Dr. Sacks, thank you for your 

time here. 

Dr. Marc Malloy is chief executive officer of Renaissance Medical 

Management Company. You too, sir; thanks very much for being 

here today. 

And Mr. Paul Diaz is chief executive officer of Kindred Healthcare. Mr. Diaz, thank you too. 

So let us begin. You know our procedure. You may each speak 

for about 5, 6 minutes, whatever seems most appropriate. Your 

statements are automatically included in the record. 

This is a very important subject, so just tell us what you think 

and make the best use of this hearing. Thank you very much. 

Dr. Migliori? 

STATEMENT OF RICHARD MIGLIORI, M.D., EXECUTIVE VICE 

PRESIDENT OF HEALTH SERVICES, UNITEDHEALTH GROUP, 

MINNETONKA, MN 

Dr. MIGLIORI. Thank you, Chairman Baucus and Ranking Member Hatch, for holding this important hearing and for the opportunity to share UnitedHealth Group’s recommendations on improving the health care system. 

At UnitedHealth Group, I focus on innovations focused on improving care delivery through technology and health services. 

UnitedHealth Group is a diversified health and well-being company 

based in Minnetonka, MN. We serve over 75 million Americans 

through contractual partnerships with more than 85 percent of 

America’s hospitals and physicians. That activity generates more 

than $300 billion in annual health expenditures and, as I will explain, it is also a rich source of information that helps us improve 

the system. 

5 

UnitedHealth Group has the privilege of partnering already with 

approximately 300 Federal and State government agencies. We are 

the country’s largest provider of Medicare Advantage plans and 

Medicaid managed care plans. We are honored to have recently 

been awarded the Department of Defense Tri-Care contract to manage health care services for beneficiaries in the West region. We 

administer large-scale databases for CMS and the Office of Personnel Management. We are also proud to partner with CMS on 

various demonstration initiatives, including the ACOs. 

To create sustainable access, however, to high-quality, affordable 

health care, we must address variations in the quality of care, increases in the prevalence of chronic diseases, and fragmentation of 

existing information, as you both noted in your introductory comments. 

With our partners, UnitedHealth Group addresses these challenges by embracing wellness and prevention programs that foster 

behavioral changes, by empowering consumers with decision support tools through transparency initiatives, and finally by aligning 

incentives and driving better outcomes through data analytics and 

payment reform for the health care delivery system. 

These innovative approaches are deployed in the private marketplace today at full scale, but they are not as widely available in the 

government health programs. Broader adoption of these kinds of 

programs would lead to better quality outcomes at lower costs for 

Federal and State governments, and most importantly for the 

American people. 

In short, we believe better information leads to better decisions, 

resulting in better health. To help us achieve those goals, we invest 

$2 billion annually just in technology. UnitedHealth Group’s prevention programs use technology to identify and mitigate risk of 

disease by fostering behavioral changes. 

To prevent the onset of diabetes, we partnered with the CDC and 

the Y to develop the Diabetes Prevention Program. This diet and 

exercise program helps create healthy lifestyles for people on the 

cusp of developing diabetes. The results confirm that this program 

works, and we estimate that, if Medicare fully embraced and reimbursed programs like it, the Federal Government could save about 

$70 billion over 10 years. 

Enhancing transparency is also critical to modernizing the health 

care system. UnitedHealth Group’s decision support tools empower 

people to be better health care consumers and decision-makers. 

Our treatment cost estimator provides a comprehensive view of 

quality and cost differences among providers. It delivers personalized cost estimates for treatment options for hundreds of diseases, 

including surgical procedures and tests, giving consumers more 

control of the quality and cost of their care. 

Lastly, effective delivery system reform requires aligning incentives in driving better outcomes through broader adoption of payfor-performance programs and data analytics. We measure to ensure that care delivery achieves quality and efficiency. When physicians deliver high-quality, efficient care, we can offer a variety of 

value-based reimbursement structures that reinforce optimal results. 

6 

Our premium designation program is a comprehensive tool for 

physician performance assessment. We assess care quality as defined by specialty societies and other independent credible medical 

experts. High-performing doctors are designated in our online and 

mobile directories, but, most importantly, premium physicians deliver care that is 14 percent lower in cost on the basis of better decisions and fewer complications. Importantly, the program has received positive feedback and engagement from physicians and medical societies. 

Public-private collaboration on delivery system reform will 

produce better results for the American people. We are eager to 

partner with the Federal Government to bring our resources, best 

practices, and innovations to the public marketplace. 

Together, we can use existing information to improve health, to 

create transparency, and to improve the health care delivery system so Medicare and Medicaid patients will experience higher quality and more affordable care. 

We look forward to continuing to be a resource to the committee, 

and thank you for your leadership on this important issue. 

The CHAIRMAN. Thank you, Doctor. 

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

The CHAIRMAN. Dr. Sacks, you are next. 

STATEMENT OF LEE SACKS, M.D., EXECUTIVE VICE PRESIDENT AND CHIEF MEDICAL OFFICER, ADVOCATE HEALTH 

CARE, OAK BROOK, IL 

Dr. SACKS. Chairman Baucus, Ranking Member Hatch, and 

members of the committee, thank you for inviting me to testify before you today. My name is Dr. Lee Sacks. I am the chief medical 

officer of Advocate Health Care and the CEO for Advocate Physician Partners. 

Since a picture is worth a thousand words and I just have 5 minutes, my understanding is the staff has given you five slides to follow along with my comments. 

The CHAIRMAN. All right. 

Dr. SACKS. Advocate Health Care is a faith-based not-for-profit 

integrated delivery system with roots that go back over 100 years 

in metropolitan Chicago. We have everything from academic medical centers down to a 25-bed critical access hospital in Eureka, IL, 

as we have been in central Illinois the last 3 years. 

Advocate has been very focused on engaging physicians, because 

they are the key to our success, and has a pluralistic physician 

platform. Today we have over 6,000 physicians on the collective 

medical staffs; about 4,000 are partnered in Advocate Physician 

Partners. 

Within the 4,000, we have 3,000 who are in independent practice, mostly solos, 2-, and 3-person practices, and another 1,000 

who are employed in our two large medical groups, Advocate Medical Group, or AMG, and our Dreyer Clinic. 

Advocate Physician Partners has a 17-year history that started 

off doing capitated managed care. Today, we have 230,000 capitated lives, and we have 245,000 attributable lives in a commercial 

ACO-like arrangement that started in 2011. 

7 

APP has been recognized for our clinical integration program, 

which has created value for our patients, for employers, and for 

payers. We liken it to an umbrella over our local physician hospital 

organizations and medical groups, each of which has a medical director who continues to be a practicing physician in the local community, respected by his peers, supported by staff and by a local 

board which create accountability and drive results. This has created value for the communities that we serve. 

Clinical integration is a difficult term to understand, so my last 

slide is a schematic to help picture what this means. Take a patient, Jane Smith, in her 50s with diabetes. Jane sees a primary 

care physician. She gets prescriptions filled, she has lab tests periodically, she checks in with an endocrinologist regarding diabetes, 

she has a screening mammogram according to guidelines, and she 

sees an OB/GYN for female issues. For all of those encounters, data 

goes into the APP Data Warehouse and populates our disease registries. 

The disease registries—we have 10 chronic disease registries, 

starting with conditions that are high-cost and have an opportunity 

to create value, such as diabetes and congestive heart failure. We 

also have registries for wellness: adult wellness, screening for 

breast cancer and colon cancer, pediatric wellness, tracking immunizations. 

The registries are an opportunity to assure evidence-based care 

and best practices by all of our clinicians. So, whenever Jane or another patient sees one of our physicians, they have access to the 

registry. If they use electronic records, it populates the record automatically. 

If they are on paper, they can access the registry through a webbased browser. It guides them to assure that every one of the patients in the registry gets evidence-based care and that we work to 

optimize their results. It takes a team of physicians supported by 

other clinicians to provide optimal results in those chronic diseases. 

What I consider to be the critical success factor for our performance is that we have been physician-driven. We use the same 

metrics across all payers. Additional dollars in our pay-for-performance program recognize that it takes work that is not paid for in 

traditional fee-for-service to accomplish managing chronic disease, 

and we provide infrastructure to our independent physicians to 

surround them with resources so that they can perform like a large 

multi-specialty group. 

That includes governance, technology like the disease registry, 

practice redesign coaches, patient outreach programs, office manager training, and physician education through our e-university. In 

2011, we entered into a shared savings contract with Blue Cross 

of Illinois that covers 245,000 attributable lives and 150,000 HMO 

lives. 

Results to date have achieved what both Blue Cross and Advocate set out to accomplish: we have bent the cost curve while maintaining our market-leading outcomes in service and safety. We 

have applied to participate in the Medicare Shared Savings Program to start July 1, and have been told that we will have over 

150,000 assigned lives. 

8 

In conclusion, we realize that the current fee-for-service system 

is not sustainable and have focused on innovative changes that enhance value. Despite the challenges, this is an exciting time to be 

a leader in health care with an opportunity to make a difference. 

I look forward to your questions. 

The CHAIRMAN. Thank you, Dr. Sacks. 

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

The CHAIRMAN. Mr. Malloy? 

STATEMENT OF MARC MALLOY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENAISSANCE MEDICAL MANAGEMENT 

COMPANY, WAYNE, PA 

Mr. MALLOY. Chairman Baucus, Ranking Member Hatch, and 

distinguished members of the committee, thank you for the opportunity to be here today. My name is Marc Malloy. I serve as the 

president and chief executive officer of Renaissance Medical Management Company. I am honored to be asked to share with you our 

experience as an industry leader driving innovation in health care 

delivery. 

Renaissance is a physician-owned network of 230 primary care 

physicians located in the suburban market of Philadelphia. It is 

one of the 32 pioneer ACOs chosen by CMMI. 

Since 1999, Renaissance has been focused on improving patient 

outcomes, improving quality of care for the population served, and 

lowering medical costs. We exist to support our patients through 

the practice of high-quality medicine in an economically sustainable way. We have never shied away from the challenge of improving our patients’ well-being, delivering high-quality care, and controlling cost. Renaissance has invested in people, processes, and 

technologies to achieve results. 

From a practical perspective, the physicians understand that the 

best way to improve quality and lower costs is to focus on three primary areas. First, keep people healthy. At the root of our success 

is the commitment of our physicians whose daily efforts ensure 

that we focus on prevention and wellness. 

We do this by making sure that our patients get health screenings that they are supposed to receive and by making available to 

patients up-to-date information and tools to become active, engaged 

partners in promoting their health. In addition to the obvious benefit of patients staying healthy, if we can prevent patients from developing a medical condition, we can completely avoid the costs associated with that care. 

Second is mitigating the health risk factors. In order to improve 

the health and well-being of the people we serve, it is critically important that we ensure that the individuals understand how their 

family history and lifestyle affect their well-being and how to mitigate their health risks. Our physicians regularly screen the patients to identify patients with emerging conditions so that they 

can effectively treat any of the emergent issues before they become 

more serious. 

Once we identify the risk, we work with the patients to create 

personalized goals and target appropriate, proven interventions, 

such as tobacco cessation, stress management, nutritional counVerDate Nov 24 2008 20:28 Jun 28, 2013 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 R:\DOCS\80998.000 TIMD
9 

seling, physical activity, and others to help the patients mitigate 

the identified health risk. 

When I think about the efforts in this area, it reminds me of a 

phrase I learned from my mom, Sylvie Marceau, who passed away 

this past October. She always spoke about the importance of early 

entry to care. In her work as the CEO of the Healthy Start Coalition in St. Lucie County, FL, she dedicated her life to reducing infant morbidity and mortality. Her work demonstrated that getting 

expectant mothers into care early in their pregnancy provided the 

best opportunity for healthy moms and babies. Likewise, the identification of and early entry into care for patients with medical conditions typically results in lower costs of care as well as better outcomes when the condition can be managed before it becomes more 

significant. 

Lastly, ensuring the provision of coordinated care is a very important aspect of what we do. When a patient already has a serious 

acute or chronic condition, our ability to improve well-being and reduce costs comes from our commitment to delivering an evidencebased plan of care that is coordinated across the patient’s entire 

care team. We deploy nurses to perform patient risk assessments, 

establish clinical goals for the patient, educate the patient or the 

caregivers on how best to manage that disease state, monitor the 

progress, and feed all that information back to the primary care 

physician. 

The combination of the various resources developed and deployed 

by the physicians has produced some pretty impressive results. We 

have achieved some of the highest quality measures in the Nation. 

We have demonstrated medical cost savings over several years. It 

is because of our success in these areas that Renaissance applied 

for, and was selected as, a pioneer ACO. 

Every innovation that Renaissance has made over the years has 

essentially been based on adapting to the ecosystem within which 

we operate. With the passage of PPACA, the environment continues to change, and Renaissance is working with its partners to 

adapt the people, processes, and technologies to continue its mission to improve patient well-being, improve the overall quality of 

care, and lower costs for the population served. 

Thank you for the honor and privilege to report on our work in 

the Philadelphia marketplace. 

The CHAIRMAN. Thank you, sir. Thank you, Mr. Malloy, very 

much. 

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

The CHAIRMAN. Mr. Diaz? 

STATEMENT OF PAUL DIAZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, KINDRED HEALTHCARE, LOUISVILLE, KY 

Mr. DIAZ. Good morning. My name is Paul Diaz, and I am the 

chief executive officer of Kindred Healthcare. I want to thank you, 

Mr. Chairman and Ranking Member Hatch, and all the members 

of the Finance Committee, for holding this hearing today. 

I am honored to share our experiences about the significant 

amount of private sector activity around delivery system changes 

occurring in the field and the critical role that post-acute care plays 

10 

in reshaping our delivery system into one that is more patientcentered, outcome-driven, and cost-effective. 

Your decision to have this hearing today is timely. Providers and 

payers, as you have heard, across the country are actively engaged 

in efforts to improve care and reduce cost. Because Kindred provides care to patients in over 40 States and has developed a significant presence in 20 large health care markets, as well as many 

small communities, we have been able to participate in a wide 

range of efforts and test new models of care delivery. 

Before I share our experiences, I would like to emphasize two 

things that we think are very important for the committee to consider. First, reshaping our health care system will require teamwork, cooperation, and trust between those charged with delivering 

care and those paying for it. This will not be easy, but with change 

comes opportunity. 

But change also brings uncertainty and fear, and there is a great 

deal of that out in the health care environment today. So the only 

way to transform our system, as we see it, is to take concrete and 

measurable steps to create incremental reforms and establish a 

path for the future. 

Second, post-acute care is a critical part of the solution we have 

talked about today. Today, there are over 47 million Medicare 

beneficiaries, and an estimated 7,000 individuals join the program 

every day. Thirty-five percent of these patients need post-acute 

care following a hospital stay. 

More and more of our patients have chronic conditions such as 

diabetes and heart disease, as you spoke of, Mr. Chairman, and it 

makes them very expensive to care for as they cycle through our 

health care system, with multiple hospitalizations and rehospitalizations. We have to do a better job of coordinating care for these 

patients to improve quality and reduce cost. 

But tremendous opportunities exist as they leave hospitals and 

enter post-acute care settings and transition homes. Several years 

ago, Kindred and other providers began to develop the capabilities 

to meet the needs of patients through their entire episode of care 

to begin to address the shortcomings of the current silo-based system. 

So we set out to build capabilities to deliver integrated post-acute 

care in local communities. This includes medically complex care in 

our long-term acute care hospitals, intensive rehabilitation services 

in our inpatient rehabilitation facilities, restorative rehabilitation 

and nursing care in our skilled nursing centers and home care— 

where patients really want to be—and palliative hospice services. 

But this is not a goal that any provider, in our view, can achieve 

on their own. Instead, we are working with acute care hospitals 

and managed care organizations, physicians, care managers, and 

others to integrate care and services in a more patient-centered 

way and into the broader health care delivery system at a local 

level to achieve the shared goals of clinical patient satisfaction and 

financial goals. 

We have found that there are certain key capabilities that have 

been spoken of today that are critical across a patient episode. 

First, as Dr. Sacks talked about: achieving clinical integration. We 

do this through Joint Operating Committees with our partners to 

11 

establish systems and clinical practices to coordinate and improve 

care. 

We established dozens of these committees throughout the country, with hospitals and physicians, payers, and private and public 

ACOs. This type of clinical integration builds trust and has produced measurable results in clinical outcomes and patient satisfaction, while reducing rehospitalization rates in our system by over 

8 percent since 2008. 

It also is essential to establish partnerships and trusts with the 

physicians in order to achieve the care integration across settings. 

Today, physicians oversee care within health care settings, but all 

too often do not follow their patients across settings to oversee care 

in a seamless way. 

So we are testing different models that enable physicians, nurse 

practitioners, and other coordinators to continue the care throughout a patient care episode. In one community, staff physicians employed by our acute hospital partners follow their patients into our 

post-acute care settings, which helps to provide a seamless transition from hospital to home. The point here is that physicians and 

other practitioners under their supervision must be at the center 

of efforts to better coordinate care. 

Another key enabler of teamwork and coordination is the availability of electronic health records. The ability to have information 

for our clinical teams within our care settings, and to transmit information across sites of care with our partners is a critical element for effective care management over an episode. 

At Kindred, we have a 5-year plan to install and link electronic 

health records across our care settings, and we are doing this as 

we are also piloting and testing linking these systems with the 

electronic health records of our partners. 

We would be happy to share the details of these pilots with the 

committee, but I caution the committee that these activities are 

time-consuming, technically challenging, and an expensive process. 

All of these integrated pilots are designed to eventually support 

the kinds of changes that have been spoken of today for the payment system to improve quality and reduce cost. It is tempting to 

say that we should immediately pay for a fixed cost or a full episode of care, commonly known as bundling or capitation, but I 

would caution the committee that comprehensive reform of delivery 

and payment systems will take time. But incremental changes can 

produce immediate results while we build the infrastructure for a 

fully integrated system. 

We are testing different pay-for-performance models to align interests and build trust with our partners. These pilots can help 

build a bridge from today’s pay-for-volume-based fee-for-service to 

tomorrow’s value-based system. These pay-for-performance pilots 

build into payment rates incentives to lower costs and improve 

care, such as paying for reduced length of stay, reduced rehospitalizations, and improved clinical outcomes, so that folks can develop the confidence to take financial risk. 

In closing, it is important for the committee to understand that 

providers are committed to transforming our health care system 

through innovation, as has been spoken of today, but this is difficult to do in an environment of uncertainty and payment cuts. 

12 

As you know well, providers were subject to many payment cuts 

over the last few years, as Congress, CMS, and private payers understandably deal with a deficit imperative. But I urge the committee to consider the impact of additional payment cuts, including 

the pending 2-percent sequestration cuts to Medicare payments, on 

our ability to continue to improve quality, meet the growing demand for health care services, and continue to invest in the innovations you have heard about today. 

We believe we can reduce costs and overall spending and reshape 

our delivery system. And investing in electronic health records, investing in care management, and improving quality have long-term 

rewards, but achieving these requires investments in the short 

term. 

A good place to start is rehospitalizations that you have heard 

about today. Today, post-acute providers are not rewarded or penalized for rehospitalization rates, so I urge the committee to consider ideas about ways that the payment system can encourage reduced hospitalization on the one hand, and discourage high rates 

of rehospitalizations on the other. 

Acute care hospitals are already incentivized by the payment system to do this, as Chairman Baucus noted, and I see no reason why 

physicians and post-acute providers should not have skin in the 

game so that our interests are aligned in this effort as well. 

At the end, again, thank you. I am an optimist. I believe we can 

take the important steps here to change our system, but we need 

to do so over time in a manner that preserves patient access and 

rewards quality and outcomes. And we do need stability and alignment in our current payment and regulatory system to foster collaboration and teamwork and establish a path to a more rational 

and integrated system. 

Thank you, sir. 

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

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

The CHAIRMAN. In the spirit of Mr. Einstein, we are going to do 

things a little bit differently, and have done things a little bit differently. Number one, usually in a hearing like this we would have 

CMS up here, and so on and so forth. I thought it would make 

more sense not to have CMS, but rather to have the private sector 

here. You can tell us what you are doing and what is working, 

what is not working, and we will get it straight from the horse’s 

mouth rather than having to go through a Federal agency. 

There is something else I am going to do differently, and that is 

this. I am going to ask a few questions—let me back up. The traditional practice in this committee is for each Senator to be allotted 

5 minutes to ask questions on the basis of arrival to the committee. 

It is sort of the early bird system. So whenever a Senator arrives 

early, he or she is in queue ahead of those who arrive later. 

But I am just going to upset the apple cart a little bit this morning. I will ask a few questions, and then I will tell my colleagues, 

it is just open to all of you. It is kind of like the Supreme Court. 

You just ask questions. Just jump in at any time if you have a 

question you want to ask on a certain subject. 

I know we will all respect each other’s time and respect each 

other, and so forth. So, in the spirit of the search for the truth, 

13 

what works, and being kind of efficient about this and not getting 

siloed ourselves in 5-minute segments, I am going to attempt this 

experiment. 

So, I will start, and then anybody else jump in anytime he or she 

wants. 

Here we have post-acute sector riders and the insurance industry 

and so forth. I would just like you to tell us—and I am assuming 

that we all want to move much more toward reimbursement based 

on quality as opposed to quantity. I am assuming that you all agree 

with that. If you do not, you had better speak up, but I am assuming that. 

And we have passed this law. We have innovation centers and 

so forth. If you were a little more bold in each of your areas and 

how we integrate across the board, or even just generally, whether 

it is ACOs, bundling, or whatever it is, and working with the Innovation Center—I did not hear you talk much about the Innovation 

Center, any of you—how do we get there more quickly? How will 

we know when we get there? 

By ‘‘getting there,’’ I mean we pretty much change the system so 

we are reimbursing based on quality outcomes, not quantity, and 

we are getting better care for less cost. So how are we going to kind 

of know when we are there? But the earlier question is, I want 

each of you to be a little more bold and just suggest an idea that 

maybe together we might pursue. I will start with you, Dr. 

Migliori. 

Dr. MIGLIORI. Thank you, Mr. Chairman. Innovation is core to 

improving. We are pushed to innovation by our current client base, 

the employees across America, as well as the government agencies 

we serve. We compete on our ability to demonstrate innovation. 

The areas of innovation that we focus most on are three. One is 

tools of innovation to get people healthy. By getting people healthy, 

they not only can avoid and prevent the progression of chronic disease, but we can also lessen demand on an already over-taxed 

health care system—I mean overburdened health care system. The 

delivery of health care is going to be challenged by the fact that 

we are going to be some 45,000 primary care physicians in deficit 

as a result of the increasing need, as well as the increasing—— 

The CHAIRMAN. But how do you work with providers? Because I 

think your company does a pretty good job of burrowing down, finding the cost, and reducing costs. I mean, you mentioned the diabetes prevention program of yours. But how well do you work with 

providers, the doctors over there, on the outcome side? 

Dr. MIGLIORI. Yes, Senator. In fact, what you are describing is 

the whole reason why we built our services wing of our organization, a discrete business that has as its clientele 240,000 physician 

practices, over 54,000 hospitals, 66,000 pharmacies. The purpose of 

that business is to do two things. 

Number one is, to better link those health care delivery systems 

together so that they can look more like each of the organizations 

that are also on the panel today, but then to use the information 

that we collect on a regular basis to inform them about health care 

activity within their practices and the people they serve. 

14 

The CHAIRMAN. Let me ask Dr. Sacks or Mr. Malloy. I mean, are 

insurance companies working with you, the providers? Are you 

working with them? 

Dr. SACKS. Senator, I will say ‘‘yes.’’ I mentioned our program 

with Blue Cross of Illinois that started in 2011. It really was the 

first time that we created some alignment of incentives, because it 

used to be an ‘‘us’’ or ‘‘them’’ situation. If one side did well, usually 

the other side was disadvantaged. 

But I think in terms of answering your question, we need alignment of incentives, and we need to think about it across the whole 

continuum of care. I firmly believe that if we are going to succeed 

in managing costs and creating value—and I use ‘‘value’’ rather 

than ‘‘quality’’ because value is quality and efficiency, and we have 

to have both. 

They generally go hand-in-hand, but you want to make sure 

about that. Then you have to look at systems of care. It is one of 

the reasons we have not focused on bundled payments in some of 

the small innovation grants, because they are all very small fragments of the system. With that, virtually everybody in the Medicare population has more than one condition, and patients with 

chronic conditions—diabetes, heart failure, coronary artery disease—you cannot split that apart and just focus on diabetes, or you 

cannot just focus on taking care of the knee replacement without 

managing the other chronic conditions. 

So we have focused on populations over time. We are thinking 

that, as we do this in the commercial population, our population is 

going to age into Medicare very quickly. Hopefully the investment 

we have made in them while they have been employed and insured 

commercially, if we can continue with similar alignment, will pay 

dividends and let them live healthier lives and create more value 

in the Medicare population. 

The CHAIRMAN. So the Innovation Center will not allow you to 

apply for larger grants to get more diseases coordinated? 

Dr. SACKS. Well, the pioneer program was an example. As I said, 

we applied for the Medicare Shared Savings that will start July 

1st. That is to manage a population of 150,000. It will be a challenge, but it is a real opportunity to create alignment across the 

whole continuum with that. We need to move quickly. We do not 

have the luxury of 10 or 20 years to figure this out because everybody knows what is going on with the cost curve. 

I think another opportunity to learn from the private sector— 

large employers, in conjunction with their benefits consultants and 

health plans, have redesigned benefit plans to create alignment 

with their employees so that they are focused on the things that 

they can manage, because individual behavior plays a role in a lot 

of our health care expenses. 

I hear it every day from physicians who get frustrated, and my 

answer has been, we need to figure out how to engage our patients, 

but it certainly helps when the benefit plan incents that. 

So, an example. At Advocate Health Care, over the last 5 years, 

we have gone from having patients voluntarily filling out health 

questionnaires to raise their awareness to providing an $800-a-year 

credit towards their out-of-pocket expense to get a health screening, with parameters like blood pressure, weight, body mass index, 

15 

glucose, and cholesterol. If their parameters do not meet the criteria for being healthy, to get the money, they have to go through 

six coaching sessions. 

The CHAIRMAN. Well, I appreciate this. I would invite my colleagues to jump in here. I am going to keep asking questions until 

somebody jumps in. 

Senator HATCH. I will be happy to ask a couple of questions. 

Dr. Sacks, I understand that Advocate spent several years working through the appropriate channels at the Federal Trade Commission to ensure that the ACO set up with Illinois Blue Cross was 

legal and did not run afoul of the FTC laws. 

Now, considering the ground work laid by your organization, how 

long should other groups plan on devoting to this type of a process, 

and has the FTC streamlined their review cycle, or are you critical 

of it? 

Dr. SACKS. Senator, that is correct. Between 2002 and our consent decree in 2007, it was a long time, and there were some 

unique circumstances. I think part of that was, we were pioneering 

and helping to clarify what clinical integration was. Since then, the 

FTC has really used us as an example, along with other organizations. I have participated in several workshops that they have put 

on. 

My understanding is that, if an organization is looking to clarify 

whether or not they are within the safe harbor of clinical integration, it can be done within a matter of months. There are hundreds 

of organizations today that either have clarified that or are moving 

down that road, so it is moving a lot quicker. 

Senator HATCH. Well, your organization spent almost a decade 

on clinical integration, and you have a very successful model as a 

result, as I see it. 

Now, can you tell us a little bit about the cultural changes needed to ensure that you have the necessary buy-in from the physician 

community? 

Dr. SACKS. That is an important question. We have had the luxury of evolving. We started in 1995. We had 90,000 capitated lives 

and about 2,000 physicians, and we grew, initially just focused on 

capitation. I recognize that is a loaded word today, with a lot of 

negativity attached to it, but it does allow you to align incentives 

and focus on the population and manage outcomes. We grew to 

over 400,000 capitated lives. 

One of my colleagues has a saying similar to the Einstein saying: 

‘‘There is nothing better than playing with live ammunition.’’ You 

learn very quickly, as opposed to dabbling with small numbers. 

When physicians are taking the risks for financial performance, 

they self-correct and take the difficult steps, discipline each other, 

and move forward. 

The discipline of being under the scrutiny of the Federal Trade 

Commission also helped create more alignment within the organization because there was a resolve that we were going to continue 

to be successful, create value, and demonstrate that to the marketplace. 

When new physicians come in, there is an intense orientation. 

There is an orientation for our governance. I think we are at a 

point now where we are self-perpetuating and can pass this on, but 

16 

I do not want to minimize the challenges. You cannot just flip the 

light switch and go from being in the pay-for-volume paradigm to 

doing something like we have and expect that it will come off 

seamlessly. 

Senator HATCH. As a medical liability defense lawyer many years 

ago, I had some experience in this field. Let me just ask all four 

of you, how do you prepare for and handle medical liability concerns, and what is the percentage of cost of doing business that is 

caused by many of these suits? 

I remember when I was trying those cases, I estimate about 95 

percent of them were brought to get settlement of what it cost for 

attorneys’ fees. A lot of them were frivolous. The explosion started 

when they changed the law from the standard of practice in the 

community to the doctrine of informed consent, which meant every 

case went to the jury. 

How do you plan for, prepare for, and handle medical liability 

concerns? Dr. Migliori, we can start with you. How serious are they 

in your planning purposes, and so forth? 

Dr. MIGLIORI. Senator, I cannot provide specific facts and figures 

as to how much of health care costs are dedicated to defensive medicine or practice. What we do understand, though, is that the most 

effective tools, we think, in improving the health care system and 

lowering costs really have to do with the adoption of a better use 

of automation tools, as you have heard from the other panelists, 

but also data that we can provide them so that the physician has 

more awareness of what is happening with the patient and they 

can take specific action and share that information with the patient. If we are going to get into how much of what we see in terms 

of utilization is driven by fear, I think we would have to engage 

some of our actuaries to come up with a more learned response. 

The CHAIRMAN. Let me ask just your gut impression on that. To 

what degree does moving toward quality affect defensive medicine? 

Dr. MIGLIORI. I think that with the—— 

The CHAIRMAN. Anybody can answer that question. 

Dr. MIGLIORI. I think with the very visible impact and the efforts 

around the table and around the health system on quality and the 

pursuit of quality, my anticipation is that the quality of care will 

go up and the whole issue around defensive medicine will become 

much more mitigated. 

Senator HATCH. What percentage of money do you set aside for 

possible medical liability litigation? 

Dr. SACKS. I will give you some examples, Senators. 

Senator HATCH. Yes. 

Dr. SACKS. I am responsible for risk management and insurance 

and patient safety. We have been recognized as leaders in patient 

safety. Yes, it makes things better, but we still make mistakes. 

There are system failures. In 2011, our organization covering the 

hospitals and the employed physicians spent $90 million on liability costs, both accruals based on the actuaries and actual payouts. 

As you probably know, tort reform was overturned by the Illinois 

Supreme Court in February, 21⁄2 years ago. So for 2012, our actu- aries have said that we need to budget $190 million because of the 

increase in lawsuits. So, in spite of having fewer patient safety 

events and much more transparency and disclosure, that is an 

17 

extra $100 million that is not being reinvested in patient care in 

our organization. So, it is real. 

Senator HATCH. Is it the same for you other folks? 

Mr. DIAZ. Yes. Let me echo that. 

Senator HATCH. Mr. Diaz? 

Mr. DIAZ. Approximately $70 million on $6.5 billion of revenue, 

equal to our profits last year. So it is a—— 

The CHAIRMAN. That figure again? 

Mr. DIAZ. So our profits, Chairman Baucus, we operate on a net 

margin of 1.2 percent, about equal to the total medical malpractice 

cost in our company. So that does a lot to take away from the IT 

budget and the other innovation budgets that we have. 

Now, as Dr. Sacks was saying, within those claims there are errors and mistakes. We learn from that. We have a pretty comprehensive risk management process. But there is no doubt that 

those dollars, from a societal perspective, are better invested in the 

innovations that we talked about today and advancing our health 

care system. 

I am optimistic, though, to echo the points that the convergence 

of focus on wellness and health care, bringing physicians into this, 

makes them act less defensive and more patient-centric and should 

have the dual impact of bringing some of this down. But there is 

no question that there is a significant inefficiency when a company 

like Kindred Health Care’s net profits are equal to the malpractice 

reserves that we take every year. There is something wrong with 

that. 

Senator HATCH. My time is up. I am happy to relinquish. 

The CHAIRMAN. Senator Rockefeller? 

Senator ROCKEFELLER. As I am listening, Mr. Diaz is the one 

who is sort of talking about the future. Do you not all pretty much 

practice managed care? 

Mr. DIAZ. We are more on the provider side. 

Senator ROCKEFELLER. The other three answer. Do you not sort 

of practice managed care? 

Mr. MALLOY. I think from the perspective of managed care, we 

are a provider organization and we operate within an environment 

of managed care, so certainly a lot of the innovations that we—— 

Senator ROCKEFELLER. All right. Well, just taking your answer 

gives me great concern. The States like to practice managed care 

because it is so safe and predictable. There is no evidence really, 

unless you can produce it for this committee, that managed care 

works, that it increases quality or that it lowers costs. Higher 

forms of managed care are more wasteful, in my judgment. What 

concerns me greatly is the medical community’s inability to try new 

things that they have not tried in the hopes that they might work. 

Now, I am just going to give you a couple of examples. To me, 

the most important thing in what Senator Hatch, running for office, calls ‘‘Obamacare,’’ is the Independent Payment Advisory 

Board. What I like about that is, that will do more to cause the 

treatment of Medicare to be scrutinized than anything else and will 

save a lot of money without reducing benefits or payments to doctors, because that is written into the accountable health care law. 

What worries me is that all the attention—and I would just like 

each of you to comment on this—is on Medicare. When Medicaid 

18 

and CHIP, for example—the Children’s Health Insurance Program—went through either CMMI or CMS, through rules which 

were a terrible mistake, they sort of concentrated on Medicare but 

not on Medicaid and Children’s Health Insurance Programs. Medicaid is, what, 70 million people? It is by far the largest amount 

of money, but there is no focus on new ways of working with Medicaid and CHIP. I worry about this in terms of the national quality, 

strategy, and all the rest of it. 

So what I would like to hear from each of you is, do you agree 

with that, and what thoughts do you have about applying some of 

the thoughts that are put to Medicare to Medicaid and CHIP? I am 

assuming that the law is going to stand and that, even if part of 

it does not, that the Independent Payment Advisory Board will. 

But it has not yet been formed, as you know. 

I will start with you, Mr. Diaz. 

Mr. DIAZ. Thank you, Senator. Well, I think at the core of all the 

things that you heard today, those same innovations extend to the 

dual-eligibles. We care for hundreds of thousands of dual-eligibles 

every day, and principally Medicaid folks, so we have great experience with this. 

We share some of your concerns, given some of the chronic 

under-funding of Medicaid that is going on right now in many 

States. But I would say that my optimism comes from the fact that 

the same learnings on managing wellness and managing chronic 

conditions that we focus on in terms of the Medicare business will 

extend to those same patients, particularly the dual-eligibles. So, I 

mean, I think that these same innovations show promise in terms 

of outcome. 

Senator ROCKEFELLER. I do not accept that. Tell me why you 

think you are right on that. In other words, if something does not 

work with the dual-eligibles, Medicaid, CHIP, or whatever, then 

the hospital committee gets together and says, well, we made a 

mistake there, so we are going to change and do it this way. 

Mr. DIAZ. The alternative—because my doctors and nurses do not 

see patients through a Medicare, Medicaid, or a united lens, they 

just see a patient. So, when we talk about clinical innovation for 

electronic health records to improve the coordination of care, it is 

not through a payment lens, it is through a patient lens. 

The opportunity we talked about today is allowing our clinicians 

to do that. So again, I just do not think they see it as a Medicaid 

patient or a Medicare patient, they see it as a patient who is ill, 

who has chronic disease, and we can do a better job of coordinating 

their care. 

Senator ROCKEFELLER. I will stop with this. My time will run 

out. But the fact that there are so many people, 70 million people, 

in Medicaid, and millions and millions of children in the Children’s 

Health Insurance Program, the fact that that is not given weight 

formally in the CMMI experimentation or approach to experimentation, you think will solve itself? 

Mr. DIAZ. I will turn it over to the other panelists. But our lessons learned and the innovations that we are participating in, I 

think, have implications for all of our patients, regardless of their 

payer source. I will let the other folks comment on it. 

19 

Mr. MALLOY. Senator, I would say that, with the innovations 

that we have deployed within our population, in similar vein, we 

have developed technology tools that our physicians use. Our hope 

is that, as the payment environment continues to change, it will 

encourage the alignment of incentives to do this across the board. 

The same thing—we do not change the way we treat patients 

from room to room to room as the physicians move from one patient to the next. The issue really comes down to whether or not 

we can create the environment to align the incentives to achieve 

what is necessary. 

I spent a number of my years within the health care world on 

the health plan side. I ran a small Medicaid plan in Maryland as 

well. It used to infuriate me that we could not get to the point 

where we understood exactly where we were with respect to our 

quality measures. 

When I came to Renaissance and discovered that physicians, 

within their own environment, 230 independent physicians scattered across the Philadelphia marketplace, had invested their time, 

energy, and money into making new tools, new capabilities, and 

care plans that would treat the patients, I was very excited about 

that, and it felt to me like there was an opportunity to take those 

same capabilities and begin to move those across the country. 

So we created a company, and we started to do exactly that. Our 

first prospective client became a client. It is a health plan that is 

using all the same tools and capabilities that we have today, and 

they are doing that to advance improved quality within their marketplace. 

Our results: we have some of the highest quality measures in the 

Nation with respect to Healthcare Effectiveness Data and Information Set (HEDIS) measures. We also have a demonstrated medical 

cost savings over the same time period. Most of our savings come 

from reduced event-driven care, so fewer emergency room visits, 

fewer readmissions into the hospital. I think those are all applicable, regardless of who the payer is. I would love to see these types 

of capabilities expand across the entire spectrum so that physicians 

are using these for all their patients, not just subsets or segments 

of them. 

Senator ROCKEFELLER. I thank you. My time is up. 

Senator WYDEN. Mr. Chairman? 

The CHAIRMAN. Senator Wyden? 

Senator WYDEN. Mr. Chairman and colleagues, I think I have 

heard the words ‘‘aligning incentives’’ about 5 times in the last 15 

minutes. I certainly support that. We always hear about it in the 

context of providers, insurers. Those are usually the two. But almost invariably the patient is kind of an after-thought, particularly 

with Medicare and senior citizens. 

I think, for example, that real behavioral change, particularly in 

this program with 50 million people that a lot of us see as sacred 

ground—I mean, I remember working on Medicare reforms when 

I was director of the Gray Panthers. We were passing petitions 

around for what Senator Rockefeller was working for back in those 

days. So this is really sacred ground. 

Senator Portman and I have introduced the first bill to really 

start trying to come up with some fresh thinking in terms of creVerDate Nov 24 2008 20:28 Jun 28, 2013 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 R:\DOCS\80998.000 TIMD
20 

ating behavioral changes, particularly for seniors: lowering blood 

pressure, cholesterol, and all that kind of thing. 

Mr. Malloy, what do you think about just the concept? Let us set 

aside any bills and the like. But what do you think about that concept? Because I think it is really an after-thought that the senior, 

the beneficiary, really is not much part of this discussion of aligning incentives. 

Mr. MALLOY. I completely agree. I personally had some experience with this within the Medicaid plans that we serve that Senator Rockefeller talked about, and we found that incentives for encouraging patients to see their primary care physician and have 

preventive care screenings were incredibly effective. I think it 

would be fantastic to continue to expand that into other marketplaces. 

The new organization that I have recently become affiliated with, 

Health Ways, has a lot of programs that are along those same 

lines, to incent and align incentives for patients, to have them 

focus more on their own health care and improving their own 

health status. I think it is important. I think incentives matter 

throughout the health care spectrum, whether it is the patients, 

the providers, or hospitals. 

I think, as we think about payment reform, those are the areas 

that we have to focus on to encourage the—— 

Senator WYDEN. We have appreciated your support, your endorsement for the legislation, the Health Ways Group. Let me take 

the other side of the coin then if I could, for you, Dr. Migliori, with 

this question of incentives and particularly for us to create a new 

approach to getting the patient involved. You have been talking 

about the transparency efforts United has put in to try to get more 

data and to try to particularly get comparative data. 

Senator Grassley and I have introduced legislation to open up 

the Medicare database so that people could really see what the 

data was, again, on an important program with 50 million people. 

Now, some States have gone beyond that. Colorado, for example, 

has been talking about an all-payer database so that you could get 

Medicare information, Medicaid information, and private payer information. I gather that you all would like to see these kinds of approaches that get a great deal more data out there, and particularly comparative kinds of approaches. Is that correct? I do not 

want to put words in your mouth; just tell me how you see this. 

Dr. MIGLIORI. Senator, that is correct. Our perspective is that 

health care improves when the participants in health care—the 

doctors, the patients, the hospitals—are connected and then informed to take action by the data they are generating themselves. 

You can go beyond that to the other point that you raised earlier, 

which is to then provide meaningful changes in reimbursement so 

hospitals do not take it on the chin when people get healthier, but 

at the same time providing incentives and fostering encouragement 

to get patient engagement, just as Dr. Sacks was saying earlier. 

Getting patients engaged, taking the information that comes out of 

the health care system, analyzing it, understanding what it is saying, and pushing it back to the health care system, is the best way 

for us to create higher quality, better health, and lower costs. 

Senator WYDEN. I appreciate that. 

21 

Mr. Chairman, thank you for that. I think what the witnesses 

are highlighting is that, with a lot of these decisions, particularly 

that last point by you, Dr. Migliori, we are making some decisions 

in the dark. I mean, to really not have this kind of information so 

that people can have it to make choices just seems to me to be a 

big gap in this. 

I want to see us align incentives, and that is what we have been 

talking about. Let us make sure, first and foremost, that we recognize that behavioral change starts with people, with individuals, 

and we ought to at least have some incentives there. I think what 

you all are trying to do with data, Dr. Migliori, is very helpful, and 

I thank you, Mr. Chairman. 

Senator NELSON. Mr. Chairman? 

The CHAIRMAN. Senator Cardin, I know you have been anxiously 

looking for recognition, but I must say that Senator Nelson has 

been even more anxiously, and earlier, looking for recognition. 

Senator NELSON. Well, with a star-studded panel like this, it is 

a good opportunity to try to point out, as we ease in to the new 

health care bill, some of the misunderstandings and confusion 

about the bill that this panel can help us understand. So I just 

want to ask questions in two areas: Long-Term Acute Care facilities and Accountable Care Organizations. 

So Mr. Diaz—— 

Mr. DIAZ. I guess I will do LTACs. 

Senator NELSON. I think you will do LTACs. How do you think 

the post-acute care that you are familiar with can reduce the cost 

and improve quality, and what are some of the other ways that we 

can improve that post-acute care? And just lace her in, because I 

want to get to ACOs before my time runs out. 

Mr. DIAZ. Well, I will tie that back to Chairman Baucus’s question too about how we can get more aggressive and how we can 

drive behavior, allocate human capital, financial capital, to move 

these things faster. I think those challenges are different in Dillon, 

MT than they are in Chicago. The problem, as we talk to physicians—and our leadership team just yesterday—is the uncertainty. 

What we need is some certainty on one side of CMS at the same 

time that we are trying to drive innovation on the other side. Those 

two activities need to be coordinated. 

The CHAIRMAN. They are not now? 

Mr. DIAZ. I think we are making progress. I think that there has 

been improved dialogue about understanding that you cannot advance the Innovation Center if there are conflicting things going on 

on the regulatory and payment side. 

So I think things like advancing the LTAC legislation to clarify 

further that only the most clinically appropriate patients belong in 

LTACs, that can save money in the Medicare system. It is just sort 

of foundational so that we can move forward to the real problem, 

which is, we ought to be focusing on wellness behavior. 

If we want to reduce costs, we need to reduce utilization across 

the board, and we need to measure our progress in reducing that 

with a limited set of clinical outcome measures and patient satisfaction measures to guardrail against pushing length of stay down 

in acute care hospitals, or LTACs, with things like rehospitalization policy. 

22 

So to tie those two together, I think if we can bring—and I hear 

fear in our physician groups all the time—some stability on the 

regulatory side and then focus on a narrow set of measurable clinical outcomes and patient satisfaction outcomes and reduced utilization, length of stay, and guardrail it with things like penalties 

on rehospitalizations, then I think we can deploy human and financial capital in a much more aggressive way. 

Senator NELSON. That is true. And also bundle payments so that 

you are looking for the outcome. Instead of paying every little thing 

that happens, you get cheaper and you get better outcomes. 

All right. Let us take Mr. Diaz’s answer, and the rest of you, 

take it to Accountable Care Organizations in the private sector, not 

in Medicare. What do you think? 

Mr. MALLOY. I think the Accountable Care Organization concept 

is something—we have been operating in that environment long before it really had that title, from our perspective. We have been focusing on improving quality on one end and making sure that we 

have gotten patients into early entry to care. I think, as we look 

into the future, we will see more of that. There is certainly an everincreasing drift in that direction, and I think that is appropriate. 

From our vantage point, as I mentioned in some of my opening 

remarks, a lot of it comes down to making sure that you are operating within the environment that you serve. So, to the extent that 

payment reform and payment changes within the commercial market begin to take hold, change, and move more toward gain share 

or risk type of arrangements and so forth, then we necessarily will 

adapt our model to that. So we assess where we are within the environment, and we adapt to whatever that environment is. I think 

that is probably true for the other panelists as well, but I will let 

them speak on their behalf. 

Dr. SACKS. Yes, Senator Nelson. As I said earlier, we have been 

engaged, so we are in the 6th quarter of commercial accountable 

care with 150,000 HMO lives under risk-adjusted capitation and 

245,000 PPO lives, which is the first time we have been able to 

align incentives for the PPO. 

What I think has jumped out is, one, it is a recognition that an 

organized delivery system can make a difference. Two, it is alignment of the incentives, both between the payer and the delivery 

system, and then within the delivery system between physician 

specialists, primary care, and possibly—— 

Senator NELSON. Let me ask you this. You are a PPO and an 

HMO. How do you see the new ACO, Accountable Care Organization, as different from what you do? 

Dr. SACKS. The ACO is like what we are doing with the PPO, or 

Preferred Provider Organization, population. Similar to Medicare, 

these patients have a benefit plan that provides access anywhere 

that you can use a Blue Cross card, which is virtually anywhere. 

Our incentive is to provide superior service and outcomes so that 

they will want to get all of their care within our network where we 

can better manage it, but we have the financial accountability for 

out-performing the market on the trend in the cost of care. 

I think the exciting thing is, with results through the third quarter of our first year, we have out-performed the market by nearly 

23 

5 percent, showing that there is an opportunity for real savings 

and getting the rate of health care inflation down to a level of CPI. 

I think to be honest, 2 years ago, if somebody had said we would 

get it to CPI, we would have been very skeptical. We set out to do 

that for 2014, thinking that, if there are going to be insurance exchanges, we had to have a product that would be price-competitive, 

and we have accomplished that in the first year. 

I think it is a grand opportunity, and yet I have no illusions. It 

is probably a transition vehicle, and shared savings and outperforming the market will not go on forever. As the marketplace 

changes and those who compete with us in the Illinois market start 

to engage in what we are doing, our ability to out-perform them 

will disappear, but it will probably migrate to some type of global 

budget. 

Several of you have referenced bundled payments, and I think 

what you have talked about is bundles for a discrete episode of 

care, such as a joint replacement or cardiac surgery. Think about 

it: a global budget is the grandest bundled payment. It is a bundled 

payment for a population over a period of time. I think that is 

where we need to move to, and that creates the alignment of everybody providing care within that system. 

Senator NELSON. I know my time is gone, but I would just ask 

rhetorically of the committee: is his success in Illinois a result of 

the new health care law, his PPO, or both? Since my time has run 

out—— 

The CHAIRMAN. You are right. That is a good rhetorical question. 

[Laughter.] 

Senator Cardin? 

Senator CARDIN. Mr. Chairman, thank you very much. There are 

a lot of good things that are happening out there. You all are coming up with ways to make our system more accountable and give 

better results at less cost. You can point to a lot of examples, and 

you have already done that. 

But I want to get back to reality. You all are facing additional 

cuts in the Medicaid programs in every State in this Nation. This 

year, we are going to be looking at a significant reduction in Medicare cost over baseline. It is not what we think is right but what 

gets scored around here that we are going to have to end up doing. 

So what I find very frustrating—and I can give you chapter and 

verse—we have a program in Maryland that has used technology 

to bring down costs for diabetes: WellDoc. It started, by the way, 

in 2004, when cell phone technology was not what it is today. It 

has demonstrated, in a 7-year study, that it has brought down diabetes care by 10 percent. That has never been scored for the 10- 

percent savings, so now we have achieved that, but we do not get 

credit for it. 

So we have spent a lot of time on delivery system reform, and 

the Affordable Care Act, with the ACOs, is clearly in that direction. 

We do talk about bundling, because bundling is a way that we can 

sometimes get scoring. 

But I think our challenge is, how do we put into the code a scoring mechanism that captures the practices that you all have instituted so that we can get credit for it through the process that we 

have to follow here in Congress? Because I tell you, we are running 

24 

against a cliff that is going to come up very soon as to how we deal 

with the sequestration, how we deal with the SGR system for 

Medicare, how we deal with the Bush tax cut issues. 

All of that is going to come up soon, and part of that is going 

to have to have scored spending savings, and a large part of that 

is being looked upon as to how we get that out of the health care 

system. We think, many of us, that we have already gotten a lot 

of that out of the health care system, and we will demonstrate that 

in the years ahead because of what we have passed, but it does not 

get scored. 

So now we have to put something in the code that gets scored 

that you all have confidence in, that is not just another round of 

cuts to providers, because, if we just continue to do that, you are 

not going to be in business. So what do we do? How do we resolve 

this issue to allow these good practices that you all put in place on 

delivery system reform to show the savings, and therefore allow us 

to get the credit for it? 

Mr. DIAZ. If I may, Senator, I think your concern is well-placed. 

I mean, I see innovation and investment in technology in our company coming to a screeching halt as a consequence of the sequestration cuts. It is just unavoidable. There are only so many years 

we can freeze wage rates for nurses and cut without affecting patient care. So we are living that struggle today. 

I think what we need to do is pick five things. As we all talked 

about, let us pick the five things that we think move the dial the 

most. Maybe some of them are penalties, like rehospitalizations. 

But things like reducing length of stay should be something that 

we are all championing, because, if we are getting patients home 

faster, there should be incentives for that. 

So providers that are accomplishing those things above the baseline and are showing superior outcomes should be rewarded, and 

providers that are not should be held accountable. That is one of 

the greatest frustrations in Kindred Healthcare: we are outperforming on all these measures, but it does not really matter at 

the end of the day in terms of our sustainability from a financial 

perspective. 

The reward systems within our organizations are hard to sustain 

too, which are around people, quality, and clinical outcomes, as 

well as financial metrics like rehospitalizations and lower length of 

stay. 

Senator CARDIN. The challenge is, it is so difficult to put that 

into code where you are reducing, in your case, reimbursements to 

hospitals based upon admissions and rewarding long-term care providers based upon results. 

You are not going to have the same confidence level from the 

hospital community that you would from the long-term care community. But you are absolutely right. I mean, that is what we do. 

The cost centers are exactly where you said they are. We are 

achieving some of those savings, and they do not get scored. 

Mr. MALLOY. In our example, what we did not have is—we compare our population to a comparable cohort using a third-party actuary to assess our savings. It is more difficult when you try to get 

into the individual initiatives that you have undertaken to say how 

much is associated with a very particular piece, but certainly our 

25 

integrated program that we have deployed has been proven to be 

effective. 

But we have similar challenges about, well, how much of that 

was really associated with coordinated care versus the preventive 

activities and the wellness that we have done? It is a challenge. 

But I think if there were a way to look at it in terms of total programs that have been deployed and compare those to a comparable 

cohort, that may be a financial—— 

Senator CARDIN. I will just make one last observation. That is, 

we know that we are going to reduce costs and hospital infection 

rates. We know that. We have been able to demonstrate that. 

There is study after study that shows that. We did not get the scoring for it, even though we know that it is going to take place. It 

seems to me that there is some way that we could put in an enforcement mechanism to make sure hospitals obtain what we know 

they should obtain in hospital infection rates so that that can get 

scored, and again a reward for those who exceed expectations. 

That is within one area of health care costs. I think we need to 

look for more of those examples where we can demonstrate savings, 

put some enforcement mechanism that gets scored, hospitals or 

providers that meet the standards or exceed them, they get rewards, and, if they do not, there is a penalty. 

Thank you, Mr. Chairman. 

The CHAIRMAN. You are welcome. 

In the spirit of bipartisanship, Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman. I am glad you are 

not forgetting about us over here. 

The CHAIRMAN. You are there, alive and well. 

Senator THUNE. Yes. [Laughter.] Yes, that is right. 

Well, I appreciate the hearing, and I thank you all for your 

thoughtful observations. 

I have a question that has to do with this whole issue of interoperability and how advanced we are, what we might be able to 

achieve in the form of savings. If I twist my knee in Colorado and 

have to go to the emergency room, and they want to find out what 

prescriptions they can give me and that sort of thing, or how to 

treat me and to be able to know who treats me in South Dakota, 

what my medical history is, that sort of thing, or for example, you 

have long-term acute care, acute care—you have all these various 

ways in which people access the health care system in this country—how integrated are we? 

How interoperable are we in terms of electronic medical records 

and that sort of thing, say on a scale of 1 to 10? Then, what sort 

of savings could we achieve—and I am sure that is a very difficult 

thing to quantify, but if you could at least in general terms talk 

about what that might mean in terms of avoiding redundancy, 

avoiding duplication and over-utilization because of tests and all 

sorts of things that might be available if you had access to a medical record for a patient? 

Dr. MIGLIORI. Senator, if I may, interoperability is something 

that is not at a level that it should be. If I was to score it using 

your 1 to 10, it is probably a 3, for two reasons. Number one, it 

has been the slow adoption of electronic health records and other 

26 

automated clinical systems. The groups to my left here are exceptions to the rule. 

The second, though, is that, even when you have integrated systems or electronic systems, trying to move between systems is very 

poor, and I think it represents a threat to safety, as well as an 

issue around efficiency—how much efficiency and the ability to provide a specific number. I suspect we could come up with some estimates. But certainly, in a society that expects choice and is full of 

mobility, to have a system that silos its information really is 

counter-current to their intent. 

Mr. DIAZ. Let me just give an echo, an example. So we have a 

Joint Operating Committee with the Cleveland Clinic. I mentioned 

in my testimony we have a lot of folks, and we are very focused 

on rehospitalizations in that Joint Operating Committee. The 

number-one issue of all of those clinicians was, how do we get information to manage these patients? So we built an interface with 

EPIC, which is the clinical information system that the clinic uses. 

Now the Cleveland Clinic doctors can access EPIC, and we have 

linked it to ProTouch, our medical record. So when they follow the 

patient from the clinic to our long-term acute care hospital or our 

sub-acute facility, they can go backwards into the EPIC system, or 

they can move forward into our system, as we have built that interface. 

That is a 1 percent on the 10 percent chart that you said. I 

mean, it is just not happening fast enough. And urinary tract infections, rehospitalizations caused by that and other things, have 

dropped like 30, 40 percent, by letting our clinicians have the information to manage patients across these care sites. 

Mr. MALLOY. I would just build on that and say that getting information to physicians is very difficult at this point. One of the 

major aspects of how we can improve quality and lower cost is 

through a transitional care program that we have within our organization, trying to make sure that, when a patient is discharged 

from the hospital, we know everything about what happened there 

so that, as they move into the home environment, we can make 

sure that we are carrying that care through so they are not readmitted into the hospital later. 

I think a big part of this is additional investments into the 

Health Information Exchange models. In Pennsylvania, there is a 

project under way, and it is at the State level. It is very complex. 

It looks like it is going to take some time to get in place. In Delaware, to our south, we found that they have the Delaware Health 

Information Network, which is the backbone of health information 

which allows physicians and hospitals to sort of plug in and get 

that information out. 

But to your question, if something is happening across the country, that information just is not there. It really is an issue of patient safety, it is an issue of making sure that you have timely information in the clinicians’ hands so that they can actually effect 

change when they need to. We are still a long way from that. I 

would not even give it a score as high as 3, as my colleague down 

at the end of the table did. 

Senator THUNE. By and large, that is a resource issue, I mean, 

to make that happen. But to create those standards of interoperVerDate Nov 24 2008 20:28 Jun 28, 2013 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 R:\DOCS\80998.000 TIMD
27 

ability, we have always talked about that, but it does not sound 

like that is happening out there. 

I guess my last question is, as my time is out, how do we 

incentivize that? 

Dr. SACKS. Senator, right now the incentives are to continue to 

build infrastructure. I agree with what my three colleagues have 

said. We are one of the more advanced systems with electronic 

health records. All of our Chicago-area hospitals achieved Meaningful Use Stage 1 last year. We have four prime vendors. 

While they all meet Meaningful Use and are ‘‘interoperable,’’ unless you set the systems up with the same data definitions and the 

same fields, you realize that you are talking theory, but in the real 

world I cannot exchange your prescription from the medical group 

system to the hospital system, and it creates a host of safety issues. 

It is much more complicated than banking because you do not 

just have to deal with 10 digits and putting them in the right 

boxes. We are moving in that direction. It needs to be encouraged 

and incented, but ultimately there needs to be standardization of 

the definitions so that, when we record a blood count in my office 

system, it is the same as a blood count in South Dakota or in the 

hospital so that it moves seamlessly, and that is one of the practical challenges. To be honest, the vendors do not have an incentive 

to do that. They want to try to be a 1-brand solution and keep you 

as a customer of their total solution. 

The CHAIRMAN. Well, how do we solve that? I mean, did the stimulus bill not provide about $20 billion for health IT? I mean, the 

first question is, was that spent wisely? Second, I know all these 

different vendors are competing for business. It seems to me that 

they are just going to keep competing and we are not going to have 

this interoperability that everybody talks about. But do you fellows 

not have some ideas on how to solve that? 

Mr. MALLOY. Sure. I think with respect to the investment in 

EMR, I think that has been hugely successful, at least within our 

realm. About 85 percent of our physicians are currently on an EMR 

system. We expect to be at about 95 percent by the end of the year. 

But EMR, in and of itself, does not really solve the issue. It allows 

you to track the records of the individual patient, but it really does 

not allow you to do sort of the population management type things 

that need to be done. 

The CHAIRMAN. Right. 

Mr. MALLOY. It also does not allow us to exchange information 

back and forth. 

The CHAIRMAN. So what do we do? 

Mr. MALLOY. I think it is a matter of understanding some of 

those core pieces. To Dr. Sacks’s point, there are some practical 

issues where EMRs do not really talk well to each other. If somebody puts information in a text field versus in an empirical specific 

data element field, it is hard to clean that up. It is really a matter 

of having sort of clinicians opine on what is really necessary in 

order to make those talk, and of establishing some standards. 

The CHAIRMAN. Senator Carper has been very patient over there. 

Senator Carper? 

Senator CARPER. Thanks so much. 

28 

We have also been patient in Delaware, and I just want to follow 

up on something Mr. Malloy said. Fifteen years ago, when I was 

Governor, we signed into law the notion of creating a Delaware 

Health Information Network, and we have nurtured it for 15 years. 

Last week, we celebrated its 5th anniversary of being live online. 

For the last 5 years, we have been able to sign up more of our hospitals, more of our nursing homes, more of our providers. Last 

week we were at 100 percent of hospitals, 100 percent of nursing 

homes, 92 percent of providers. 

This is technology that is enabling us to provide better quality 

health care, save lives, and also save money. We are very proud of 

what we have done. I know it is not the whole solution, the whole 

answer, but hopefully it is something that others can look at. We 

made plenty of mistakes along the way, and others can learn from 

our mistakes and be able to perhaps replicate some of our successes. 

Senator Thune just walked out. He is a great athlete. We had a 

5–K race last week that a bunch of people participated in, including Dick Lugar at the tender age of 80, and he has run in about, 

I think, 30 of the races here on Capitol Hill. We are just very proud 

of him. And Thune is a great athlete. I call him Thuney. But Senator Baucus over here is a great athlete as well. He does not run 

5–Ks or 10–Ks, this guy has run like 50-mile races and so forth, 

and probably still does it. 

I like to—ever since I was a Naval flight officer, an ensign, down 

in Pensacola, FL—try to work out just about every day, and I do 

not miss many days. I do not remember the last time I missed a 

day’s work from sickness. I talk to other people who work out regularly, exercise regularly, and watch what they eat, and a lot of 

them say the same thing. They just frankly do not get sick very 

much, and, if they do, it tends to go away. 

Not everybody is as crazy as guys like me, and maybe Senator 

Thune, maybe our Chairman, in terms of exercising. But I am convinced if we could somehow motivate people to do that more often, 

as well as to watch what they eat, we would all be a lot better off, 

and frankly a lot better off fiscally as we look at the squeeze on 

Medicaid, Medicare, and all. 

When we were working on health care reform legislation, former 

Senator Ensign of Nevada and I offered legislation adopted by the 

committee, signed into law, that enables providers to provide premium discounts of as much as 30 percent to employees who, if they 

are overweight, bring it down and keep it down; if they use tobacco, 

stop smoking, stop using tobacco and continue to stop smoking; if 

they have high blood pressure, high cholesterol, bring it down and 

keep it down. It can actually go up as high as 50 percent. 

But that is an effort on our part to incentivize people to do what 

they know they ought to be doing anyway, and, if they do those 

things, not only will they be better off, the group will be better off, 

and also the taxpayers will be better off. 

Could you just talk to us a little bit from your perspective as to 

what you are mindful of that we are doing to incentivize people to 

assume personal responsibility for their own health? 

Dr. MIGLIORI. Senator, that has been core to our business. In 

fact, perhaps the fastest-growing area of our business at United 

29 

Health Group has been the growth in employer-incented programs 

that incent engagement. 

We have over 40 large employers with now over 2 million people 

who are on programs that require them to do their biometric testing, the simple things—blood sugar, cholesterol, body mass index, 

and blood pressure—and, if they are out of whack, to get engaged 

into programs, much the way Lee had said earlier. 

And with doing those activities, there are some modest financial 

contributions made in a variety of ways for health care and other 

things, such as deposits made into the health spending accounts 

and the like. 

The important thing about these programs, with each one of 

them, we have seen an increase in people getting engaged. We did 

it for our own. The first client that we used was ourselves, with 

136,000 UnitedHealthcare employees that we put through a system 

of doing that. 

What we found is that we had diabetics whom we did not know 

of. Ten percent of our diabetics did not know they had it. They engaged in weight programs. Half of them lost over 9 pounds in 

weight. We had a 12-percent reduction in cardiac disease. We had 

10 fewer heart attacks that year, and we also had diabetes costs 

fall dramatically, like 19.6 percent. 

What we have done beyond that is to make it simpler to do. We 

have gone to the point now of building mobile applications for your 

smart phone that will connect to commercially available things like 

Fitbit, so that people can record into their cell phone and then 

transmit to their personal health record and their health coach, at 

their discretion, their activity. So that way we can start building 

the linkages for people to do that and, as they take on this responsibility, to effect change. 

The important thing is, what you are going after is that 50 percent of American’s premature deaths are the result of lifestyle 

choices, and those are the choices that have to change. 

Senator CARPER. Thank you. 

Dr. SACKS. From my vantage point, going back to my days as a 

practicing family physician, some of the most frustrating times 

were when I would encounter a patient, and their lifestyle was the 

barrier. No matter how I would try to educate them that you need 

to exercise, you need to lose weight, you can control your blood 

pressure without medication, my success rate was probably in the 

low double digits. 

When you get alignment with family reinforcing it, when you get 

financial incentives, when you get the employer, when you change 

the food in the cafeteria at work, when you set up exercise programs, you can get the success rate up into the 50-, 60-, 70-percent 

range. It takes the whole community to get this done. 

As I said earlier, we have been doing this with our own workforce over the last 5 years, and every year we have seen improvement. It has bent our cost curve, which was the biggest driver of 

inflation on the cost side for our organization, and it has given us 

a healthier workforce which is more productive. 

I think we all have creative ideas of how that can be driven deeper and farther across this country, because it has typically been the 

30 

large commercial employers that are self-insured that have been 

innovative because they are paying for it. 

Senator CARPER. Could the last two witnesses just briefly respond? 

The CHAIRMAN. Sure. 

Senator CARPER. Mr. Chairman, thank you. 

Please, Mr. Malloy. 

Mr. MALLOY. In similar fashion, I tend to agree. I think we are 

now beginning to meet the member where they are at so that they 

can really focus on improving their health care. I think a lot of 

times they feel as if it is a little overwhelming, and, if they have 

the proper tools and the proper incentives there and begin to understand that small changes can really make a difference, I think 

that is very important. 

Health Ways has been doing that for their employees for a number of years, also with the plans and members that they serve. New 

mobile apps and those types of things are certainly important, 

being able to track and trend where you are with respect to how 

you are performing against those things. The Fitbit idea is something that has really been phenomenal. 

It makes it easy for people to kind of link together what they are 

doing and report it back to their health records, track it, and then 

to share it socially, because we do know from the science that there 

are a lot of positive effects from the social interactions of family 

and friends and the impact that that has on changing behavior. So, 

I think there is a general movement that seems to be happening 

in a number of different areas that will reinforce that. 

Senator CARPER. Thank you. 

Mr. Diaz, just briefly. Mr. Diaz, could you comment, please? 

Mr. DIAZ. We have 77,000 employees across the country and have 

embarked on some of the same things. I mean, it is amazing the 

frustration I have sometimes going into the break room to see 

nurses who are caring for patients on ventilators who are having 

a cigarette and a regular Coke. 

Senator CARPER. Did you say cigarette and a rum and Coke? 

[Laughter.] 

Mr. DIAZ. And so we have redesigned programs. We have really 

tried to foster a much more active lifestyle within our support center. I think we are sort of just at the beginning of that, but I think 

there are clearly signs of change happening in employer-based systems. I think the bigger challenge, as Senator Wyden said, is how 

do we accelerate that in Medicare beneficiaries, the dual-eligibles 

in Medicaid, where some of the lifestyle things are more entrenched because of socioeconomic issues and other things. 

Senator CARPER. All right. Thank you. 

Mr. Chairman, you have been very generous. Could I just add 

one last quick P.S.? 

The CHAIRMAN. All right. 

Senator CARPER. Later this year, part of the health care law that 

we passed will go into effect in States across the country. It is a 

provision that Senator Harkin, Senator Murkowski, and I worked 

on, with good support from our committee. It provides that people 

who walk into a chain restaurant later this fall will look up on the 

31 

menu board and see, for the item being served, cost and calories. 

If they do not have a menu board, they will have a menu. 

Chain restaurants across the country that have a sit-down menu, 

you open it up, and for the item being served, you see price and 

calories. The restaurants have to provide, upon demand, upon request, additional information as to sodium, fats, trans-fats, cholesterol, a variety of other things. That is just one more tool to help 

people, encourage people, enable people to take personal responsibility. Thank you. 

The CHAIRMAN. No question, it all helps. It all adds up. 

Senator Menendez? 

Senator MENENDEZ. Thank you, Mr. Chairman. 

I want to thank Senator Carper for his focus in this regard. His 

example has made me go to the gym more and order Egg Beaters 

when I head for breakfast. 

I thank you all for your testimony. Mr. Diaz, in your testimony 

you highlight the important issue of increasing coordination and integration as a means to improve care and reduce unnecessary 

costs, something that we clearly want to achieve. Kindred is in a 

unique position to provide this high level of coordination as the operator of so many post-acute facilities. However, that can be difficult when those post-acute care sites are not under one roof. 

In New Jersey, to address this issue, health care facilities, home 

care providers, and other stakeholders worked with State officials 

to create and implement what we call a mandatory Universal 

Transfer Form. The use of this form will, we believe, ensure that 

providers across the continuum of care have the access to patient 

history and information that will help improve care. 

So my question is, do you see that as a way to more effectively 

and accurately coordinate care for patients transferring into postacute settings, and do you think something like a Universal Transform Form can be an effective tool to improve provider coordination? 

Mr. DIAZ. I do, whether it is in the ACO examples that we have 

talked about or other collaborations. We talked about a lot of capabilities, and I mentioned building trust, breaking down silos, things 

like IT to enable that, are critical. 

In each community, there is going to be a role for large integrated providers and individual providers. I think what it is going 

to require is that these networks, as we set them up, have people 

to deliver on the value proposition, whether they are large or small. 

So we have to allow for that. 

People have to come at it from a collaborative perspective. I 

think the challenge is, if we continue to approach things in a sort 

of ‘‘I win, you lose’’ fashion, we are never going to get anywhere. 

It is going to require everyone giving a little bit in terms of breaking down these silos that we are in. 

Senator MENENDEZ. And I would assume that that sharing of information at the end of the day is critical, (1) for the patient, and 

(2) also for savings. 

Mr. DIAZ. Without question. As you have heard today, and we 

have seen examples of in our pilots, there are just tremendous patient opportunities and tremendous opportunities to reduce costs 

when we can give clinicians information to manage patients over 

32 

an episode as opposed to aligning incentives around the short-term 

acute care hospital, as has been spoken to. 

Senator MENENDEZ. Finally, I know that earlier you mentioned 

in your testimony, legislation that Mr. Nelson and Mr. Roberts are 

sponsoring, that I am co-sponsoring, with reference to long-term 

care hospital improvements, which outlines specific criteria to better identify long-term care hospitals and their role within the continuum of care. Why are such specific criteria needed, and what 

would having such criteria in place actually accomplish? 

Mr. DIAZ. Well, long-term acute care hospitals, like inpatient rehabilitation hospitals, like skilled nursing facilities, play a unique 

role in the delivery system. Right now there is a lack of regulatory 

clarity there. I think what that would do, what the criteria would 

do, would enable not only public payers, but the private payers 

here, to all understand better what that role is, what the outcomes 

are that can be generated, and what the costs are. I think that just 

enables us to be more efficient in getting patients to the most clinically appropriate setting as quickly as possible. Long-term acute 

care hospitals do not have that clarity in the way that other sectors 

do today. 

Senator MENENDEZ. Thank you. 

The CHAIRMAN. Thank you. 

Senator Wyden? 

Senator WYDEN. Thank you, Mr. Chairman. Mr. Chairman, I 

think this has been an excellent hearing, and I appreciate the way 

you are doing it. 

I want to kind of see if I can sort of summarize how I have come 

to see this. I mean, you all have appropriately characterized what 

we are dealing with in America as largely a sick care system. We 

have not put the focus on behavioral changes for individuals. We 

are now talking about trying to change those incentives, so, when 

we align incentives, it is not just providers and insurance companies, but it is individuals. That is what Senator Portman and I are 

trying to do with the Medicare program. I think you have given us 

a number of good comments. 

But the question also has to be, for us, in the delivery system: 

what do you do when people have serious illnesses, and particularly what some have characterized as essentially a silver tsunami 

that is going to land at your doorstep, Mr. Diaz, in terms of longterm care? 

What I wanted to ask for just a minute is your thoughts about 

what could be characterized, at least in Washington, as a long-term 

care Accountable Care Organization. Now, in my part of the 

world—Chairman Baucus knows this—when people heard the 

words ‘‘Accountable Care Organizations,’’ they would kind of smile 

and say, that is what we have been doing for 25 years. That is 

Group Health up in Seattle, that is Providence in Portland, and the 

like. 

But I think in something resembling English, this is integrating 

services. If you are not a senior, it is integrating the kinds of services that Dr. Migliori is talking about with employers and unions 

and others. But for older people, I am particularly interested in it 

because, what I remember from my days working with seniors is 

33 

watching seniors get bounced from provider to provider to provider, 

particularly in the long-term care kind of setting. 

What would you think, Mr. Diaz—since you all live and breathe 

this 24/7—about that kind of concept here and having people in 

long-term care who would essentially look at that continuum of 

services, obviously trying to keep people at home to the greatest extent possible, but also having the institutional kind of services as 

well, and for this committee and the Congress to start thinking 

about, probably in the lingo of Washington, DC, it would be called 

a Long-Term Care Accountable Care Organization? 

I would see it—from my Gray Panther days—as something that 

puts it all in one place for the seniors so they do not get jostled 

around from place to place. What do you think of the idea? 

Mr. DIAZ. Well, I think we talked about some of the success stories that many of us have had. At the core of that, particularly for 

seniors—30 or 40 percent of whom have some cognitive impairments and do not have champions within their household—it is 

about having a physician-directed care manager, someone who can 

really attend to the drug regime, attend to the discharge, prevent 

that rehospitalization. So I mean, I think at the core there has to 

be a care manager. 

If we take the 5 percent of Medicare beneficiaries with those 

chronic diseases who are consuming 50 percent of the costs, going 

back to Chairman Baucus’s question, and we focus on them having 

a care manager, I think we can bend the cost curve and create a 

lot of value for those beneficiaries. I mean, I know probably everyone here has a personal story of the difficulty in navigating the system when you are a senior and how we have to jump into this for 

parents. 

So I think that is one of the highest returns we could get to the 

system. It has been proven in many of the physician practices that 

when you can really get a nurse practitioner or a care manager 

who is following the patient and owning that medical record, I 

think a lot can be accomplished. 

Senator WYDEN. I would like to continue that discussion, particularly with people in the long-term care industry, because we are 

seeing, in the Affordable Care Act, one of the provisions—and 

Chairman Baucus was very supportive of it—was independence at 

home. Oregon just has been able to receive one of the first demonstration projects for a wonderful program called House Calls. 

What we have been pointing to is the VA—for the sickest people, 

people you all speak about with these co-morbidities, having a very 

sick population—saving upwards of 20 percent on that population 

by caring for them at home. That is the kind of model I would like 

to see, where someone like yourself—and I think you characterize 

it correctly—a care manager, a physician, a nurse practitioner, 

would have this array of options. I am interested in following that 

up with all of you in the industry. 

Dr. Migliori, did you want to add anything? 

Dr. MIGLIORI. Yes. I fully agree with you. That is the right kind 

of model, where you are expanding the responsibilities and capabilities of fully licensed clinicians to do those kinds of things, such 

as nurse practitioners. We serve about 9 million people who are 

Medicare-eligible through a variety of programs. We have 1 million 

34 

people who are both Medicare- and Medicaid-eligible. For many of 

those people, we actually conduct house calls. 

We have built tablet-based electronic health records so we can go 

in the home to make sure that the primary care physician’s orders 

are understood and they are able to be fulfilled. We go to the point 

of actually looking at their medicine bottles to see whether or not 

there is a pill, there is a bottle corresponding to the prescription, 

and that the pills are being taken. We will make sure that they 

have access to nutrition, to whatever therapies, whatever equipment they need. When we have done that, we have reduced readmissions 28 percent. Those readmission rates are impacted even 

more for our non-white clientele. 

Senator WYDEN. Could you get me that information? I would like 

to see it. I am also interested in following up with you and Mr. 

Diaz, those of you who are working with this, on what the implications are in other areas, particularly with respect to medical monitoring equipment. We have as our large private employer in our 

part of the country Intel, and they have been very interested in 

this, doing very good work, and I would like to follow up with you. 

Thank you for the time, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

You know, for what it is worth, I know a lot of you are talking 

to a lot of very smart people in the social networking sphere, new 

start-ups. Smart phones are going to be so smart and do so much. 

It is not just financial services, banking and so forth, but health 

care. I know you are doing this already, but, just off the top of my 

head, I would just urge you to spend a lot of time and go out to 

Silicon Valley, or go up to New York to something called Silicon 

Alley, and just pick their brains. They will surely pick yours to try 

to find a way to make money. 

Second, thank you very much for all that you are doing here. We 

depend on you. You are the private sector. You know what works, 

what does not work. You have a bottom line to meet, you have payroll to meet. So I would just urge you, as I did earlier, just be aggressive. Be bold. Take a flier, let us know what might be better, 

work better, as we proceed. You will get great reception from this 

committee. I know you will elsewhere too, but certainly with us, 

and I would just urge you to keep it up. 

I have a question that Senator Hatch wanted me to ask, and I 

will just ask it. It is for you, Mr. Diaz. You do not have to answer. 

The answer could be for the record. 

The question is, I have been hearing of some innovations in managing the dialysis population, a population that is only 1 to 2 percent of the Medicare population but takes up to 8 percent of Medicare spending. Can you tell me what the dialysis industry is doing 

to manage this chronic problem? Do you have a short answer? Go 

ahead. 

Mr. DIAZ. I have a very short answer. It is a very complex population that also has the same rehospitalization trends, and I think 

a lot of good work is happening. I am on the board of a company 

called DaVita. It is one of the leading dialysis companies. I know 

there is a great commitment there to clinical outcomes and to focusing on integrated health, so I think there is a firm commitment 

35 

in that industry to be part of the solution to managing a very 

unique population. 

The CHAIRMAN. Yes. All right. 

Thank you all very much. Remember, I said to let us know what 

other ideas you have. Just give us anything. All right? Thank you 

very much. Thanks for taking the time. You have come great distances. We appreciate it. 

The hearing is adjourned. 

[Whereupon, at 11:58 a.m., the hearing was concluded.] 

(37) 

A P P E N D I X 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD


80998001.eps
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80998.002

And, for the first time, hospitals will be penalized if patients are readmitted too often. Almost one in 

five Medicare beneficiaries is readmitted to a hospital within 30 days of discharge. We need to 

encourage providers to do the job right the first time. 

I am encouraged to see the private sector aligning with this effort. This year, the insurance company 

Well Point will require all hospitals it contracts with to be subject to similar programs. These incentives 

provide a common-sense foundation to change behavior. 

The private sector cannot do it alone, nor can Medicare and Medicaid. The only path forward is 

through partnerships between the public and private sectors. 

That's why we created the Center for Medicare and Medicaid Innovation, known as the Innovation 

Center. Medicare and Medicaid are now engaged on the front lines and working with the private sector 

to find new models of payment and delivery of care. 

The concept is simple: Find the best ideas. Test them. If they work, expand them. If they don't, move 

on to new ideas. 

Already, the Innovation Center has launched more than a dozen new projects. These projects involve 

more than 50,000 providers and almost every state in the country. They tryout new payment models tc 

reduce costs and make patients healthier. 

We know there can't be a one-size-fits-all solution. Health care in Missoula, Montana is different than 

health care in McAllen, Texas. 

I look forward to hearing about the innovative models our four witnesses are developing. Their 

experience pioneering new approaches, and in partnering with Medicare and Medicaid, should be 

instructive to all of us. 

So let us embrace innovation as an opportunity to change things for the better. Let us encourage public 

private partnerships. Let us do this to lower health care costs for consumers and for taxpayers. Let us 

do this to improve patient care. And as Mr. Einstein advised, let us not always do what we always did. 

### 
39 


80998.003

Statement of Paul J. Diaz 

CEO, Kindred Healthcare 

Senate Finance Committee Hearing 

Progress in Health Care Delivery: Innovations from the Field 

Washington, D.C. 

May 23,2012 

Kindred Healthcare is pleased to submit these comments for the Senate Finance 

Committee's hearing on "Progress in Health Care Delivery: Innovations from the Field." 

Kindred is honored to participate in the hearing and share our experiences about the 

critical role that post-acute care plays in transforming our delivery system into one that is 

more patient-centered, outcome-driven and integrated. In particular, we commend the 

Chairman, the Ranking Member and the entire Committee for seeking input from those of 

us in the field who are testing new models to improve care and reduce costs through the 

many collaborative innovations in care delivery. 

The Committee's decision to hold this hearing on delivery system reform is very 

timely. Hospitals, health systems, managed care organizations, physician groups, postacute providers and others across the country are actively engaged in efforts to transform 

our nation's healthcare system through private sector and publicly supported initiatives. 

There is a growing recognition that our current healthcare delivery system must be 

changed. Kindred has a national vantage point to offer in these discussions since we 

operate in over 40 states and are participating in a range of reform efforts in local 

healthcare communities throughout the country. As a provider of diversified post-acute 

services caring for our nation's sickest and most expensive patients, Kindred is actively 

working with private and public Accountable Care Organizations (ACOs), hospitals, 

health systems, physicians and managed care organizations on innovative ways to deliver 

integrated care, improve quality, restore wellness and reduce costs. 

At the outset I want to emphasize that transforming our healthcare system requires 

building trust, collaboration, cooperation and aligned incentives between providers, 

payers, patients, and policymakers. It won't be easy, and in our experience systemic 

change will require incremental reforms, but without a culture of cooperation, teamwork 

and trust between those charged with delivering and paying for care, I fear we will 

remain stuck in our current silos, state of inefficiency and unsustainable cost growth. 

will emphasize this theme throughout my comments. 

Why is Care DelivelY Reform Needed and Why is Post-Acute Care Important? 

Before sharing with the Committee some examples of new care delivery models 

we are testing with our partners in the field, I would like to provide some context as to 

why we are engaged in these activities and why post-acute care is so important to 

delivery system reform. 
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80998.004

As you know, the existing fee-for-service system, which pays for volume rather 

than value, has produced a fragmented delivery model that does not serve patients well 

and contributes to unsustainable cost growth. This problem also exists in "post-acute" 

care, where a growing number of chronically ill and medically complex patients require 

care after a short hospital stay. Today, there are over 47 million Medicare beneficiaries 

and an estimated 7,000 individuals added to the program every day. I A growing number 

of these people have chronic conditions such as diabetes and heart disease and represent 

the most expensive patients to care for as they cycle through our system with acute care 

hospitalizations, re-hospitalizations, and consumption of other health care services. The 

following chart from a eMS-sponsored study illustrates this point and also highlights the 

critical role that post-acute care can play in coordinating care and lowering healthcare 

costs: 35% of all Medicare beneficiaries who have been admitted to an acute care 

hospital require some form of post-acute care following their hospital stay. These same 

patients often require care in more than one post-acute setting to meet their needs. 

Tremendous Opportunities Exist to Better Manage Patient Care 

jor Patients Discharged From Acute Care Hospitals 

The problem from a care perspective is that as patients move from the acute care 

hospital to multiple post-acute settings there isn't anyone, particularly physicians, who 

are responsible for coordinating care and driving the outcomes throughout the patient's 

entire episode. This results in a lack of coordination among providers, confusion about 

how to transition patients, when to transition, what is the most appropriate setting and 

how to continue the care in a seamless way from provider to provider. This "silo-based" 

delivery system does not make the most efficient use of healthcare services based on 

individual patient need. Worse, it is not "patient-centered" in terms of achieving the 

1 Kaiser Family Foundation, 2011 and AARP 2011 projections 
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80998.005

patient's goal of getting well and home more quickly. And it results in fragmented care 

including unnecessary hospitalizations, a major focus of policymakers and providers. 

This system is also not ideal from a payment perspective. Because providers are 

paid each time the patient has an encounter with the healthcare system, there is little 

incentive for coordination of care and this system can produce redundancy in services 

and higher than necessary costs. 

The Needfor Coordinated, Cost-Effective Post-Acute Care 

Several years ago Kindred as well as many other post-acute providers embarked 

upon an effort to develop the capabilities to meet the needs of patients throughout their 

entire episode of post-acute care-- from hospital to home-- to begin to address the 

shortcomings of the silo-based system described above. The goal is to become a postacute "continuum of care" provider so that we can be part of the solution for patients and 

payers in a future healthcare system that will be more integrated. As I noted at the 

beginning of my comments, this is not a goal that post-acute providers can achieve on our 

own. Instead, we are working with acute hospitals, health systems, managed care 

organizations, physicians, care managers and others to "integrate" post-acute care into the 

broader healthcare delivery system to achieve our shared goals. Our motivation for doing 

so was well summarized by MedPAC in their 2007 Report to Congress: "Effective 

coordination of care between acute and post-acute settings has benefits for patients and 

providers. Such coordination can reduce hospital readmissions-thereby reducing 

spending and improving patient experiences." 

Today, Kindred is the largest provider of diversified post-acute care in the nation, 

operating in over 40 states. Within these 40 states we are focused on approximately 20 

local healthcare communities where we are building the capacity to develop the service 

lines that span the entire post-acute spectrum so that we can partner with others in the 

delivery system to better coordinate care. We have 121 Long Term Acute Care Hospitals 

(LT ACs) serving the most critically ill patients, 5 free-standing and 102 hospital-based 

Inpatient Rehabilitation Facilities (IRFs) providing intensive rehabilitation services to 

restore functional ability, 224 Skilled Nursing and Rehabilitation Centers (SNFs) 

providing restorative, rehabilitative and long term care services, and 51 Home Health and 

Hospice sites providing in-home services and palliative hospice care. We are also the 

largest provider of rehabilitation services in the nation, with 2,100 sites of service 

providing physical, speech, and occupational therapy to about 500,000 patients a year. 

But our size and national scale is less important than our efforts to be able to 

provide a continuum of post-acute care in local healthcare communities. The following 

map shows Kindred's sites of service throughout the country and highlights those 

communities where we have or are developing the capacity to deliver a continuum of 

integrated post-acute care. 
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80998.006

Advancing Integrated Care: Kindred is developing the capacity to deliver the full 

continuum of post-acute care in local healthcare markets 

Innovations in the Field: Key Capabilities Needed to Provide Integrated Acute 

and Post-Acute Care 

Kindred's growing capacity to deliver the continuum of post-acute care in local 

communities has provided us with a good opportunity to test different models of 

integrated care with our hospital and managed care partners to improve quality and 

reduce costs. We have discovered in testing these models that no one approach will fit 

every situation and every community. The adage that "all health care is local" is 

especially true when considering how to transform the system and make care and 

payment more integrated. Still, we have learned that there are certain key capabilities 

that are needed to integrate care across a patient episode, and we have focused on these 

key capabilities in our new care model pilots. 

C/inicalintegration Between Acute and Post-Acute Care, alld Between Post-acute 

Providers 

As I noted earlier, trust and collaboration among a team of physicians, nurses, 

therapists, and other post-acute and acute providers is crucial to reforming our delivery 

system. We have learned that a critical first step is to achieve clinical integration with 

our hospitals and managed care organizations. We do this through establishing "Joint 

Operating Committees" (JOCs) with our partners to establish a formal mechanism to 

identify shared goals and strategies to coordinate and improve quality care. These JOCs 

have a formal charter, include clinical, care management and operational representatives 

from each of our organizations, meet regularly and use structured agendas to identify 

specific clinical outcome, patient satisfaction and efficiency goals, and collect and 

analyze data to measure progress and identify areas for improvement. 
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80998.007

Kindred has established dozens of JOCs throughout the country with hospitals, 

health systems, physicians, managed care payers, and private and public ACOs. This 

type of clinical integration can yield significant and immediate results even under the 

current fee-for-service payment system: As a result of our efforts in collaboration with 

our acute hospital partners, Kindred has reduced re-hospitalization rates by over 8% in 

our L TACs and Skilled Nursing and Rehabilitation Centers since 2008. 

A specific case study can demonstrate the power of collaboration and 

communication to improve quality and reduce costs immediately. A Joint Operating 

Committee between Kindred and a prestigious Academic Medical Center in Cleveland, 

Ohio focused on higher than acceptable fe-hospitalization rates. The Joint Operating 

Committee analyzed the data and found that a significant number ofre-hospitalizations 

from Kindred post-acute settings involved patients with urinary tract infections ("UTI"). 

To examine the issue further, patients were screened prior to post-acute admission and it 

was discovered that many patients had actually acquired the UTI in the acute care 

hospital, prior to post-acute admission, but before clinical symptoms had appeared. The 

intervention chosen was to more actively screen and treat patients prior to discharge from 

the acute care hospital. The result was a significant decrease in re-hospitalization rates. 

We have achieved similar declines in re-hospitalization rates with Managed Care 

Organization ("MCO") partners, but MCOs are also interested in reducing lengths of stay 

over episodes of care since they are paid on the basis of capitation. A Joint Operating 

Committee with a Physician-led managed care organization in Las Vegas, Nevada has 

focused on appropriate length of stay for the multiple Kindred post-acute service lines in 

that market-LTAC, hospital-based subacute, and free-standing skilled nursing and 

rehabilitation services. Based on appropriate use of each of these services lines, and a 

relentless focus on appropriate length of stay across an episode of care, post-acute length 

of stay has been significantly reduced. Kindred and other acute and post-acute providers 

have achieved similar results nationwide: Between 2008 and 2011 patient length of stay 

has dropped at Kindred L T ACs and Skilled Nursing and Rehabilitation Centers by 12% 

and 27% respectively. This is better for patients as they are able to return home sooner 

and it also lowers cost to the system by reducing length of stay. 

Physician Participation in Care Management Across Settings 

A very important part of achieving care integration across settings is the role of 

physicians in participating in decision-making and overseeing care across multiple 

service sites. Under the current fragmented system, physicians typically oversee patient 

care within settings, but rarely follow patients from acute, to post-acute, to home to make 

sure that the care is coordinated and seamless across settings. The movement towards 

"medical homes" and other arrangements to engage physicians in population health 

management are encouraging, but we have found that more is needed in the short-term to 

better coordinate post-acute care. 
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80998.008

The models of physician care oversight vary significantly from community to 

community. As a result, Kindred and our partners are testing a range of models to 

achieve the goal of active physician engagement in care management across an episode 

of care. In Indianapolis, where Kindred has the full range of post-acute services, we are 

working with a large health system who has been selected as a "Pioneer ACO." We also 

have an affiliation with an independent physician practice group whose practice 

privileges include the acute hospital system as well as Kindred's post-acute service 

offerings. Our coordination with both the hospital system and the physician group 

enables treating physicians to follow their patients throughout an entire episode of care. 

This increases the likelihood of care being better coordinated and also reduces the risk of 

re-hospitalization. 

In Denver and other markets, the absence of an independent physician practice 

group with the capacity to follow patients from acute to post-acute sites requires a 

different approach. In these markets, we are testing a "Hospitalist" model in affiliation 

with a national organization that provides Hospitalist services to both acute and postacute providers. Under this approach, we have identified Hospitalists who treat patients 

in acute care hospitals and are willing to follow those patients into Kindred post-acute 

settings to ensure smooth transitions in care and to better integrate care across settings. 

In a growing number of markets across the country it is increasingly common for 

physicians to become employed by hospitals, health systems, and managed care payers. 

In fact, over 50% of physicians are now employed by hospitals and a decreasing number 

are choosing independent practice. The challenge for post-acute care providers is the 

availability of enough physicians to provide care, particularly integrated care across our 

sites of service. To respond to this trend, in markets such as Cleveland where most 

physicians are employed by hospitals, we have established an agreement with the hospital 

system to have hospital-employed physicians follow their patients into our post-acute 

settings. The example given above about the reduction of re-hospitalizations attributable 

to urinary tract infections was made possible because statfphysicians from the acute 

hospital system not only follow their patients to Kindred post-acute sites of care, but also 

actively participate in our Joint Operating Committee. 

The Importance ofh!/ormation Technology, Electronic Health Record5 and 

Interoperability as a Key Enablerfi)r Care Integration 

In addition to clinical integration and physician coverage across sites of care, a 

key enabler for care integration is the availability of Electronic Health Records and 

information technology. The ability to collect and retrieve patient information accurately 

and efficiently within healthcare settings can improve quality care and reduce costs. The 

ability to transmit this information across sites of care is a critical element to effective 

care management over an episode of care. 
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80998.009

While few providers across the country have achieved full adoption of electronic 

health records, there is some progress being made and Kindred is piloting different 

approaches. We have a Kindred-specific 5-year 1-T plan, costing millions of dollars, to 

install health information technology within each of our service lines and currently have 

an electronic health record in our LTACs. At the same time that we are working on 

installing electronic health records within Kindred service lines, we are also testing ways 

to create "interoperability" with our acute care partners. 

In Cleveland, for example, we have established an I-T linkage between the EPIC 

Electronic Health Record system used by our acute hospital system partner and our own 

LTAC electronic health record. This enables physician access to electronic patient 

records in both settings and includes information from both the acute hospital and postacute stay. We are in the process of creating a similar linkage with the records in our 

hospital-based sub-acute service line as well as our free-standing Skilled Nursing and 

Rehabilitation facility. This interoperability has produced a high level of physician and 

patient satisfaction, enabled improved integration of care, and in the future will be a key 

enabler to support a more integrated delivery system. 

But I would be remiss in not pointing out that achieving even modest levels of 

interoperability is technically very dift'icult and expensive. And while a growing number 

of hospitals and physician practices are investing in electronic health records because of 

government financial support, only a tiny portion of the billions of dollars available for 

health information technology in the Stimulus Package was made available to post-acute 

providers, so the investment in HIT for the post-acute sector will lag other healthcare 

sectors, as documented in a recent Health Affairs article. 2 

Clinical Criteria/or Post-Acute Levels of Care and Care Management 

Capabilities 

Another key enabler for care integration between acute and post-acute sites of 

care is clinical criteria for post-acute levels of care and the use of clinical care managers 

across an episode of care. This is a particularly important strategic initiative for Kindred 

since, as noted above, patients often need multiple post-acute services to meet their needs 

and it is vital to coordinate these services to achieve care integration for the patient and 

cost savings for the system. The following chart shows the number of Kindred patients 

who are discharged from our own settings to other post-acute settings which 

demonstrates two key points: The number of patients returning home from all sites of 

Kindred post-acute care is increasing; and it is important to coordinate care between 

settings to achieve quality and cost control objectives. 

Z "Electronic Health Records: Hospitals Ineligible For Federal Meaningful-Use Incentives Have Dismally 

Low Rates Of Adoption Of Electronic Health Records" Health Affairs March 201231-3505-513. Larry 

Wolf, Jennie Harvell and Ashish K. Jha. 
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Kindred Is Working Towards Determining the Most Appropriate Care Setting For 

Patients as they Continue Their Care Throughout a Post-Acute Episode 

We are piloting several different initiatives across the country aimed at achieving 

these goals, including: centralized admissions for all Kindred post-acute sites of care to 

help discharge planners determine the appropriate site of care based on clinical criteria 

and patient need; clinical programs in Kindred post-acute settings that are tailored to 

meet the needs of acute hospitals in the market to promote coordinated care; care 

management strategies that focus not just on appropriate site of care upon hospital 

discharge but also throughout a patient's entire episode of care, including the post-acute 

episode; clinical criteria to help determine when patients are ready to transition to another 

site of care, including home, without increasing the risk of quality problems or rehospitalization; and direct admissions to post-acute sites of care (including developing 

urgent care centers) to avoid costly acute hospitalizations. 

As noted above, communication between sites of care is key, as is the ability to 

transmit patient information across an episode of care electronically. But there is no 

substitute for clinical care managers on the ground to ensure smooth transitions for 

patients throughout the healthcare system and helping to determine which clinical setting 

is appropriate based on patient need and when transitions can safely occur. In addition to 

physician coverage across sites of care, Kindred is also testing models of nurse 

practitioner and other clinical nurse specialists serving as "care managers" to help 

manage a clinical episode of care. 

We are also testing models of integrated care targeted at getting patients home 

faster and in a way that prevents re-hospitalizations. In Dayton, Ohio, for example, we 

are piloting a program where Kindred's home health care managers conduct predischarge assessments of patients in Kindred Skilled Nursing and Rehabilitation Centers 
47 


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to make sure transitions home are smooth. Part of this assessment includes an evaluation 

of the continued need for physical, speech and occupational therapy at home. Since 

Kindred's RehabCare therapists provide therapy in both settings, the functional gains 

achieved at the skilled nursing and rehab setting, which enables the patient to return 

home, can be continued in a seamless way, both to continue functional improvement as 

well as reduce the risk ofre-hospitalization. 

Quality Measures that Transcend Sites of C' are 

As noted by MedPAC, providers, payers and regulators need quality measures to 

coordinate care between settings, to achieve quality improvements, and to reduce costs. 

Likewise, consumers need access to understandable information to be part of care 

decision-making. In post-acute care, it is vital to have quality measures that transcend 

sites of care and for there to be a high level of transparency on these performance 

measures. Currently, the post-acute space lacks a common set of quality indicators to 

evaluate care outcomes as patients move across sites of service. This lack of common 

quality measures impedes effective care management across an episode of care. 

While policymakers test different ways to produce common quality metrics such 

as through the recently released CMS study, PostAcute Care Payment Reform 

Demonstration" CPAC-PRD"), Kindred has several innovation pilots underway. For 

example, we are pilot testing use of a "Functional Outcome Measure" (which measures 

functional improvement produced by a course of rehab) across an entire episode of care, 

including the acute hospital and post-acute stay. These measures are collected and 

displayed on an IPAD so that both clinicians and patients can see, in real time, where 

they are in their recovery cycle. Collecting and using this common measure across both 

the acute and post-acute episode promotes continuity of care as the treatment protocols 

used, and the functional gains achieved, can be continued from setting to setting. Again, 

since Kindred therapists provide care across all settings, this also promotes continuity of 

care and efficient delivery of services. 

Aligned Payment Incentives Between Payers and Providers 

All of the key enablers described above that promote care integration will also be 

needed to support a payment system that is more integrated. As noted, the current feefor-service payment model contributes to a fragmented delivery system and payment 

inefficiency. It also discourages aligned incentives between providers and between 

payers and providers. Today, there are separate payment systems for each post-acute 

provider and insufficient criteria to guide appropriate patient placement Today, payment 

systems do not encourage post-acute providers to reduce lengths of stay. In fact, 

providers who reduce lengths of stay are penalized because patient care costs are frontloaded and payment systems do not recognize this fact and can produce payments below 

costs for very short lengths of stay. Today, post-acute providers are not rewarded or 

penalized for re-hospitalization rates. And today, post-acute providers are not paid based 

on the quality outcomes achieved. 
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The Committee should recognize that it will take time to transform our current 

payment system into one that pays for value, rather than volume. In the meantime, I 

wanted to share a few Kindred pilots with managed care payers that can help shed light 

on how the payment system might be designed for the future. For example, Kindred has 

developed with one physician-led managed care organization a pricing model that reflects 

different levels of care based on patient characteristics for multiple post-acute services. 

The levels of care are determined both by patient characteristics and the services needed 

in each post-acute setting. The pricing agreement is supported by a centralized admission 

infrastructure as well as physician-led care management used to assess level of care, 

appropriate length of stay, and movement between sites of care. 

We are also in the process of developing "pay for performance" payment 

adjustments to this and other contracts with managed care organizations to promote 

alignment of interests between payer and post-acute provider. These payment 

adjustments include, among others, shared risk and gain around: 1) reductions in lengths 

of stay; 2) reduced re-hospitalizations; 3) quality improvements, including patient 

experience measures; and 4) discharge rates home. As discussed below, we view "pay 

for performance" payment adjustments as a critical bridge to a fully integrated payment 

system, including the concept of payment of a fixed cost for a full episode of care. 

Towards Delivery System RefiJrm and Integrated Care: Barriers and Opportunities 

In some ways Kindred is uniquely situated to support delivery system reform 

through integrated care because of the diversity of our post-acute service lines and our 

national scope which has provided us an opportunity to work together with our partners 

in the field to test new models of integrated care that are tailored to the needs of local 

communities. But we are by no means unique. Many post-acute providers-L TACs, 

IRFs, SNFs, Home Health, Hospice providers--are likewise expanding their capacity to 

meet the diverse needs of patients, establishing closer linkages with hospitals, health 

systems, ACOs and managed care payers, making investments in health information 

technology and developing care management capabilities to prepare for a more integrated 

system. 

And all providers face the same challenges in making progress towards these 

shared goals, some of which [ would like to highlight for the Committee. I would also 

like to share a few ideas for incremental progress as we work together towards 

comprehensive reform. 

Payment Instability under the Current SYstem 

Kindred recognizes our shared obligation to reduce costs and have supported 

efforts to stem the rise in healthcare expenditures as part of our nation's debt reduction 

imperative. Over the last several years, all healthcare providers have been subject to 

tremendous reimbursement pressures as Congress, CMS and private payers have been 

forced to reduce provider payments to address this national crisis. At the same time, I 

urge the Committee to consider the impact of additional payment cuts-including the 
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impending 2% sequestration cut to Medicare payments beginning in January 2013 and 

continuing for 10 years-on our ability to continue the kinds of innovation pilots I have 

described today. Innovation requires stability, and more payment cuts will cause a level 

of instability that I fear will prevent the kind of innovation needed to transform our 

healthcare system. 

We can reduce costs and overall spending by reforming our delivery and payment 

system - through reduced lengths of stay, reduced hospitalizations, investments in 

electronic health records, investing in care management, and improvements in quality. 

But achieving these long term goals will required investments in the short-term, and 

making these investments requires a measure of stability and confidence in the current 

payment systems. As noted by a prominent policy expert: "Before provider payments 

are reduced, our payment system must be reformed to encourage the more efficient 

delivery of care ... so that new delivery models can gain traction." 3 

Address n;s Payment Rules that are Inconsistent with Integrated Care 

As we work together towards a more integrated delivery and payment system, I 

urge the Committee to consider incremental reforms to the current fee-for-service 

payment systems that inhibit innovation and progress towards a more rational system in 

the future. There are many examples that I would be happy to discuss with the 

Committee, but I would like to mention two specific ideas in the time that I have. 

First, as I have mentioned, it is important that acute and post-acute providers and 

payers have aligned incentives to achieve the shared goals of improved care and lower 

costs. An immediate focus on reducing re-hospitalizations is an area where providers and 

payers can be aligned. I urge the Committee to consider ideas from post-acute providers 

and others about ways that the payment system can encourage reduced hospitalizations 

on the one hand, and discourage high rates ofre-hospitalizations on the other. Acute 

hospitals are already incentivized by the payment system to address this important issue. 

I see no reason why post-acute providers should not also have "skin in the game" so that 

interests are aligned. 

Second, there are changes to the current fee-for-service payment system that can 

encourage appropriate patient placement into post-acute settings based on patient needs 

and align Medicare payments more closely with patient characteristics and care needs. 

For example, the so-called "IRF 60%" rule, which defines appropriate patient criteria for 

admission to an IRF, has had the effect of stemming growth in overall IRF spending and 

encouraging appropriate use of this post-acute setting. Likewise, I commend Senators 

Roberts and Nelson, both members of this Committee as well as several Committee cosponsors, for introducing last session S. 1486, The Long Term Care Hospital 

Improvement Act. This legislation, like the "IRF 60% Rule," would more clearly define 

the role ofLTACs in the healthcare continuum as treating the nation's most medically 

complex patients. It would also reduce Medicare spending by ensuring only patients who 

3 Mechanic, Robert E.: Altman, Stuart H. "Payment Refonn Options: Episode Payment is a Good Place to 

Start." Health Affairs - Web Exclusive (2009): 262.271. 
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require the intensive services provided by LTACs are admitted and treated in that postacute setting. These types of incremental reforms to current fee-for-service payment 

systems are a helpful and necessary bridge to a fully integrated delivery and payment 

system. 

On behalf of Kindred, I would like to thank the Chairman and the Ranking 

Member again for the opportunity to share our perspective on delivery system reform and 

some of the innovative projects we are pursuing with our partners in the field. I started 

my comments by emphasizing the need for collaboration, trust and teamwork between 

providers, payers, and policymakers to achieve delivery system reform. I would like to 

close my comments by re-emphasizing this point and committing to the Chairman, the 

ranking Member and the entire Committee that providers stand ready to work with you 

and others in the healthcare community to transform our healthcare system, beginning 

with incremental reforms that can produce immediate results. Our ability to do so will 

depend critically on some measure of payment stability and confidence in the short-term 

and incremental reform of our current payment system to enable and promote the type of 

innovation that needs to occur to transform our system in the long term. 
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Kindred Healthcare is 

dedicated employees 

taking care of 

patients and residents 

every day in over 

locations in 

states. 

O lOCAL KINDRED MARKETS WITlI 

A DEVELOPING CONTINUUM OF POST· 

ACUT! SERVICES AND ACTIVE INTEGRAT!D 

CARE PARTNERSHIPS 

5 
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Every year, more than 34 million ratients are IbchargeJ 

fwtH inpatient hospital care, For many of t heS(' patien! s 

medica! and rehabilitative care after a short stay in H 

and dedicated support stHff enables us \"0 more successfully 

and seamies..dy transition patients and effectively manage 

rheir entire episode of om:, across multiple settings - this: is 

how we Continue the Care. \f,/e make recovery possible at 

sites '1f service in local commtmities nationwide, including 

6 

untts, inpmienl rehahiHtati,)t'l hospitals (lRHs), suhtransitional care t;:enters, skilled nursing and 

rehabilitation centers, homecare, hospice :md through 

Kindred's committeJ arpr~)ach hRS led to a proven track 

record of success with superior dinical ourcomes, high 

custOmer 5<'ltisfaction and quality care. 
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IIl:1II Patients' use of sire duling a 90-day episode 

(1) RT!, 2tJ09: Examining Post-Acute Care Relations/Jips in an Integrated Hospital System 

SOllRCEKlf\drilillnt1>maIOatll 

7 
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Throughout 2011, Kindred built upon its significant e~ch patient.C)ne pilor that illustrates this approach is in 

our Columbus, Ohio, market. Upon admL"sion to {lUr skilled 

in the area, 

communtcHrion, ("nabling a better undcrswnding of padent agency- attends aU ;;::are conferences and ~mdersl:;mds aU 

improved Olfe outcomes and 

more patients dLscharged home. 

Kindred is proud to be participating in it number of 

Organizati~m (ACO) Pionet:~rs. 

in hospit"l Joint 

Operating Committt-"es OOCs), and utilizing our intcrnal 

finandal flnd clinical goals. 

Tr".smooal care and !10m""",. Pilul 

Our npproach to integration and ;;::oordinatlon is to hreak 

down the silos of care and foclls on the unique ntedsof 

for the Pflti(>nt -and a tnlstcd advisor to the p;ltknt and. 

family who \vorb to ensure everyone for the 

transition to homecarc, 

lnoo •• tions in Technology 

KinJreJ has recognized Hnd invcsled in the development 

of infof1:nation technoiogies including electronic hcalth 

records (EHRs) in ord,:r tL\ improve clinical delivery, {'.HpturC 

a patlcnt's ch,,111ge in con~lit ion or medication manrlgement; 

enable clearer communication betwecn physicians, nurses 

Hnd case 111l.Wtager,,; 1.111\1 provide improved data ~\nalytic$< 
59 


80998.023

Additionally, in the Cleveland, Ohio) market we have 

estahlished an electronic linkage with our acute care 

EPIC, within our bea\ LTAC 

Point' Click Care web-based EHR in nul' Nursing Center 

streamline pr-Lxesses and increase operating efficiencies -

aU contributing to improved q1..1aHty care. 

provide the highest levels of productivity and efficiency. 

data, 

which pmvides the ability to identify and implement 

improved patient outcomes. 

Innovallons In Reduced Relmspitalizallons 

Kindred continues itS focus on innovative stratcj:,,'les t~) 

and first pilot test of an application that identifies patients 

hospitalization so that colleagues can take action to reduce 

thetisk. 

Innovalions in PIlysiclan Engagement 

To promote training of physicians in post~acute care, 

Kindred facilities are used as academic sites for residents, 

medical students and allied health dinicians, 
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Our patients arc critically iU \vith few care optiuns left. 

and radiology services and operating rooms. 

Wllollre Our Paliellls 

TIle physicians Hnd clinical teams in Kindred LTAC 

services receive care and rehabilitation in l1Item_ate settin!,,'S 

best suitl-d for their needs. The criteria dicmte th.lt our 

S(lUn.,:~: National Healthc3u, Safety Network 12i)10) and Kindred !ntarnal Oata (2011) 
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Pain Manageme-nt 

CaUlightResponse 

lnterdistlipllnary Care Coorllinalion 

In each LTAC hospital we use Interdisciplinary Care 

Coordination Teams to best treat the patient by planning 

care specialists. 

" 

34.8 

$3,311 

Suurce: MerlPar (2010) 

SUbacute Units 

Situated within our LTAC h0Spituls, our subacute unitslicensed as skilled nursing facilities - provide medical care 

, 

11 
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Kindred invt':sted additional clinical reSl)UfCeS, including 

an 11 % increase in nursing h-ours per patient day since 

2004, to !neet the -growing patiC'nt needs. This 

hl1s resulted in an lncreasc in patien.ts discharged h0111e, 

a decrease in the ,:lVerage length of ~tay 3Xld ,-"t reduction 

Oule.me. Excellence 

otltcomt's tracking, providing robust reports which inchhJe 

functional OlHcome mcmalres and customer $atisf~1Ction. 

We use this data to improve our quality and build post<tcutt' 

C:lfC relationships that establish appropriate patient goals 

and CTC,,1t-C plans of cnfe fz)t a sllccessJui retutn to home. 

these programs, patients benefit from specialty physician 

!'raDsill.nal Care - SIlort· Term Rehabilllati •• 

complex, 

unique and changing needs. OUf transitional care Centers 

are sh~\ping the futun.: of our nursing and rehabilitation 

include physkfll, occuparinnal and spe(;'~~h-18nguage 

AIzheimer1s and Dementia Care 

Many of our pHtients- go home within n fe,v weeks, and ror 

those residents \vho me unable to return home, we provide 

involv('mc-nt, an interdisciplinary \CHm with advanced of mind for their familie:). 

training for the conditions they treat and specific protocols 

12 
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52% 

2011 

Source: Kindrad Internal Data 

2008 2009 

Source: CMS·Mairltainad OSCAR Database, November 2011 

28.8 

2010 

2011 

% Increase In Pharmacy Costs 

Source: Kindred !nt$ffisl Data 

U4'1l 

Tota! Average Length 

of Stay IALOSI 

Rehospitalization % 

Discharge Home % 

2010 

13 
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in "vhleh cure is delivered, rchahilitative theraplcs I1rc 

~m essemi;'ll cnmpoQC'nt in delivering impro\.'"ed patient 

achieve improved function and independence. 

There Hlustrates that 

rmd unaffiliated skilled nursing faciUties led to the ability of 

39.8% of treated p-'.ttients and residents to return to home 

or community. 

Clinical Training for Outstanding RehabllilaOun 

RchnhCarc focuses on the clinic{11 devd{)pmcnt of our 

therapists. OUf rehabilitation te[lms llfe educated and 

trained on the latest technology, surgical approac....fu:s, 

We provide ongoing clinical training rebted to tilUs 

management, cognitive retraining, rain mnnagemC'1)t, 

seating and posh loning, low vision and ha.riatric care, among 

manyothcTS. 

highcI~intcns.ity thcmpy interventions resuh in shorter Inpatient Rehabilitation Hospitals 

(certified by Medicare 8S inpatient rehabilitation fudlities 

Recovery Through Rehabilitation (lRfs» provide rapid f\'COvery and improved function 

In 2011, the !'eh<lbiHtatton providd by our RchahCnre for patients "who can rolemre at icast three hOUf& of 

rehabilitation therapy e<.1ch day. 

compared to what they wer¢ able to d<.) prior to llhlt"sSOT In 2011, wc-carcd f0f approximately 42,400 patients in t02 

injury. As well. Ollr rehabiHration inten:enth1tl.S in Kindred rehabilir, ... tion unk.,. More than 76% 

\vere discihJrgcd to home or (:ommunity aftcr an aVt'lTlgc 

14 Source: Dianna Jette, at al {20051, Archives (If Physical Medicins and Rah.sbi!itation 
65 


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F!MGain F1MEfficiencv Discharge to Community 

Smm:e: Kindred !nternal Data, Using Modified "Functional Outcome Measures~ (FOMS) 

15 
66 


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Kindred~~ homecare and hospic(' division, PeopleFirst. tocntion - their home or place of residence. Our homccare 

includes 2,300 caring employees serving 4j 800 individuals profc%ionnb ,-ltC' abk to provide the most cost~effccti\'e 

2011 saw significant growth and development for 

PeoplcFirst Homecne and tlo;;pke. This additional 

continue the care for patients, residents and clients across 

the entire pnsh1CUk spz'Cmrm. These capabilities allow us 

to pnwidc care and services in an individual', most'pee/wed 

16 

How Often Traat~d h:Jr Pain 

criticnl nursing and rehabilitative services that alleviate the 

Til(' abililY to dhd,(lfge patients from LTAC hospimls., 

IRFs or skilled nursing ,1nd rehabilitation centers to 0\11' 

we"",· cn"niim'twn of 

care, with qUkker transfers home and fewer post,discharge 

[ehospitalizations .. aU at significant savings to the 

healthcare sy~tem. 

StlUn,";6: Centers for Mt'ldlcam and Medreaid Services; Ham ... 

HsalthCompare-1fito3!l2011 
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In •• st""'nl in Employees 

equip our employt'C's to provide high-qualiry mt'i..lical care 

l:md rehabilitation 8.cross the continuum, we invest in 

being, 

Our goal i~ to ~lrtT:;Kt, clew-lop Hml n~!ain oursmrl"Hng 

desis.,rned to bring Out the best ampng our coHcag'ues 

including out Exe,'utiv~ Fellol.-wl\ip, Nurse Leader~hip an~l 

to pmvide hands~on field experience, practical t~)l)h and 

individuals for officer leadership positions. 

Hospitals NUfsingCentafs 

18 

In hire 2011, Kindred held its third anm!"j Chni(:allmpacr 

C"mtinuum. By bringing tQgt,ther 350 pwC(,SSiOf1<lls fn)m 

many different disciplines througl1\'nt Kindred, we furthered 

ou!' commitment to provide the best in interdisciplinary care 

for our patients Bnd customer&, and to expand our dinka! 

Providing HOPE 

1112005 21110 1112011 
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19 
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STATEMENT OF HON. ORRIN G. HATCH, RANKING MEMBER 

U.S. SENATE COMMITTEE ON FINANCE HEARING OF MAY 23, 2012 

PROGRESS IN HEALTH CARE DELIVERY: INNOVATIONS FROM THE FIELD 

WASHINGTON - U.S. Senator Orrin Hatch (R-Utah), Ranking Member of the Senate Finance 

Committee, today delivered the following remarks at a committee hearing examining the 

progress of health care delivery in the nation; 

I want to thank Chairman Baucus for convening today's hearing. Americans are looking 

for areas of agreement between our two parties on health care. I have been very clear about 

my opposition to Obamacare, the President's health care law. This deeply flawed law spends 

too much, taxes too much and does nothing to address the fundalJlental challenge of rising 

health care costs. However, the Chairman and I agree on the need for providers and payers to 

work together to provide higher-quality, better coordinated care to patients. Our witnesses 

this morning all have tried innovative methods to achieve that shared goal. 

According to the Medicare Payment Advisory Commission's most recent report, last 

year Medicare spent over $229 billion on inpatient hospital and post-acute care for Medicare 

beneficiaries. This represents 43 percent of total Medicare spending. 

Meanwhile, the population of Medicare beneficiaries is exploding. Last year the first 

baby boomer became eligible for Medicare. By 2031, it is projected that 80 million people will 

be Medicare eligible. As these retirees enroll in Medicare, government spending will 

mushroom. 

As most health care providers will tell you, in addition to an aging population, we face a 

growing number of patients with chronic illnesses, such as diabetes or heart disease. These 

patients are sicker and more expensive to treat. And while providers are doing their best to 

manage these patients, too often our health care system is not structured for easily 

coordinated care. 

Currently, we have a system of silos. Patients are seen in a variety of settings -

doctors' offices, hospitals, or nursing homes - and it is not uncommon for a health care 

provider to have an incomplete picture of all the care a patient is receiving. 

Furthermore, our fee-for-service system provides little financial incentive to manage 

care properly. Instead, the incentive is to increase the volume of services. Reducing costs will 

require that patients receive the right care, in the right place, at the right time. Increasingly, it 

is private payers - on behalf of employers - who pressure providers to reduce costs, 

providing better care and better health outcomes. 

Patients deserve and demand better care. In my own state of Utah, we are privileged to 

have some of the nation's best, most efficient health care providers. But not all providers are 

created equal. Much of our health care system is fragmented, and often the right hand does 
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80998.036

not know what the left hand is doing. Unfortunately, the patient is caught in the middle with 

very little coordinated care. We know from our witnesses today, as well as other health care 

leaders that there is a needed focus on care transitions. Many errors can be avoided when 

health care providers keep this focus. 

Of late, much attention has been focused on the Center for Medicare and Medicaid 

Innovation - CMMI - and the flourish of activity it has created. Like many of my colleagues, I 

remain concerned that CMMI has an enormous budget and very little accountability. It is more 

than a little ironic that an organization touting quick, innovative change and efficiency took 

over five months to respond to my request for very basic information on its strategic plan and 

an accounting of how it is spending $10 billion of taxpayer money. 

In addition to continued oversight of CMMI, I intend to ensure that the pilots and 

programs they develop actually work for our seniors. For example, when CMMI unveiled the 

Accountable Care Organization - or ACO - pilot, most providers felt it simply would not work, 

was unnecessarily burdensome, and did nothing to advance the cause of higher quality, lower 

cost, more efficient care. 

Many of our witnesses today have very interesting stories to tell about how they are 

transforming care within their communities. They identified a problem, knew a solution was 

needed, and did not wait for the government to tell them how to best fix the problem. 

Innovations happen in every community and in all sizes, and no one knows better the needs of 

a community, than the caregivers on the ground. I know this is not easy and often takes years 

to develop, but I congratulate all of you for the great work that you are doing every day. 

I look forward to hearing from our witnesses and learning about how others can 

hopefully adopt some of these great ideas and achieve positive results in their own 

communities. 

### 
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Testimony of Marc Malloy 

President and Chief Executive Officer 

Renaissance Medical Management Company 

United States Senatel Committee on Finance 

"Progress in Health Care Delivery: Innovations from the Field" 

May 231 2012 
74 


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Chairman Baucus, Ranking Member Hatch and other distinguished Members of the Committee: 

Thank you for the opportunity to be here today. My name is Marc Malloy. I serve as President and Chief 

Executive Officer of Renaissance Medical Management Company. I am honored to be asked to share 

with you today our experience as an industry leader driving innovation in health care delivery. 

Renaissance is a physician-owned network of 230 primary care physicians located in the suburban 

market of Philadelphia and is one of the thirty-two Pioneer Accountable Care Organizations (ACO) 

chosen by CMMI. Since 1999, Renaissance has been focused on improving patient outcomes, improving 

quality of care for the population served and lowering medical costs. We exist to support our patients 

through the practice of high quality medicine in an economically sustainable way. 

We have never shied away from the challenge of improving our patients' well-being, delivering high 

quality care and controlling costs. Renaissance has invested in people, processes and technology to 

achieve results. From a practical perspective, the physicians understand that the best way to improve 

quality and lower costs is to focus on three primary areas: 

Keep Healthy People Healthy 

At the root of our success is the commitment of our physicians whose daily efforts ensure that we are 

focused on prevention and well ness. We do this by making sure that our patients get the health 

screenings they are supposed to receive and by making available to patients up-to-date information and 

tools to become active, engaged partners in promoting their health. In addition to the obvious benefit 

to the patient of staying healthy, if we can prevent people from developing a medical condition, we can 

completely avoid the costs associated with care. 

Mitigate Health Risk Factors 

In order to improve the health and well-being of the people we serve, it is critically important to ensure 

that individuals understand how their family history and lifestyle affect their well-being, and how to 

mitigate their health risks. Our physicians regularly screen patients to identify patients with emerging 

conditions so that they can effectively treat any emergent issues before they become more serious. 

Once we identify risks, we work with patients to create personalized goals and target appropriate, 

proven interventions such as tobacco cessation, stress management, nutrition counseling, physical 

activity and others to help patients mitigate identified health risks. 

When I think about our efforts in this area, it reminds me of a phrase I learned from my mom, Sylvie 

Marceau who passed away this past October. She always spoke of the importance of "early entry to 

care." In her work as he CEO of the Healthy Start Coalition in St. Lucie County Florida, she dedicated her 

life to reducing infant morbidly and mortality. Her work showed empirically that getting expectant 

mothers into care early in their pregnancy provided the best opportunity for healthy moms and babies. 

Likewise, early identification of health risks and early entry to care for patients with medical conditions 

typically results in a lower cost of care and better outcomes when a condition can be managed before it 

becomes more significant. 
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Ensure the Provision of Coordinated, Evidence-Based Care 

When a patient already has a serious acute or chronic condition, our ability to improve well-being and 

reduce costs comes from our commitment to delivering an evidence-based plan of care that is wellcoordinated across the patient's entire care team. We deploy nurses to perform patient risk 

assessments, establish clinical goals for the patient, educate the patient and or caregivers on how best 

to manage the disease state, monitor progress and report findings and progress to the primary care 

physician. 

The combination of the various resources developed and deployed by the physicians has produced some 

impressive results. We have achieved some of the highest quality measures in the nation, and 

demonstrated medical cost savings over several years. It is because of our success in these areas that 

Renaissance applied for and was selected as a Pioneer ACO. 

Every innovation that Renaissance has made over the years has been based on adapting to the 

ecosystem within we have operated. With the passage of PPACA, the environment continues to change. 

Renaissance has entered into a strategic relationship with Healthways that will bring new capabilities to 

our ACO for things like predictive modeling to identify patients likely to need additional care 

management services. In turn Healthways expects to deploy the tools and capabilities developed by 

Renaissance into other parts of the country as part of its phYSician driven popUlation management 

strategy. 

Renaissance is working with its partners to adapt the people, processes and technology to continue its 

mission to improve patient well-being, improve the overall quality of care and lower costs for the 

population served. In addition, we have entered into new discussions with hospitals and payers alike to 

establish high performance networks, which is to say, hospitals and physicians aligned in ways to 

collaborate on providing the best care at the lowest costs. We believe that these smaller but higher 

performing networks of providers will provide a basis for new products and services for the consumer 

market, and the health insurance exchange. 

The clinical leadership within Renaissance has concluded that vertical and horizontal integration are 

inevitable, as such we have entered into discussions with potential partners to drive a deliberate and 

contemplative approach to advance our clinical quality objectives but to also provide better information 

sharing, greater transparency in quality and costs, and better delivery of care to patients. Our goal is to 

be the architects of these arrangements. 

The world of health care delivery is changing and the changes will certainly be disruptive, but we think 

that organizations willing to innovate and adapt have an opportunity to fundamentally improve the 

delivery of health care in America. 

Thank you for the honor and privilege to report on our work in the Philadelphia marketplace. I would be 

pleased to answer any questions. 
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United States Senate Committee on Finance 

"Progress in Health Care Delivery: Innovations from the Field" 

Testimony of Richard Migliori, MD 

Executive Vice President for Health Services 

UnitedHealth Group 

May 23,2012 

Thank you Chairman Baucus and Ranking Member Hatch for holding this important and 

timely hearing and allowing UnitedHealth Group to provide you with our perspective on how to 

improve the health care delivery system. My name is Dr. Richard Migliori, and I am the 

Executive Vice President for Health Services at UnitedHealth Group, a diversified health and 

well-being company based in Minnetonka, Minnesota. UnitedHealth Group serves more than 75 

million people through its health benefits and health services businesses and operates in all 50 

states. The company has the unique ability to engage in all aspects of the health care delivery 

system and apply lessons learned at full-scale in the marketplace. As a result, we view health 

care delivery and benefit design through multiple lenses. Our findings are informed by our 

experience with: 

16,000 physicians, nurses, and clinical practitioners on our staff; 

Direct relationships with 754,000 health professionals, 5,400 hospitals, 66,000 

phannacies, 900 labs, 400 life science organizations, 300 commercial insurance 

companies and health plans, and 300 government agencies; 

Managing more than $300 billion in health care annually; 

Processing 80 billion transactions a year, including 750 million transactions through our 

Web portals and mobility devices; 

Processing more than 2 million claims and more than 1 million calls per day; 

Operating Health Information Exchanges for eleven states; and 

Managing over 24 million Personal Health Records. 
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I. Challenges and Opportunities in the Current Health Care Marketplace 

Sustainable access for Americans to high quality, affordable health care is put at risk by 

factors that will persist until the health system is modernized. These factors include: 

l. Variation in Quality of Care and Resource Consumption: Though our health system is 

remarkably talented, its outcomes and resource utilization perfonnance can vary greatly 

across regions, among physicians and institutions, and across specialties. This results in 

measurable evidence of overuse, underuse and misuse of medical treatments across the 

system. 

2. Fragmentation oflnformation: Much of American medicine is practiced in small groups 

of physicians, and the adoption of automated clinical and administrative systems has been 

comparatively slow. Even with broader adoption of enterprise Electronic Health Record 

(EHR) systems, interoperability to enable inter-institutional infonnation exchange is 

suboptimal. As a result, the level of adoption of automated infonnation within health 

care lags behind other sectors of our economy. This fragmentation and suboptimal 

infonnation may interfere with a physician's ability to gather information during the 

evaluation and treatment of a patient, increase administrative costs, and slow the adoption 

of new innovations in care. 

3. Increasing Burden of Chronic Disease: The changes in American lifestyle behaviors have 

contributed to the more than doubling of obesity rates since the early 1990's. It is well 

established that the prevalence of many chronic diseases, such as diabetes and its 
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complications coronary artery disease, osteoarthritis, and hypertension, increase as a 

function of body mass index. These increased prevalence rates place an additional 

burden on the health system that is already facing challenges of capacity - a burden that 

can be relieved by modification oflifestyle behaviors. 

These factors and their consequences contribute to a health care experience that is 

inconsistent in its quality, create waste that leads to ongoing cost trends that threaten its 

sustainability, and result in a care experience for its consumers and providers that is less than its 

full potential. 

In our role as one of the nation's largest payers for health care, managing and 

coordinating care for 75 million people across a vast network of physicians, hospitals and other 

health care entities, we have had the privilege of being able to measure and document these 

trends and to introduce innovative approaches to improve access to high quality and affordable 

care. Over the last 18 years, we have worked to foster a health system that is more connected, 

better informed, and better aligned in its objectives and incentives to continuously improve the 

safety, timeliness, effectiveness, efficiency, equality, and patient focus of the health system. 

Our approach leverages health data and analytics, technology, shared accountability, cost saving 

measures, and collaboration among providers, payers and patients across the health care delivery 

spectrum. 

The challenge to modernize the health system that provides for better health and higher 

quality of care at an affordable cost is evident to those who seek care and those that provide it 
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the system's patients and physicians. Through a national survey we recently conducted, we 

found that only a quarter of physicians (26%), around a third of consumers (38%), and half of 

hospitals (50%) believe that - absent new action their local health care community is on course 

to becoming more sustainable. As result, UnitedHealth Group is working with partners in both 

the private and public sectors to address the following identified key challenges: 

1. The Health Challenge: While doctors think that patients always or often receive needed 

preventative health care 50% of the time, patients believe they receive it one third (33%) 

of the time. Although this shows that both doctors and patients suspect that more 

preventative care could be delivered, patients are more skeptical and believe they are not 

receiving the full breadth and scope of the preventative care they could benefit from. 

2. The Quality Challenge: 47% of consumers said they believe there are significant 

differences in the quality of care provided by doctors in their local area, while 64% of 

providers said that was the case. Clearly, there is a transparency gap between what 

patients believe and their physicians know. 

3. The Cost Challenge: U.S. adults believe that health care costs in their community could 

be cut by between a quarter and a third (29%) without having a negative impact on 

quality. This shows consumers, who would normally be apprehensive about cutting 

health care budgets, know there is room for reform in the system. 
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This information guides us on how we engage with the health system, the investments we 

make and the innovations we bring to the marketplace. We identify ideas we think might work, 

test them and, if they are demonstrated to work, we bring them to full-scale in the marketplace. 

We rely on the market feedback loop to learn. There are times when our investments don't 

work, but when they do, we can transform how health care is delivered and see powerful results 

in the areas of quality, care coordination, and maximizing the system's potential. 

The opportunities that exist today are core to our mission to help people live healthier 

lives through our benefits business platform UnitedHealthcare and to help the health system 

work better through our services business platform Optum. We need to increase care 

coordination in the U.S. health system as consumers, doctors, and hospitals are increasingly 

finding that the health care delivered in their communities is not coordinated. There is an 

opportunity to increase the use of technology and leverage its capabilities better. Today, fewer 

than half of the Electronic Medical Records in use allow doctors to share their patients' medical 

records electronically with hospitals, and only a third of physicians report having a computerized 

system in place to track patients with chronic conditions and ensure appropriate monitoring and 

follow-up care. We need to align incentives and create a more transparent system for physicians 

and patients. 

Delivery System Reform must incorporate the tools to empower consumers and providers to 

achieve a common goal: transparency so informed decisions can be made and alignment of 

incentives so the system can reach its full potential. These tools will not only improve health 

outcomes but also reduce costs. 
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UnitedHealth Group's health care delivery efforts are targeted to address the core challenges 

and opportunities of the heath system outlined above. We do this by: 

Embracing well ness and prevention programs and fostering behavioral changes to 

improve the health status of the entire population by preventing avoidable diseases and 

the complications that result from the progression of these diseases; 

Empowering health care consumers with decision support tools through various 

transparency initiatives to help those that need to access the health system so they can do 

so with greater insight and make informed decisions; and 

Aligning incentives and driving outcomes through the use of data analytics and payment 

reform to empower health care providers with the technology and services they need, 

enabling them to better serve their patients. 

Underlying all of these capabilities is our proficiency in gathering, protecting and 

analyzing diverse forms of health data and sharing our insights with participants in the health 

system those who seek, deliver, regulate, and finance health care. Through our investment of 

over $2 billion annually in technology, including new development, we collect, dissect, analyze, 

and apply data to predict health care needs, identify areas of improvement, and protect program 

integrity. 
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Through our health services business, Optum, we provide services to 60 million 

individuals. Optum's customers include hospitals, physicians, health plans and their members 

(UnitedHealthcare and others), and other health care stakeholders. Over the past 15 years, 

Optum has created products and services which provide consumers and clients with complete 

solutions for a modem and evolving health care marketplace. We help physicians achieve 

greater consistency in their clinical performance and patient outcomes, build stronger individual 

consumer engagement and better health for people, drive down unnecessary costs, adapt to 

quality-focused compliance mandates, and help the alignment of participants across the health 

industry make the transition to new funding and payment arrangements. 

Our benefits business, UnitedHealthcare, serves 26.4 million Americans, including 

employer-sponsored health plans, of which 3 million workers and their families are sponsored by 

small business health plans; 8.9 million seniors; and more than 3.6 million Medicaid 

beneficiaries (including 2 million children in 24 states and Washington, D.C. in acute and longterm care Medicaid plans). UnitedHealthcare utilizes innovations, strategies, and resources to 

steadily transform the way health care is delivered and financed. As a result, we offer consumers 

a simpler, more affordable health care experience that serves their needs through every stage of 

life. We are looking forward to providing benefits administration and services for 2.9 million 

active duty and retired military service members and their families in the TRICARE West 

Region starting in 2013, and bringing many of our innovative best practices and approaches to 

the TRICARE Program. 
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Our deep clinical expertise across these broad populations, exemplified by our robust 

medical management programs which apply evidence-based medicine, has led to reduced 

hospital readmissions, length of stays, and inappropriate emergency room utilization, We have 

enhanced quality while managing the cost trend, Improvement in quality outcomes for our 

UnitedHealthcare plans is exemplified by a dramatic reduction in readmission rates of7, 1% for 

our Medicare Advantage members in the past 2 years, and a 15% conversion of unnecessary 

hospitalizations into outpatient observation status, Preventing unnecessary admissions and 

readmissions helps to reduce waste in the system and deliver better outcomes for consumers, 

We appreciate the opportunity to provide the Committee with our insights regarding what 

has worked for us in meeting the needs of our customers and individuals across the health care 

system and our recommendations for application of these innovations to Medicare and Medicaid 

as areas for potential collaboration and partnership, The tools and innovations I will outline are 

not currently broadly available in the Medicare and Medicaid programs, That is where the 

greatest opportunity lays for the Federal Government to change the health care delivery system 

and prepare it for today and tomorrow's consumers and health care participants, While not 

comprehensive, below are some of the best performing and highly successful tools and 

innovations we are deploying today to address various health care challenges and create an 

innovative, efficient, high quality, consumer-responsive, and provider-supportive health care 

system, 
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II. Embracing Prevention Programs and Fostering Behavioral Changes 

The vast information and knowledge we have collected has helped us to learn more about 

who is consuming health care, why they are consuming it, where they are consuming it, and how 

their care may vary from published evidentiary standards of best medical practices. These 

insights are clinically significant and also have an economic impact. We have learned that gaps 

in the system exist and there are often significant differences between the care people receive 

and the care they should have received based on the published clinical guidelines and evidence. 

Informing the consumer of these gaps, educating them and making them a smarter and more 

empowered health care consumer is critical to creating opportunities to improve care delivery. 

The benefit of using this data is seen in our well ness programs, where we work to 

identify the risk of disease in its earliest stages and to inform lifestyle modification programs that 

reduce the likelihood of disease. It helps us engage people with established chronic diseases in 

programs that address and potentially reverse the progression of that chronic disease. 

We are proud of the investments we have made in these programs and the results we are 

achieving in decreasing the prevalence of chronic diseases. I'd like to touch on a few specific 

UnitedHealth Group initiatives: 

Preventing the Onset of Chronic Diseases Such as Diabetes: 

Working in partnership with the Centers for Disease Control and with nontraditional 

providers such as the Y -USA to deliver the Diabetes Prevention Program (DPP), we work to help 

delay the onset of diabetes. Our results from the DPP include a 5% mean weight loss for 
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participants, an average of 13 sessions attended out of the 16 sessions, and nearly 75% of the 

participants that attend at least one session will go on to complete the program. With 50% of 

seniors entering the Medicare program with pre-diabetes, we estimate that the Medicare program 

could save $67 billion over ten years by reimbursing for programs like the DPP. We have two 

specific programs designed for those who are already combating Diabetes. Our Diabetes Control 

Program (DCP) partners with pharmacies like Albertsons, Kroger, Rite Aid and Walgreens to 

provide private one-on-one consultations with local pharmacists to increase compliance with 

medications and care plans. Our expectations from the DCP include increased compliance with 

the American Diabetes Association's guidelines, 75% compliance for Alc, and an increase in Rx 

compliance while slowing the progression of the disease. Our commercial business, 

UnitedHealthcare, has designed the Diabetes Health Plan to help consumers manage their 

diabetes while reducing their out-of-pocket expenses by as much as $500 annually through 

enhanced benefits in exchange for compliance with preventive care guidelines. 

The Diabetes Health Plan is an example of a value-based benefit that incents consumers 

to practice healthier behavior. Consumers receive richer benefits, or lower out-of-pocket costs, if 

they commit to fulfilling the American Diabetes Guidelines such as receiving blood sugar tests at 

least twice annually or diabetic retinal exams once annually. In exchange, they receive lower 

out-of-pocket costs, such as no copays for their diabetes, hypertension or cholesterol -lowering 

drugs. 

Considering the high costs associated with managing chronic diseases, investments in 

prevention are worthwhile for all parties involved. Working with the Federal Government on 
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ways to increase medication and care plan compliance and preventing the onset of Diabetes will 

be key to addressing this chronic disease. 

Implementing Employer-Sponsored Healthy Rewards Programs: 

The CDC estimates that roughly 50 percent of a person's overall health stems from daily 

lifestyle choices. To encourage healthier lifestyles and behaviors, we have developed 

UnitedHealth Personal Rewards, a program that rewards people for making healthy choices in 

their daily routine. Created by UnitedHealth Group in 2010 and adopted by over 40 large 

employers, the program serves more than 2 million people. The program has led to greater 

awareness of an individual's health, better care seeking behaviors such as well ness program 

enrollment, a reduction in Emergency Room use, an increase in PCP well ness exams, and weight 

loss. We saw a 19.6% reduction in diabetes-related complications, a 12.3% decrease in coronary 

artery disease costs, a 3.3% reduction in hospital admissions, and a 5% reduction in Emergency 

Room use. The investment in the health of our employees helps us keep a productive workforce 

and helps our employees and their families live high quality lives. As we look to modernize the 

Medicare and Medicaid systems, we should consider how we can incent the population, similar 

to what employers are doing in the private marketplace, to make the right behavioral changes and 

informed care decisions. 

Leveraging Telehealth Capabilities to Increase Access to Primary Care: 

Through enhanced models of telemedicine, we are working to expand access to 

America's health system and increase the use of preventative services and ensure individuals get 

the care they need when they need it. The NowClinic, a telehealth program established by 

UnitedHealth Group to meet the lifestyle needs oftoday's consumers, is an online tool that 
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provides patients with real-time access to licensed physicians in their state and facilitates through 

secure, live conversations between patients and physicians. Available in 18 states (Arizona, 

California, Connecticut, Illinois, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, 

New Mexico, New York, North Carolina, Ohio, Pennsylvania, Utah, Wisconsin, and Wyoming), 

people can log into myNowClinic.com and get access to physicians, and, in select states, our 

nurses, regardless of insurance coverage. This capability brings primary care to the individual's 

home or office, removing yet another obstacle to accessing a physician. 

As individuals' lifestyles continue to change and access to providers becomes even more 

difficult because of demands on the system, the Federal Government can playa role in 

encouraging innovative care delivery that leverages technology and is an efficient use of 

providers' time. 

Leveraging Technology and Mobile Apps to Increase Care Compliance: 

Our Medicaid benefits business, UnitedHealthcare Community and State, recently 

launched an initiative - Baby Blocks designed to engage pregnant women with an online 

mobile tool to drive the understanding of appropriate pre-natal and post-partum care and wellbaby care. By using email reminders for scheduled appointments and offering an incentive 

program to encourage engagement in their care and the care of their babies, we believe that 

women will experience fewer complications and that their babies will be healthier. If proven 

effective, compliance with this program should result in Medicaid savings to the State and 

Federal Governments. 

III. Empowering Health Care Consumers Through Transparency and Decision Support 

Tools: 
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UnitedHealth Group has been at the forefront of developing transparency tools and 

decision support services that help people make better decisions as they access the health system. 

Examples of the most important and effective tools include: 

Transparency on Costs: 

UnitedHealthcare's Health Treatment Cost Estimator provides our consumers a 

comprehensive view of how treatment costs differ from doctor to doctor. The tool delivers 

personalized cost estimates for various treatment options. It covers a broad range of care 

options, provides cost and quality data for more than 400 geographic areas covering 116 

diseases, 90 different types of surgeries and procedures, 500 individual services, lab tests, and 

radiology tests, and more than 3,000 medications. Utilizing significant amounts of data from a 

variety of sources, including our own in-network fee schedules and data licensed from the 

independent not-for-profit FAlR Health, this tool equips our consumers with personalized 

information to make informed decisions on where to seek care. Empowering consumers with 

this information allows them to be more confident about the quality of their care and in control 

of the economics surrounding it. 

Creating Customized Health Care Tools: 

Optum has taken the concept of providing the right care at the right time to the right 

people even further with the creation of our eSync Platform. This powerful technology helps 

build a detailed health portrait of each patient and then delivers customized health care 

management tools to individuals directly and via their care providers. By combining, in a 
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HIP AA compliant manner, a wide range of health data such as medical claims, health and 

lifestyle choices, and demographic factors, UnitedHealth Group can turn this information into a 

practical blueprint for effective, personalized plans based on a member's actual health care 

needs. Through a combination of outreach by Optum's nurse, direct mail, mobile applications 

and Health eNotes, our consumers receive information about an upcoming medical procedure, or 

a reminder to schedule an annual exam, or tips on starting an exercise plan, all based on their 

personal needs. Optum' s eSync also powers the ability to proactively reach out to high-risk 

customers and offer them the opportunity to participate in programs specifically designed to help 

them reduce their health risks. 

For nurses, clinicians, health coaches, physicians, and others, the eSync platform also 

provides enhanced visibility into a patient's medical history and real-time medical profile which 

can result in better health management and potentially significant savings for individuals, their 

employers, and the health care system as a whole. Medical care designed for the individual is 

critical to creating an efficient, effective, and consumer-friendly health care system. 

Adoption of technology in a manner that allows communication across the health care 

system, regardless of payor or provider, and is critical to reforming the health care delivery 

system in a manner that decreases costs without impacting quality. In addition, it provides an 

opportunity to empower both consumers and providers with the information they are seeking to 

improve outcomes. The Federal Government's role in requiring the adoption of Health 

Information Technology is critical to increasing its widespread use. 
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IV. Aligning Incentives and Driving Outcomes Through Technology and Payment 

Reforms: 

Our data analytics allows us to serve the important needs of physicians and institutions 

that care for consumers, customers, and their patients providing insights into everything from 

physician practice patterns, to gaps in care, to the full cost of specific care episodes. Our 

technology and investments enable us to provide tools and solutions to more than 250,000 

physician practices of varying sizes and more than 5,400 hospitals. In addition, we partner with 

the provider community through Accountable Care Organizations and Medical Homes, In 

addition to the eSync platform I discussed earlier, we are working with the hospital and provider 

community to develop new ways to deliver health analytics directly to the point of care, aligned 

with physicians' regular workflow, to enable better, real-time decision making between 

physicians and patients. Optum developed the Optum Care Suite for patients, physicians, and 

other health professionals to access essential health intelligence and collaborate in making 

medical care decisions to improve health outcomes. Managed via Cloud technology, in a secure 

environment that protects patient privacy, Optum Care Suite marries clinical data from electronic 

medical records with related health claims, patient-reported outcomes, and Optum's powerful 

analytics, Pilots conducted with small group primary care practices in Arizona have 

demonstrated that sharing of information bi-directionally with physicians, measuring clinical 

outcomes, and moderate financial incentives that are reimbursed effective to their ability to close 

the gap in care, led to a ten-fold increase in the rate at which the evidence-based medicine gaps 

were closed. 
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Creating Meaningfnl Use to Securely Share Information: 

Our investments include operating Health Information Exchanges in more than 11 state-wide 

programs, multiple regional programs, and several hospital-specific health systems. The 

connectivity established across these health systems is further enhanced with administrative - and 

clinical information based decision support systems. Optum' s Axolotl Discover Program 

delivers powerful analytics to the Health Information Exchange, converting vast amounts of raw 

data, almost instantly, into critical health insights for physicians and other care providers who 

participate in the Exchange. The Quality Health Network (QHN) and Optum partner together to 

deliver a Health Infonnation Exchange in Colorado. Using Optum's Elysium Exchange platform 

deployed by QHN, the independent hospitals and physicians of Aspen and Montrose counties are 

electronically connected to each other and with other independent hospitals and physicians in 

Grand Junction, Colorado. The real time clinical messaging infrastructure allows authorized 

physicians to share clinical data at the point of care between and among disparate hospital and 

Electronic Medical Record (EMR) systems. The Exchange has been identified as a model for 

quality improvement and cost efficiency. 

Innovative Program Designs: 

Our commitment to being a leader in modernizing America's health care system is also 

evident in our program designs and our leveraging of nurse practitioners. Utilizing appropriate, 

evidence-based clinical interventions through our Evercare Program and the Senior Care Options 

Program in Massachusetts, Medicare and Medicaid Eligibles have experienced: 

A greater than 50% reduction in inpatient utilization; 
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A 26% bed-day reduction over a three year period; 

A 64% reduction in Medicare inpatient admits; 

A 52% reduction in Medicare costs; and 

A 60% reduction in emergency room visits. 

In our Medicare Advantage programs, with the use of high-risk case management, advanced 

illness transitional care, and post-acute transition programs, seniors experience: 

30% fewer hospital readmissions than Fee-for-Service; 

50% fewer hospital readmissions in institutional settings; 

A reduced length of stay in the Skilled Nursing Facilities by 2 4 days, resulting in over 

$1,000 in savings per case; and 

Savings of $2,400 a year per member through the use of high risk management tools. 

We all benefit when care is delivered in the right setting, when gaps in care are narrowed, 

and complications are identified earlier and treated effectively. 

Innovative Payment Reforms: 

Payment is another important method in aligning incentives and driving quality 

outcomes. We have a strong commitment to modernized reimbursement systems with 

physicians and hospitals that pursue evidence-based care when conventional Fee for Service 

systems could create ineffective outcomes. The UnitedHealth Premium Physician Designation 

Program empowers our members across the Country to make physician selection choices based 
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on quality and cost efficiency. Started eight years ago, our Premium Designation Program is 

perhaps the nation's broadest and deepest transparency tool for physician performance and 

assessment. This program provides physicians with valuable feedback on their performance 

while at the same time enabling patients to make informed health care decisions. We use the 

extensive data we have from claims, pharmacy, laboratory and other administrative data sources, 

and analyze care patterns using sophisticated episode-grouper analytic software. This approach 

analyzes patient care by condition across settings and time, thus representing a more patientcentered view of care. 

Our program is grounded in the principle that performance measures should be developed 

by expert physicians in each specialty area and approved by nationally-accredited bodies. As 

such, we incorporate performance measures that have been reviewed and endorsed by the 

National Quality Forum and the National Committee for Quality Assurance, as well as 

performance measures developed in collaboration with medical specialty societies and reviewed 

by committees of practicing physicians. The Premium Designation Program evaluates physician 

performance on quality and efficiency across 21 different areas - including primary care and 

specialties such as cardiology and orthopedics. 

The Premium Designation Program analyzes the perfonnance of physicians against both 

quality and efficiency benchmarks. Quality is measured first and only those physicians who 

meet or exceed quality benchmarks are then evaluated for cost-efficiency. Quality is assessed 

using more than 300 national standards and metrics developed by physician specialty societies. 

Efficiency is measured using more than 230 measures and benchmarks that are risk-adjusted and 
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tailored to each physician's specialty and geographic area to account for differences in average 

costs. On both dimensions, performance is measured relative to other physicians. Results are 

displayed in our provider directories using a "star" format, with one star for quality and another 

for efficiency. This online system has been well-received, with positive feedback from 

physicians and medical societies. Key outcomes associated with our Premium Designation 

Program include: 

For all 21 physician specialties in the Program, the incremental savings between 

Premium Designated Physicians and non-designated physicians is 14%; 

Cardiologists who earn a quality designation have 55% fewer redo procedures and 55% 

lower complication rates for stent placement procedures than cardiologists who did not 

receive the quality designation; and 

Orthopedic surgeons who earn a quality designation have 46% fewer redo procedures and 

a 62% lower complication rate for knee arthroscopy surgeries than other orthopedic 

surgeons who did not receive the quality designation. 

Another example of a unique provider reimbursement model is our Cancer Care 

Reimbursement Model which reimburses oncologists up-front for an entire cancer treatment 

program, as well as for the margin between their costs of purchasing medication and the retail 

price charged. By paying medical oncologists for a patient's total cycle of treatment rather than 
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a number of visits and the amount of chemotherapy drugs given, this new program promotes 

more patient-centric, evidence-based care with minimal loss of revenue for the physician. 

Payment reform is an important tool to create greater efficiency and high quality 

outcomes in the health care system. The Federal Government should look to adopt payment 

models that align incentives and reward high quality medical outcomes. 

Collaboration with Providers: 

Working closely with various health care providers in local markets and communities, 

our business and effectiveness is driven by the recognition that care delivery needs to promote a 

collaborative network aligned around the concept of total population health management and 

outcomes-based reimbursement. In close coordination with local integrated care delivery 

systems, we deploy a core set of technology, risk management, analytical and clinical 

capabilities and tools to assist physicians in delivering high-quality care across the populations 

they serve. Our coordinated post-acute care services augment primary care physicians to deliver 

services outside of hospitals to vulnerable, chronically ill populations. Specifically, two of the 

systems Optum partners with, Monarch HealthCare and AppleCare Medical Group, both in 

California, are currently taking part in CMS' ACO demonstrations and initiatives. 

v. Opportunity for Public-Private Partnerships: 

UnitedHealth Group partners with federal and state governments in a variety of ways. 

We serve approximately 300 federal and state government agencies. Currently, we administer 

the Multi-Payer Claims Database for CMS and the Data Warehouse for the Office of Personnel 

21 
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Management. We are in the final discussions with CMMI to participate in its Comprehensive 

Primary Care Initiative in Colorado and Ohio. In addition to serving as the largest provider of 

Medicare Advantage Plans and Medicaid Managed Care Plans in the country, we are proud of 

our partnerships with the Federal Government in the following capacities: 

Federal Employee Health Benefits Program, Office of Personnel Management; 

TRICARE West Region (awarded in 2012, for Conlracl Beginning in 2013); 

A Blue Button participant with HHS and the Department of Veterans Affairs; 

Community-Based Care Transitions Program for CMS; 

Development and testing of imaging efficiency measures for CMS; 

Contract with TRICARE's North Region on predictive modeling; 

Reserve Health Readiness Program for the Department of Defense; and 

Clinical disability exams for Military Veterans for the Department of Veterans Affairs. 

We continue to look for ways to partner with the government and bring our private sector 

innovations to the public marketplace. Delivery System Reform is a ripe opportunity for 

collaboration. 

As the Senate Finance Committee and Congress continue to evaluate how to implement 

Delivery System Reforms and create a high quality health care system that is efficient and 

responsive to consumers' needs, I urge you to invest in the application of Health Information 

Technology, leverage existing data and information capabilities in the health system today, and 

apply those private sector best practices that are proven and delivering results, to federal and 
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state health programs so that Medicare and Medicaid beneficiaries have the benefit of what is 

available and working in the broader marketplace. The innovations I have outlined for you today 

are examples of these best practices. They are proven and operating at full-scale in the 

marketplace today, yet Medicare and Medicaid beneficiaries generally don't have access to them. 

Medicare and Medicaid modernization is a tremendous opportunity for our nation and addressing 

the dually-eligible Medicare and Medicaid population will be critical to addressing some of our 

greatest health care challenges. UnitedHealth Group appreciates the opportunity to testify today 

and the Committee's recognition that Delivery System Reform is needed to truly modernize 

America's health care system. We look forvvard to continuing to be a resource to the Committee. 

Thank you for your leadership on this important issue. 
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Advocate Health Care 

Senate Finance Committee Hearing 

Progress in Health Care Delivery: Innovations from the Field 

May 23, 2012 

Lee Sacks, M.D. 

Chief Medical Officer 

Advocate Health Care 

Chairman Baucus, Ranking Member Hatch and Members of the Committee, thank you for 

inviting me to testify before you today. My name is Dr. Lee Sacks, and I am the Chief Medical 

Officer for Advocate Health Care and the Chief Executive Officer for Advocate Physician 

Partners. Advocate is pleased to have been recently named one of the nation's top health 

systems, based on clinical performance in 2011 by Thompson Reuters. We are the largest health 

system in Illinois and one of the largest health care providers in the Midwest, operating more 

than 250 sites of care, including 10 acute care hospitals, two integrated children's hospitals, five 

Level I trauma centers (the state's highest designation in trauma care), two Level II trauma 

centers, one of the area's largest home health care companies, and one ofthe region's largest 

medical groups. 

Advocate Physician Partners (APP) drives improvement in health outcomes, care coordination 

and value creation through an innovative and collaborative partnership with our physicians and 

the Advocate System, with a physician network that includes more than 1, I 00 primary care 

physicians and 2,900 specialist physicians. 
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APP's nationally-recognized clinically-integrated approach to patient care utilizes best practices 

in evidence-based medicine, advanced technology and quality improvement techniques. 

Through its focus on prevention, the early detection and treatment of diseases and the 

coordination of care across the continuum, APP continually provides value and reduces 

avoidable costs. We have fostered widespread adoption of evidence-based practices in 

independent private practice physician offices and in large integrated medical groups. We have 

demonstrated value to the community through improved health outcomes and significant cost 

savings for employers, payers, and patients. 

APP's Clinical Integration Program (Program) began in 2004, with 36 measures directed largely 

at primary care physicians. This sophisticated pay-for-performance program has grown to 

include 159 measures in five domains, including clinical effectiveness, efficiency, patient safety 

and patient experience. The number of measures has grown by adding measures for physicians in 

specific specialties, measures which align physician and hospital outcomes goals and measures 

requested by private payers and employers. The Program's use ofa single consistent set of 

measures and goals across all payers is an ideal approach to facilitate participation by physicians. 

APP maintains clinically-integrated PPO contracts with all major commercial insurance 

companies in the market and has provided commercial payers and private employers with 

consistent quality improvement and cost savings over the eight years of the Program's existence. 

Incentive payment structures vary based on the needs of the individual payer. Funding for both 

hospitals and physicians in these contracts depends upon attainment of high performance. By 
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design, approximately 15 percent of incentive funds remain unearned by physicians in any given 

year, because of the rigor APP uses in setting perfonnance targets. 

APP's Clinical Integration Program has demonstrated that through shared accountability and 

transparency, a physician-hospital organization with more than 4,000 physicians, including 2,900 

independently practicing physicians, in over 900 separate practice sites, can improve health 

outcomes and patient satisfaction while reducing costs. Through private sector innovation, the 

Program has overcome three challenges addressed in health refonn: the limitations offee-forservice reimbursement; the need for infrastructure to improve outcomes in small single-specialty 

physician groups (the country's dominant mode of practice); and the barriers to physician and 

hospital collaboration necessary for improving patient outcomes. The Program has received 

national recognition for both the quality of its outcomes and its operational efficiency and fonns 

the framework upon which Advocate based its first accountable care organization (ACO)-like 

contract with Blue Cross Blue Shield of lllinois (Blue Cross). 

FTC Identifies APP as a Model Organization 

APP is one of a comparatively few organizations whose contracting practices and Clinical 

Integration Program have been reviewed by the Federal Trade Commission (FTC). Following a 

multi-year review, beginning with an inquiry in 2002 and ending with its Consent Decree in 

2007, the FTC made the determination to allow APP to continue operating its clinically 

integrated program. 
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As a result of its experiences with the FTC, APP instituted an annual review of its governance 

program and conducts mandatory annual workshops on fiduciary duty for all physicians and 

associates who participate in the governance program. This focus on governance supports APP's 

commitment to its ethical responsibility to conduct itself in a manner that creates value for 

society-in the form of better health outcomes at sustainable costs-through the collaborative 

efforts of clinicians and health care administrative professionals. In addition, over the course of 

the past two years, the FTC has invited APP to participate in its workshops on antitrust and 

clinical integration, including Clinical Integration in Health Care: A Check Up in May 2008, the 

FTC, DOJ, and CMS-sponsored workshop in October 2010 and the May 2011 workshop 

focusing on potential ACO antitrust issues. We have appreciated these opportunities to share our 

experiences and lessons learned and continue to stand-at-the-ready to be a resource to 

policymakers, as well as those in the private and non-profit sectors, seeking to adopt the types of 

changes and practices we have to improve outcomes and reduce costs. 

APP's Relationship with Blne Cross Improves Health Care Quality 

When Advocate and Blue Cross began contract renewal discussions in 2010, both parties agreed 

that bending the health care cost trend was a critical step to ensure employers could continue to 

provide health insurance as an employee benefit and for publicly-funded programs to remain 

solvent. The passage of the Patient Protection and Affordable Care Act (PPACA) provided a 

framework for innovations in both the private and public health care sectors, with the 

overarching goal of supporting innovation and partnership throughout the health care system in a 

way that encourages and rewards organizations that are able to reduce the cost of care while 

improving quality and patient safety. 
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The negotiations resulted in the creation of one of the nation's largest ACO-like commercial 

shared savings PPO contracts between Advocate and Blue Cross, covering more than 245,000 

attributed PPO lives. The negotiations also led to a contract for Blue Cross HMO products under 

which APP is responsible for the total cost of care for 180,000 lives. APP and its member 

physicians also provide care for an additional 400,000 PPO patients who are not part of a shared 

savings contract and 60,000 patients covered under other HMO contracts. The agreement also 

includes a rigorous set of performance measures on outcomes, safety and patient satisfaction. 

After the first year, the shared savings program has achieved the goals that APP and Blue Cross 

laid out. It has bent the cost curve, decreasing inpatient days per thousand by 12.5% compared 

to the non-APP rate of7.5%, with a trend in the cost of care on a risk-adjusted basis that has 

been 4.6% below the market trend through the first three quarters of 20 11. All of this was 

achieved while maintaining the outstanding outcomes, safety, and patient satisfaction results for 

which the APP network has been recognized. 

Advocate Health Care--A Leader in Innovation 

Advocate recognized that in order to bend the cost curve and be successful under these new 

arrangements, the organization would need to attain the optimal convergence between the three 

interdependent drivers of value: population health, patient experience and total cost per capita 

(the Triple Aim). Advocate made a strategic decision to align the entire organization through a 

transformational approach to care delivery called AdvocateCare. The goals of AdvocateCare 

relate to: improving care coordination across the continuum; developing lifelong relationships 
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with patients; and, improving access to appropriate care. This approach will reduce unnecessary 

utilization resulting from poor care coordination, poor communication and poor transitions from 

one site of care to another, all of which also contribute to increases in avoidable hospital 

admissions and readmissions and overuse of outpatient services. 

Seventy dedicated outpatient care managers-principally registered nurses, advanced practice 

nurses and social workers-work closely with APP's l, LOO primary care physicians to address 

the needs of the sickest three to five percent of patients assigned to APP physicians in its PPO 

shared savings and HMO risk arrangements with Blue Cross. The care managers focus on 

enhancing patient knowledge, increasing patient adoption of behaviors to further selfmanagement of the condition and providing assistance to patient and caregivers to navigate the 

health care system. Although financially feasible in shared savings and capitation models of 

care, these care management services are not reimbursed under fee-for-service models. Specific 

payment models like those specified in the PP ACA and like the shared savings program 

developed in conjunction with Blue Cross are necessary in order for health care organizations to 

provide these valuable services in the fee-for-service sector, the dominant mode of payment in 

the country. 

Medicare Shared Savings Program Participation 

APP understands that the current health care delivery model and the associated payment system 

are not economically sustainable. As such, we have launched innovative partnerships, like the 

one with Blue Cross, in order to test new health care delivery models to improve health care 

quality. Given its size and experience with financial and clinical integration, APP recognizes its 
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duty and responsibility to be at the forefront of developing new and innovative care delivery and 

payment models. Programs such as the Medicare shared-savings program (MSSP) help promote 

new models of care delivery and care coordination that will enable the delivery of high quality, 

affordable care to Medicare beneficiaries. 

APP views participation in MSSP as a critical step in its evolution, and a key means to achieve 

the critical mass needed to transform its operations and the practices of its member physicians 

and hospitals. If selected to participate in MSSP, APP would fully embrace the opportunity to 

expand its existing ACO model to include Medicare beneficiaries. APP looks forward to its 

partnership with CMS and the opportunity to transform health care delivery-improving 

outcomes and reducing costs. 

Conclusion 

APP's Clinical Integration Program fosters collaboration among payers and patients, as well as 

physicians and hospitals, creating the framework by which it has evolved into an ACO. 

Advocate firmly believes that organizations like APP must be at the center of any lasting 

solution to improve-and sustain-the current health care system. Sustainable, system-wide 

solutions will necessitate changes to health care delivery, performance measurement and 

provider reimbursement. Organizations such as APP, as evidenced by its seventeen-year history, 

have the ability to implement these changes and drive significant improvements in health 

outcomes and the patient experience while also reducing costs. 
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Thank you for the opportunity to testify before you today. Advocate Health Care and Advocate 

Physician Partners stand ready to serve as a resource and work with this Committee and all 

Members of Congress to improve the quality and efficiency of health care in this country. 

would be happy to answer any questions you may have. 

80998.070

Advocate Health Care 

• $4.7 Billion Annual Revenue • AA Rated 

• Acute Care Hospitals 

- 2 Children's Hospitals - 5 Levell Trauma Centers 

- 4 Major Teaching Hospitals 

- 4 Magnet Designations 

• Over 250 Sites of Care 

Advocate Medical Group 

- Dreyer Medical Clinic 

Occupational Health 

Imaging Centers Immediate Care Centers 

Surgery Centers 

Home Health I Hospice 

Advocate Physician Partn

80998.071

A i i 

Total Physicians on Medical Staffs = 6,007 

Total APP Physicians = 3,974 

Employed/ 

Affiliated =.987 Independent APP= 2,987 

AMG {Employed)·=815 Affiliated (Dreyer) = 172 

Independent NQ

APP= 2,033 

Advocate Physician Partn

80998.072

.. II 

I I 

.. Physician Membership 

1,085 Primary Care 

Physicians 

- 2,889 Specialist 

Physicians 

Total Membership 

Inciudes 987 AdvocateEmployed Physicians 

.. 1 ° Acute Care Hospitals an

$ 

2 Children's Hospitals 

. Central Verification Office .. 

Certified by NCQA 

.. 230,000 Capitated Advocate Physician Partners delivers Lives/700,000 PPO Lives services throughout Chicago/and and 

Downstate Illinois. .. 215,000 "Attributable Lives 

Advocate Physician Partn
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110 


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.. -

.-

........ 
(111) 

COMMUNICATIONS


80998075.eps
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AARP appreciates the opportunity to share with the Committee our thoughts on delivery 

system reforms that hold promise for improving the quality, of care, safety and efficiency 

of services throughout the health care system. Our goal is to ensure every American 

has access to adequate, affordable health coverage that offers services of high quality, 

and is delivered in an efficient, person-focused manner. 

For most Americans, health care is uncoordinated, quality is uneven, and the cost of 

care increasingly unaffordable. The prevailing method for paying clinicians (Le., fee-forservice) encourages fragmentation and offers little incentive for clinicians or health 

plans to improve, coordinate, or integrate care. Cost is an issue for employers as well. 

Individuals and families with employer-based insurance often experience discontinuity 

due to coverage changes their employers make in search of lower premiums. Such 

churning makes it difficult for people to receive continuous care, develop meaningful 

clinician/patient communication, or establish trusting relationships with their clinicians. 

One out of every six dollars in our economy is for health care; we spend a far greater 

share of GDP on health care than any other nation. There is widespread agreement 

that the continuing escalation of health care costs is not sustainable and that there is 

great urgency to transform health care to reign in excess cost growth. Moreover, there 

is also substantial evidence that the quality of care provided in the U.S. does not 

produce better results for the dollars we spend. Thus, we face the enormous challenge 

of trying to reduce health care spending as we improve service delivery and quality. 

The Affordable Care Act ("ACA") included a number of important reforms to improve 

health care delivery that should help us make significant progress toward improving the 

health care system in this US. Proper implementation of these delivery system reforms 

are needed in order to transform our health care system to achieve the goals we have 

described. The status quo is simply not acceptable. 

We also must focus more efforts on cost savings in addition to delivery reforms. 

Unfortunately in our current system, fraud is too prevalent and is the cause of wasted 

resources that could be used for other productive purposes. Further legislative action is 

required to eliminate waste, fraud, and abuse in the U.S. healthcare system, and there 

are a number of pending bipartisan bills that will help in this effort. 

Delivery reform accomplished through adoption and implementation of new models of 

care -- such as Accountable Care Organizations ("ACOs"), Medical Homes, and 

Independence at Home Demonstration Program -- will present a major departure from 

the way most primary care practices now provide services (where care continues to be 

fragmented and siloed). But these new approaches hold great promise as the 

foundation for a person-centered delivery system. A family caregiver may also often act 

as the care coordinator or help provide services, especially for someone with multiple 

chronic conditions, cognitive impairment, or other needs for long-term services and 

supports. Interdisciplinary care teams, working with other team members with the 

individual and their family caregiver at the center of the care team, is an important 

approach in reforming the delivery system. 
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Below, we provide a brief discussion of innovative delivery system reforms we believe 

may lead to improved, more efficient care. 

Accountable Care Organizations 

Accountable Care Organizations ("ACOs") are a new model of care that consists of a 

group of providers who accept responsibility for the cost and quality of care a population 

of individuals receives. The ACA outlines how Medicare will pay ACOs in the traditional 

Medicare program and identifies how they will be formed, organized, and paid. ACOs 

that are able to improve quality and reduce health care costs will be eligible to share 

some of the savings accrued to the Medicare program. In the ACO model, entities will 

be jointly accountable for the care they provide, thus reducing the incentive to provide 

unnecessary testing and procedures. HHS estimates that ACOs could save Medicare 

nearly $1 billion in the first three years. 

ACOs will also be developed in the private sector. Several pilot programs are underway 

to test various ways to organize ACOs. These will provide valuable insights into best 

practices. 

Medical Homes 

"Medical homes" are intended to lead to higher-quality, more cost-effective care through 

better coordination of services and support for patients that is culturally appropriate, 

interactive, and respectful. This model is inherently patient-centric and embodies a 

"whole-person" approach to improving care through enhanced access, coordination, 

and support for patient self-management. 

Community Health Teams to Support Medical Homes 

In an effort to establish policies that encourage all payers to improve care coordination 

and provide transitional care, the Affordable Care Act authorized Interdisciplinary 

Community Health Teams to collaborate with and support Medical Homes. These 

teams would target patients with chronic conditions, including children, regardless of 

payor type. Community Health Teams would contract to provide supportive services to 

patient-centered medical homes and qualified primary care providers who will receive 

capitation payments for each enrollee. Expansion of the Community Health Teams 

have the potential to improve the efficiency and quality of care coordination and 

transitional care by developing best practices and specializing in these services within 

designated geographic areas. 

Independence at Home Demonstration Program 

The Independence at Home ("IAH") model offers the potential to improve the delivery of 

care for high-risk individuals with multiple chronic conditions who need help with daily 

activities (such as eating, bathing and dressing), as well as better address their high 

costs. This model uses physician or nurse practitioner directed home-based primary 

care teams designed to improve health outcomes and reduce expenditures. It is a 

demonstration program in the ACA and similar models have shown promiSing results. 
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Transitional Care 

Almost one fifth of Medicare patients discharged from a hospital were readmitted within 

30 days; these readmissions cost Medicare $17.4 billion in 2004. These hospital stays, 

many of which are preventable, pose a major concern-from both a health quality and 

financial perspective. Transitions from hospital to home or other settings can be 

complicated and risky, especially for individuals with multiple chronic illnesses. Patients 

frequently report difficulty remembering clinical instructions, confusion over correct use 

of medications, and uncertainty over their prognosis. And in cases where multiple 

providers are involved, patients often get conflicting instructions from different providers. 

Family caregivers often act as care coordinators for their loved ones, but they face 

challenges in coordinating care, especially as individuals transition from one setting to 

another. 

AARP was pleased to see that as part of the ACA, several provisions addressed 

transitional care, including the Community-Based Care Transitions Program and 

Community Health Teams. The Community-Based Care Transitions Program 

authorizes HHS to make grants available to hospitals with high readmission rates in 

partnership with community-based organizations. As this program is implemented, we 

urge Congress to consider expanding this program. 

Home- and Community-Based Services ("HCBS") 

Individuals prefer to live in their homes and communities, and an AARP study found that 

9 out of 10 Americans age 50+ want to stay in their current residence for as long as 

possible. Receiving services in such settings is also cost effective, as on average, 

Medicaid can provide home and community-based services to three people for the cost 

of serving one person in a nursing home. Helping individuals live in their homes and 

communities can help delay or prevent unnecessary and more costly stays in nursing 

homes or other institutional settings. 

Unfortunately, when states are forced to cut Medicaid long-term services and supports 

spending, they often target home and community services ("HCBS"), since these are 

defined as "optional services" under Medicaid law (even though they are critical services 

for many people). Cutting HCBS could result in more people having to go to nursing 

homes - generally more costly than HCBS and their care being paid for by Medicaid. 

Research shows that states that invest in HCBS, over time, slow their rate of Medicaid 

spending growth, compared to states that remain reliant on nursing homes. The ACA 

contained a number of important provisions both in Medicaid and outside of Medicaid, 

including the Community Living Assistance Services and Supports ("CLASS") program, 

to help give people more options to receive services to help them live in their homes 

and communities. 

Family support is a key driver in remaining in one's home and in the community. The 

estimated economic value of family caregivers' unpaid contributions was about $450 

billion in 2009, more than the total spending on Medicaid that year. Family caregivers 

who take on this unpaid role risk the stress, physical strain, competing demands, and 

financial hardship of caregiving, and thus are vulnerable themselves. Recognizing 
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family caregivers and supporting them in their caregiving roles in the health and longterm services and supports ("L TSS") systems is vital, including assessing and 

addressing their needs. 

Comparative Effectiveness Research 

AARP strongly believes that a fundamental building block of a reformed health care 

system is the availability of better evidence on which to base care decisions. According 

to some estimates, less than half of all medical care is based on or supported by 

adequate evidence about its effectiveness. Research is needed that is scientifically 

valid, objective, and that will produce comparative information about treatment options 

and guidance about when to use particular interventions and for whom. Independent, 

objective comparative effectiveness research ("CER") has the potential to greatly 

improve health care quality and patient outcomes by helping to ensure that consumers 

and clinicians receive valid information upon which to base their decisions. This 

research can ensure that the resources expended by patients and payers (including 

government health programs) result in the delivery of quality, evidence-based and high 

value healthcare that is appropriate for the individual patient. Well-designed 

comparative effectiveness research will seek to identify specific subpopulations of 

patients for whom one intervention might be more appropriate than another intervention. 

As a result, such studies often enable physicians to make better decisions based on 

specific patient characteristics, applying the scientific information elicited in evaluating 

various treatment options. 

For years, AARP advocated for the establishment of an entity to conduct or oversee 

independent, objective research to inform clinical and patient decisions and we were 

pleased to see the creation of the Patient-Centered Outcomes Research Institute 

("PCORI") included as part of the Affordable Care Act. We applaud and support 

PCORl's mission to help people make informed health care decisions by producing and 

promoting high integrity, evidence-based information derived from research that has 

been guided by consumers, families, and the broader health care community. 

Health Information Technology 

Health Information Technology ("HIT") is a critical tool that can enhance quality 

improvement efforts. HIT can promote and facilitate data collection, storage, and 

retrieval; reduce errors; foster coordination; support clinical and patient decisions; and 

reduce unnecessary duplication. The many advantages of HIT and data exchange 

include: 

Reduction of medical errors by helping to eliminate mistakes that arise from poor 

handwriting or lack of complete medical records; 

Decision support for clinicians and patients through access to information, 

prompts for best practices, educational information, etc; 

Facilitation of information-sharing at critical times in non-emergent situations to 

enhance opportunities for care coordination and integration across settings and 

between and among providers; 
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Reduction of duplicate tests and procedures that are now commonly performed 

because records are not available when they are needed; 

Facilitation of data collection to measure performance and accelerate the 

development of interventions to address identified problems; 

Facilitation of data collection on race, ethnicity, and other patient characteristics 

that give rise to health care disparities. Without data, it will be impossible to 

assure equitable care for all; 

Support for public health initiatives by providing access to data to help avert 

public health threats; 

Elimination of redundant paperwork and the need for patients to repeat medical 

history and demographic data; 

• Greater consumer engagement by giving patients and family caregivers access 

to information they need to support self-management; and 

• Access to a wide array of technologies that help people stay in their own homes 

and out of institutions and also allow them to access needed health care services 

remotely through non face-to-face encounters with clinicians and other medical 

personnel. 

CBO estimates that these changes in utilization will reduce Medicare spending by $4.4 

billion over the 2011-2019 period. 

Reducing Health Care Disparities 

There is ample documentation of disparities in health care that arise among certain 

population groups (e.g., racial and ethnic minorities), or based on age, gender, 

geography, or sexual orientation. As we move forward to improving the quality of the 

health care system, we must take steps to eliminate disparities so all Americans receive 

high quality care in a manner that reflects their cultural and linguistic and personal 

preferences. Efforts to address health disparities over the last decade have been 

hampered by a lack of data. For example, data on racial and ethnic groups must be 

routinely collected in standardized formats if we are to be able to focus efforts on 

eliminating the reasons for disparate care. Similarly, unless we include women and 

older persons in clinical trials and other research, we will not have the knowledge to 

address reasons for differences in care they experience. 

AARP is deeply concerned about the unique health challenges that many minority 

populations face. We commend the important steps taken by the passage of the 

Affordable Care Act and the development of data collection standards by HHS to ensure 

that these challenges can be better addressed. Under the ACA, many of the previously 

underserved will have affordable coverage for the first time. However, we must ensure 

that this coverage is truly accessible. It is essential that all providers, whether insurers 

participating in the Exchange or publicly-funded programs like Medicare or Medicaid, 

offer linguistically and culturally competent care. Without trained interpreters and 

providers who can recognize cultural differences and alter their services accordingly, 

these communities will have coverage but not access. 
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Prevention and Wellness 

AARP believes that wellness and prevention efforts, including changes in personal 

behavior such as diet and exercise, should be a top national priority. The ACA made 

achieving healthy living a goal by establishing the Prevention and Public Health Fund, 

which provides much-needed funding to support initiatives such as community-based 

tobacco cessation and prevention programs, efforts to reduce diabetes and heart 

disease, breast and colon cancer screenings and adult vaccine programs. A focus on 

prevention will not only lead to better health for Americans, but will also help reduce 

health care costs. Seventy-five percent of all health care costs in our country are spent 

on the treatment of chronic diseases, many of which could be easily prevented. 

Investing in public health initiatives will reduce the need for more costly treatment and 

intervention of these chronic diseases. 

AARP strongly supports investments in disease prevention and health promotion 

because they can save lives, reduce chronic illness and the spread of infectious disease 

and help slow the growth of health care costs. 

Nursing Workforce Issues 

AARP recognizes that in order to achieve these important reforms in health care 

delivery, we must have the appropriate mix and number of highly skilled health 

professionals. For example, to deliver more primary care, better coordinate care and 

increase our focus on wellness and prevention, our nation needs more advanced 

practice registered nurses and nurses at all levels. As recognized by the 2010 

landmark Institute of Medicine ("10M") report on the Future of Nursing, advancing 

nursing education and leadership while allowing nurses to practice to the full extent of 

education training can improve health care quality, access and efficiency. AARP 

strongly supports investments in nursing education and promotion of innovative delivery 

models that take full advantage of the skills, experience and leadership of nurses. 

Elder Care Workforce Issues 

AARP also believes that it is important to have a competent and trained workforce that 

is able to meet the unique health and L TSS needs of older adults. There is a shortage 

of individuals at many levels with the appropriate competencies and training to meet the 

needs of the current, as well as the growing, aging population. The ACA took some 

important steps in this area, such as training for direct care workers, geriatric education 

and training, additional training opportunities for family caregivers, and a demonstration 

project to develop training and certification programs for personal or home care aides, 

to name a few. However, it is important and more needs to be done to make sure that 

there is a sufficient and adequately prepared workforce at all levels to address the 

needs of the growing aging population. 

Genuine Pathway for Generic Biologics 

Biologics are used to treat many diseases - such as multiple sclerosis, arthritis, cancer 

and others that often affect older populations. The daily costs associated with 
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biologics are approximately 22 times higher than the daily costs associated with smallmolecule drugs; annual costs for biologic drugs can reach as high as $400,000. Underinsured and uninsured persons who are prescribed biologic drugs-particularly those 

with chronic conditions who require such treatment indefinitely-may find the drugs 

unaffordable and decide to forgo them completely. Biologic treatments may also be too 

expensive for individuals fortunate enough to have health insurance; even the wellinsured may face high co-insurance amounts. The costs associated with biologic drugs 

are also a large and growing burden for employers, state governments, and federal 

programs like Medicare and Medicaid. 

Increasing the availability of generic versions of biologics is a critical element of a health 

care cost containment strategy. In the last Congress, AARP endorsed bipartisan 

legislation entitled the "Promoting Innovation and Access to Life-Saving Medicine Act." 

This legislation, H.R. 1427 introduced by Representatives Henry Waxman (D-CA) and 

Nathan Deal (R-GA) and S. 726 introduced by Senators Charles Schumer (D-NY) and 

Susan Collins (R-ME), would have created a five-year period of market exclusivity. 

However, despite the Federal Trade Commission ("FTC") finding that biologic 

manufacturers did not need any exclusivity beyond the term of their patent, biologic 

manufacturers were ultimately granted twelve years of market exclusivity by the 

Affordable Care Act. 

Were the exclusivity period reduced from even twelve years to seven (and the 

Administration has previously urged 5 years), there would be a $2.3-$3.5 billion savings 

over ten years. These savings could be further increased if the unnecessary market 

exclusivity period provided by the ACA were eliminated entirely 

Conclusion 

On behalf of our millions of members and all older Americans, we thank you for the 

opportunity to share with you our views on the important role of health care delivery 

system reform in improving quality and lowering costs. AARP is committed to tackling 

high costs throughout the health care system, as well as ensuring that every American 

has access to adequate, quality affordable health coverage that is delivered in an 

efficient, person-focused manner. 
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Senate Finance Committee 

on 

Progress in Health Care Innovations from the Field 

May 23, 2012 

1710 N Street, NW 

Wa;;hington, DC 20036 
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The American Medical Rehabilitation Providers Association (AMRPA) is pleased to submit a 

statement for the record to the Senate Finance Committee in connection with the hearing on 

''Progress in Health Care Delivery: Innovations from the Field." 

AMRPA is the national trade association representing medical rehabilitation providers. In 

addition to inpatient hospital level medical rehabilitation hospitals and units (IRH/Us), AMRP A 

represents a large number of outpatient rehabilitation service providers associated \vith hospital 

members. Additionally,.AMRP A represents comprehensive outpatient rehabilitation facilities 

(CORFs), rehabilitation agencies, and the outpatient 'practices in skilled nursing facilities (SNFs). 

Inpatient rehabilitation hospitals and units (IRH/Us) serve more than 550,000 patients per year. 

AMRP A members work with patients to maximize their health, functional skills, independence, and 

participation in society so they are able to return to home, work, or an active retirement. 

Post acute medical and rehabilitation care is o ften critical to the treatment and recovery of 

patients after discharge from the hospital. Today, such care is provided by various providers, 

including IRH/Us, long-term care hospitals (LTCHs), and hospital-based skilled nursing facilities 

(HSNFs). With this array of providers, there is confusion about what care is clinically necessary and 

effective and what value is being received by patients and payers. Medicare's payment systems and 

regulations make referring and treating patients among these different care settings difficult and 

costly, especially if a patient needs more than one level of care during his or her recovery. These 

factors point to a need to improve the post acute care delivery system by moving from facilitycentered to patient-centered care and improving care coordination. 

Inpatient rehabilitation hospitals and units have recognized the need for improvement in 

America's health care system and have embraced innovative care models that will improve the 

coordination and continuity of care for patients who need post acute care. We firmly believe that 

public-private partnerships can transform the health care delivery system. To that end, AMRPA, in 

particular, has been a leader in developing innovative care models, such as the Continuing Care 

Hospital (CCH). The Continuing Care Hospital Pilot was authorized in Sections 3023 and 10308 of 

the Affordable Care Act of 2010 (ACA), Public Law (p.L.) 111-148.

1 AMRP A strongly supported 

its inclusion in the health care' reform legislation, We are disappointed, however, that to date the 

Department of Health and Human Services (HHS) and the Center for Medicare and Medicaid 

Innovation (CMMI) have not moved forward to partner with the post acute care sector to 

implement the CCH mandate. 

The CCH model organizes care around the patient instead of the provider. A key feature of 

the CCH is that it would enhance quality of care by eliminating regulatory boundaries among the 

142 U.S.c. 1395cc-4 (authorized the Continuing Care Hospital model as a bundling pilot) and 42 U.S.c. 1315a (allows 

the Department of Health and Human Services Secretary to test the Continuing Care Hospital model through the 

Center for :Medicare and fedicaid Innovation. 
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current hospital-based post-acute care (PAC) providers by creating a new type of pro,-ider with the 

characteristics of all three of those mentioned above (IRH/Us, LTCHs, HSNFS). It would test new 

payment methods, 'luality standards, outcome measures, and foster long-term accountability for care 

provided. It would result in reduced costs and increased efficiency of providing post acute care 

services. In addition, it would leave the clinical decision making about needed services to patients 

and their doctors, not regulators or payers. 

The Continuing Care Hospital would be an amalgam of the care settings currently described 

as LTCHs, IRH/Us, and hospital-based SNFs that are organized, in part, to deliver rehabilitation 

therapy programs, as well as medical care. The CG·! could be an actual building (a hospital offering 

some or all three levels of care) or a virtual entity (an organization that provides under common 

management most or all of the three levels of care in more than one building or unit). CCHs could 

operate distinct uuits or distinct levels of service that encompass the current three levels of sen'icc 

referenced in the authorizing statute. A physician would make the admission decision regarding 

whether a patient should receive care within tile CCH and also determine the intensity of services 

the patient would need. Payment would be determined by the patient's clinical and functional 

characteristics, plus non-patient related adjusters. Th(' episode of care would be the stay in the CCH 

plus the fIrst 30 days following discharge from the CCH. Hence, this model centers admission, 

treatment, and payment decisions on the needs of the patient, rather than concentrating on the type 

of the provider of care. 

Creation and use of performance and outcome measures would be a critical component of 

the model. The CCH model would increase quality of cate while reducing costs. The CCH model 

will improve 'luality by: (1) allowing for appropriate care based on the patient, not prm'idcr type or 

financial incentives; (2) removing barriers to access caused by the current provider re'luirements and 

payment systems; (3) measuring care and outcomes in order to provide disincentives for inade'luate 

care; and (4) promoting collaboration among HSNFs, IRH/Us and LTCHs to streamline the fIeld 

and the care provided. The CCH model will decrease costs by: (1) streamlining care delivery and 

eliminating regulatory and administrati,'e costs to the payor and providers; (2) avoiding confusing, if 

not conflicting, post acute care re'luirements that can lead to re-hospitalization; and (3) eliminating 

the costs of multiple admissions and discharges associated with transferring patients to multiple post 

acute care entities. 

Al\[RPA is eager and committed to working constructively with HHS to implement the 

CCH model to ensure the right care is delivered at the right time for patients in need of post acute 

care scn'iccs. We encourage the Senate Finance Conunittee to continue to highlight the 

contributions of the private sector in adopting innovations that improve health outcomes and lower 

costs. One thing is clear: maintaining the current system of conflicting incentives, chaotic decision 

making and placement decisions, restricted access, quality of care risks, and economic jeopardy for 

patients and providers is untenable. \Ve must all work toward improving the current health care 

system in a deliberate and visionary manner with the needs of patients fmt in mind. 
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Statement 

of 

The National Association of Chain Drug Stores 

for 

U.S. Senate 

Committee on Finance 

Hearing on 

Progress in Health Care Delivery: 

Innovations from the Field 

May 23, 2012 

10:00 a.m. 

215 Dirksen Senate Office Building 

National Association of Chain Drug Stores (NACDS) 

413 North Lee Street 

Alexandria, VA 22314 

703-549-3001 

www.nacds.org 
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The National Association of Chain Drug Stores (NACDS) thanks the Members of the Senate 

Finance Committee for consideration of our statement for the hearing on "Progress in Health 

Care Delivery: Innovations from the Field." NACDS and the chain pharmacy industry are 

committed to partnering with policy makers and others to improve quality and lower costs in the 

healthcare delivery system. 

NACDS represents traditional drug stores, supermarkets, and mass merchants with pharmacies 

from regional chains with four stores to national companies. Chains operate more than 40,000 

pharmacies and employ more than 3.5 million employees, including 130,000 pharmacists. They 

fill over 2.6 billion prescriptions annually, which is more than 72 percent of annual prescriptions 

in the United States. 

Communitp Pharmacies - Improving Patient Care and Reducing Healthcare Costs 

Community retail pharmacies are at the front line in the healthcare system, interacting with 

patients on a daily basis. In recent years, retail community pharmacies have played an 

increasingly important role in providing patient care with services such as health screenings 

provided by pharmacists to help educate patients and give them a better understanding of their 

health status and potential needs. Additionally, pharmacist-provided immunizations and 

medication therapy management (MTM) services have been proven to improve patient health 

and prevent unnecessary hospitalizations, physician visits, and other higher cost interventions. 

MTM services have also been shown to improve medication adherence. An estimated one-third 

to one-half of all patients in the United States do not take their medication as prescribed. There 

are many reasons. Many simply fail to pick up their medications from their pharmacy. Others 

fail to take their medication correctly, stop taking it altogether, or never take it in the tirst place. 

These circumstances seriously undermine quality of life and quality of care, patient outcomes, 

and the value of healthcare dollars spent. Poor medication adherence costs the U.S. 

approximately $290 billion annually! - 13% of total healthcare expenditures. Clearly, steps 

need to be taken to address the issue of lack of adherence with medication therapy. This is one 

reason we are so devoted to ensuring that patients adhere to their prescription drug treatment 

regimens. 

Community pharmacists are uniquely qualified through their comprehensive education and 

training to significantly reduce the problem of poor medication adherence. As medication use 

experts, pharmacists assist patients in achieving positive outcomes from their medication 

therapy. Pharmacists help patients every day by counseling on proper use of medications, 

checking for possible side effects, drug interactions or allergies, and helping to coordinate 

insurance benefits. All these activities help ensure patients receive maximum therapeutic benefit 

1 New England Healthcare Institute, Thinking Outside the Pillbox: A System-wide Approach to Improving Patient 

Medication Adherence for Chronic Disease, August 2009, available at http://www.nehi.net/publications!44! 

thinking_outside _the .. pillbox _a_systemwide _approach_to jrnproving_patient_ medication_adherence Jor _chronic_ 

disease (last accessed March 5, 2010). 
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from their medication therapy. When patients adhere to their medication therapy, it will reduce 

costs from higher-cost medical care, such as emergency room visits and catastrophic care. 

Medication Therapy Management (MTM) - Better Outcomes and Lower Costs 

NACDS believes that increasing access to pharmacist-provided MTM will produce better health 

outcomes while reducing overall healthcare costs. MTM consists of services such as complete 

medication reviews and professional counseling services offered by qualified pharmacists. 

MTM prevents medication errors, ensures medication compliance, and gets patients more 

involved in their medication therapy. Pharmacists are the most highly trained professionals in 

medication management. They receive a minimum of six years and in many cases eight years of 

college, with four years enrolled in a College of Pharmacy where they study medication uses, 

dosing, side effects, interactions. and patient care. As highly trained and accessible healthcare 

providers, pharmacists are uniquely positioned to play an expanded role in ensuring patients take 

their medications as prescribed. 

Evidence shows that MTM improves patient outcomes and reduces urmecessary medical 

spending. In the North Carolina "Checkmeds" program, MTM helped 31,000 seniors save $34 

million in one year a return on investment of nearly 14 to I. The January 2011 edition of 

Health Affairs found that better medication adherence produced armual savings of $7,823 for 

patients with congestive heart failure, $3,908 for those with hypertension and $3,756 for diabetic 

patients. In addition, a comprehensive medication review program by one major pharmacy chain 

showed a nearly 3-to-l return on investment, with Medicare Part D savings of over $36 per 

member per month for seniors in the program. A recent study published in the January 2012 

edition of Health Affairs demonstrated the key role retail pharmacies play in providing MTM 

services to beneficiaries with diabetes. The study found that a pharmacy-based intervention 

program increased beneficiary adherence and that the benefits were greater for those who 

received counseling in a retail, face-to-face setting as opposed to a phone call from a mail order 

pharn1acist. The study also suggested that the interventions, including in-person, face-to-face 

interaction between the retail pharmacist and the beneficiary, contributed to improved behavior 

with a return on investment of 3 to I. MTM services provided by Mirmesota pharmacists to 

Blue Cross Blue Shield beneficiaries in collaboration with primary care providers increased the 

percentage of patients achieving their goals of therapy and reduced healthcare expenditures from 

$11,965 to $8,197 per person with a return on investment of more than 12 to I. 

We appreciate that Congress has recognized on a bipartisan basis the important contribution that 

MTM makes to improved outcomes and reduced costs. The Medicare Modernization Act of 

2003, which created the Medicare Part D drug benefit, specifically included MTM as a required 

offering. The Patient Protection and Affordable Care Act of 2010 also made improvements to 

the Part D MTM benefit and established grant progran1s for MTM in treating chronic diseases 

and in care provided in the new "medical home" model. While these steps are welcome, more 

needs to be done to control the huge costs associated with medication non-adherence and to 

improve seniors' access to MTM services. 
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We are convinced that MTM is a key way to vastly improve health outcomes and reduce costs by 

ensuring that individuals receive the maximum health benefit from their prescription medicine. 

As noted above, currently the Medicare Part D program includes an MTM benefit, but the 

requirements are vague, and have resulted in inconsistent availability to beneficiaries. To ensure 

that individuals receiving prescription medications through Medicare Part D are provided with 

all the tools they need to improve their healthcare outcomes and reduce overall program 

expenditures, NACDS supports S. 274, the Medication Therapy Management Empowerment Act 

of 2011 sponsored by Senator Kay Hagan (D-NC). The Act strengthens the Medicare Part D 

MTM program requirements including services such as an annual comprehensive medication 

review for eligible beneficiaries and expands eligibility standards to include beneficiaries with 

only one chronic disease, dual eligible beneficiaries enrolling in Medicare for the first time, and 

beneficiaries in transitions of care, such as those recently discharged from a hospital or other 

institutional setting. Such beneficiaries are likely to have new medications, and would benefit 

from a targeted intervention by a pharmacist. We urge members to co-sponsor S. 274. 

In addition to strengthening the Part D MTM program, we urge Members to also consider ways 

to expand such services and benefits from MTM in other areas as well, such as the TRICARE 

program and the Qualified Health Plans that will begin operating under the Health Insurance 

Exchanges in 2014. 

Expand Coverage of Vaccines in Medicare Part D 

Neighborhood retail pharmacies have played an integral role in recent years in providing 

vaccinations and immunizations against illnesses such as flu, pneumonia, and shingles. Despite 

the availability of effective immunizations, many Americans remain unvaccinated and 

susceptible to vaccine-preventable diseases. An Institute of Medicine Report estimates that more 

than 50,000 adults and 300 children in the United States die each year from vaccine-preventable 

diseases or their complications.2 However, the United States Department of Health and Human 

Services has found that immunizations, including those administered by pharmacists, help 

prevent 14 million cases of disease and 33,000 deaths yearly.3 

Expanding pharmacists' vaccination authority can also lead to decreased healthcare costs. In a 

final rule expanding the portfolio of vaccines that TRICARE beneficiaries may obtain from 

community pharmacies, the Department of Defense noted significant savings were achieved 

under the TRICARE program when the program was first implemented to allow beneficiaries to 

obtain flu and pneumococcal vaccines from retail pharmacies. 

Notably, the Department not only allows its beneficiaries to obtain vaccinations at local network 

pharmacies, but by encouraging beneficiaries to obtain vaccinations at local pharmacies and 

waiving cost sharing when pharmacies are used for immunizations, the Department estimates it 

'Institute of Medicine Report, Shaping the Future For Health Calling the Shots lmmunization Finance Policies 

and Practice. available at http://books.nap.edulhtml/calling_the_shots/reportbrief.pdf. 

3 Department of Health and Human Services, Fiscal Year 2008, Centers for Disease Control and Prevention, 

Justification of Estimates for Appropriation Committees. available at http://www.317coalition,org/documents/ 

cdc",fY2008budget_immunization.pdf. 
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saved nearly $1.5 million in administration costs. Additionally, it was estimated that the 

Department had a savings of over $600,000 annually through avoiding medical costs that would 

have been incurred in treating influenza but were not because increased availability of the flu 

vaccine led to more beneficiaries being vaccinated (Fed. Register Vol. 76, No. 134, p.41064). 

Currently all 50 states allow pharmacists to provide certain immunizations. Encouraging 

Medicare beneficiaries and others to obtain vaccinations at their neighborhood pharmacy is a 

cost etfective and convenient way to prevent illness and reduce healthcare costs. In order to 

create a streamlined, consistent, and more cost effective vaccine policy, NACDS believes Part B 

vaccines should also be available under Medicare Part D. We believe this policy would increase 

immunization rates in target populations since pharmacists are the most accessible healthcare 

provider. The Medicare program would also benefit from the efficient, electronic-based 

processing of vaccine claims, which occurs in Part D. This will help move the system toward 

greater use of health information technology, a proven cost saver. 

Increase the Utilization of Generic Drugs 

Pharmacists are also leaders in promoting cost savings, helping educate consumers and providers 

about affordable alternatives like generic drugs and over-the-counter remedies. Pharmacies have 

long promoted generic drugs as safe, cost-effective alternatives for many patients. Community 

pharmacy has a higher rate of generic dispensing - 73% - than any other practice setting. 

Substituting generic phannaceuticals for their brand-nanle equivalents is an effective way to achieve 

significant savings in public and private healthcare programs. For example, in the Medicaid 

program, we estimate that for every I % increase in generic utilization, approximately $809 

million in federal and state dollars would be saved. NACDS has endorsed S. 1356, The 

Affordable Medicines Utilization Act, which would encourage states to increase Medicaid 

generic dispensing rates. 

Conclusion 

NACDS thanks the Committee for allowing us to share our comments on the role of community 

pharmacies in improving patient care and reducing healthcare costs through health care delivery 

system reform. 
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WISCONSIN HOSPITAL ASSOCIATION, INC. 

Wisconsin Hospital Association 

5510 Research Park Drive 

Madison, WI 53711 

Written Testimony Submitted to the 

United States Senate Committee on Finance 

for the hearing record on 

Progress in Health Care Delivery: Innovations from the Field 

Wednesday, May 23, 2012, 10:00 AM 

At exactly the same time the United States Senate Committee on Finance was hearing testimony about 

innovations in health care delivery, Wisconsin hospitals and health systems were testifying in Madison, 

Wisconsin before the State Assembly Committee on Health at a hearing entitled, "Transforming Health 

Care in Wisconsin Through Better Quality, Better Outcomes and Better Value." Invited speakers at this 

hearing were from Aurora Health Care of Milwaukee, Bellin Health System of Green Bay, Gundersen 

Lutheran Health System of La Crosse, and the Wisconsin Hospital Association (WHA) of Madison. Each 

testifier discussed how hospital and health systems are reforming health care in Wisconsin by 

refocusing on delivering higher quality, patient-centered, outcomes-focused care with the goal of 

achieving better value for each health care dollar. The testimony on the following pages was provided 

by WHA Executive Vice President Eric Borgerding to the Assembly Committee on Health at that 

hearing. We believe it gives excellent insight into Wisconsin's commitment to driving health care value 

and provides important information for the Senate Committee on Finance regarding its hearing on the 

same subject matter. 

************ 

Testimony Before the Wisconsin State Assembly Committee on Health 

Eric Borgerding, Executive Vice President, Wisconsin Hospital Association 

May 23, 2012 

Chairman Stone, ranking member Richards, members of the committee, my name is Eric Borgerding, 

I'm Executive Vice President of the Wisconsin Hospital Association. I'mioined by WHA's chief quality 

officer. Kelly Court. 1 have just a few general remarh and then will turn it over to Kelly. 

First, J want to thank you for holding this hearing and providing this venue for discussion about some 

very positive trends and developments in Wisconsin health care that warrant more attention. 

In many ways Wisconsin is a leader in a nalional transformation, an effort to repurpose and retool the 

structures of health care delivery and .financing away .from volume driven, fee-for-service 

5510 Research Park Drive P,O. Box 259038 Madi~on, WI 53725-9038 P (608.274.1820) F (608.274.8554) wha,oyg 
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reimbursement, and instead towards a system that must botll demand and reward better quality and 

hetter outcomes and that will ultimately produce more value fiJI' our health care dollars, 

Indeed, improving quality and value is health care r~form ... reform that began in Wisconsin prior to the 

passage of the Affordable Care Act, and that will continue regardless of how the Supreme Court rules 

next month 

This reform, as defined hy increasedfocus on quality and value, is being hastened. ifnot dictated, by the 

combined forces of d~ficit reduction and, as importantly, the need for employer health care cost 

containment in a national and globally competitive economy Reform here means increasingly engaged 

payers, coupled with integrated systems of providers aligned toward a common goal~producing better 

quality, outcomes and valueft)r employer and employee health care dollars. 

WHA believes this type of health care reform can set Wisconsin apartfi'om other states. Here's why: 

Wisconsin remains the home of national leaders and pioneering organizations in the quality 

and value movement. The ThedaCare Center for Healthcare Value, the Wisconsin Health 

Information Organization (WHIO), the Wisconsin Collaborative for Health Care Quality (two of 

which's founding members you will hear from today), MetaStar, the Partnership for Health Care 

Payment Reform, headed up by former Wisconsin Department of Health Services Secretary 

Karen Timberlake, and a host of other Wisconsin business and health leaders are not only 

nationally recognized cataZysts, but continue to push providers, insurers and patients to seek 

superior quality and value and, importantly, accelerate the pace of change in Wisconsin 

Wisconsin has a strong presence of integrated hospital and health .~ystems that include 

employed physicians, and align towards a common goal-better outcomes. At least two-thirds 

of Wisconsin's practicing physicians are employees of hospitals or growing integrated systems. 

That means more care is being delivered "under one 1'00/", aligned, and within a shared 

philosophy and goal o{achieving superior outcomes. 

You cannot improve what you cannot measure, and Wisconsin hospital and health systems 

have a long history of commitment to improving care and transparent reporting of results. We 

are a national leader in ongoing. measurable quality improvement, including WHA's 

CheckPoint and the Wisconsin Collaborative fiJI' Health Care Quality - pioneering efforts 

bringing providers and payers together to develop and publicly report health care performance. 

Wisconsin is a leader in adopting electronic health recortis. In 2012, Wisconsin hospitals 

ranked second in the nation in adoption of certified electronic health records (EHR) technology. 

Further, Wisconsin is ahead of nearly all 0/ its Midwest neighbors in the adoption of more 

advanced EHRs. 

Capitalizing on alignment and connectivity, Wisconsin providers are developing accountable 

models of care responsible for improving quality, reducing costs and beller managing the health 

of their patients. Hand-in-hand with this delivery system change, the payment model in health 

care is also changing, moving away.trom unit pricing, fee-for-service and volume. and towards 

outcomes, tOlal cost of care and value. There are several examples across the slate of these 

"accountable care" models ~three of which you will hear from today. 
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WiscoJlsiJl hospitals are takiJlg a page from the maJlufacturiJlg sector's book aJld iJlcreasiJlgly 

adopting LEAN aJld other efficiency iJlitiatives that focus on reengineering processes to reduce 

waste and improve quality, and we are seeing growing evidence that these initiatives are bearing 

fruit: 

o A 2011 study by Milliman and Mercer, conducted jbr the Greater Milwaukee Business 

Foundation on Health, showed that jrom 2003-10 hospital operating expenses in Sf 

Wisconsin increased by 17 percent compared to a 28 percent increase in the Hospital 

PPI and 37 percent increase in the Hospital Market basket indexfiw the same period. 

o And Lean is not limited to large organizations. I spent all day lasl Friday at Prairie du 

Chien Memorial hospital a small 25 bed hospital adopting lean management 

principles that are quantifiabzv reducing cost. Lean is more than a process. is it a culture 

change that involves employees at alileve!s and even facility design. In jact, Prairie du 

Chien is in the process of replacing their 62 year old facility and designing it with Lean 

principles in mind. 

o Further, Wisconsin hospital supply costs per discharge are now nearly 19 percent lower 

than the national median. 

o And according to recent data jrom eMS and Kaiser, Wisconsin hospitals cost less per 

Medicare patient than national averages. In filct, 88% of Wisconsin hospitals cost 

Medicare less per patient than the national average. 

And hospital commercial paymeJlts are also reflecting improvements ;n efficiency and quality. 

For example: 

o From 2003-10, commercial payments to hospitals in SE Wisconsin increased 40 percent 

less than the Hospital CPIover the same period. Health care costs are a component of 

labor costs and effect Wisconsin's competitiveness, and with over one-third of all 

Wisconsin jobs located in the seven county SE Wisconsin region, the impact of these cost 

and price improvements should be significal1l. 

o Statewide hospital rate increases are moving downward, declining .from 7. 4 percent in 

2002 to 4.8 percent in 2012. Still high, but certainly trending in the right direction. 

These are just afel!' examples, and in the interest of time I've distributed a packet containing several 

more illustrations o.fWisconsin 's high marks in national rankings and ongoing ~fJorts to improve quality 

and value. 

These are promising trends, indicators of progress and glimpses o.f solutions to our massive health care 

challenges. It is a direction in which we are heading, but not a place we have arrived. Health care still 

consumes too much of our GDP, our federal budget, our state budget, our personal budgets and 

employers' budgets. Some in the health care and the business communities are critical of the pace of 

improvement in health care. They are not wrong, but we believe, lor our part, things can change. 
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