Committee on Ways and Means, Health Subcommittee, 107-80, Promoting Disease Management in Medicare

House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.

The Subcommittee met, pursuant to notice, at 3:16 p.m., in room 1100 Longworth House Office Building, Hon. Nancy L. Johnson (Chairman of the Subcommittee) presiding.

Chairman JOHNSON. Good afternoon. The hearing will come to order. Mr. Stark is near at hand, we hope, and so I would like to start. I consider this one of the most important hearings the Subcommittee has had.

Seniors in traditional Medicare are literally held hostage to an outdated benefit package that denies them the state-of-the-art care that is possible under programs like disease management (DM). Programs designed to assist both the physician and patient to develop a plan of care can help defray rising costs while at the same time improving the quality of health outcomes and tremendously improving the quality of life of our seniors. Unless we transform Medicare from a sick and acute care program, the costs we face as the baby boomers age will be staggering, but the health needs of the rising number of seniors suffering from multiple chronic illnesses will not be met.

So, as we start this hearing, I believe it lies at the heart of improving both the quality of Medicare and managing its costs. I would have to say that as I have gone through doctors' offices where these protocols are being used, medical organizations, all kinds of providers, honestly, I have never seen such enthusiasm, such excitement by both patients and providers for the quality of life disease management is making possible for seniors with very serious and chronic illnesses, as well as the respect for the costs that can be avoided and the long-term cost control that is possible through this approach that dramatically improves quality.

A small portion of Medicare beneficiaries, 12 percent, account for 75 percent of all Medicare fee-for-service payments. Typically, it is these beneficiaries who suffer from chronic illnesses such as diabetes, asthma, or coronary heart disease. In many cases these high costs come from repeated hospitalizations due to poor medication compliance, lack of adherence to a prescribed treatment plan, and lack of patient self-management skills.

In addition, there are also provider-related problems that undermine efforts to coordinate and better manage patient care: poor communication, and narrowly focused payment systems that result in inadequate and fragmented monitoring of patients. Yet, as the baby-boom generation retires, the number of chronically ill beneficiaries is expected to increase, causing Medicare costs to escalate.

Disease management programs, designed to assist both physician and patient to develop a plan of care using evidence-based practice guidelines, more consistently manage illness, and will better involve the patient in their own health care. This will defray some of the costs while improving the health care of our senior citizens.

While some providers have attempted to implement disease management programs in Medicare fee-for-service, health care for beneficiaries with chronic illness remains typically fragmented and poorly coordinated. Conversely, many managed care entities have developed a wide array of cost control programs that combine adherence to evidence-based medical practices with better coordination of care across providers.

Medicare+Choice (M+C) plans have found preventive care and case management saves money and avoids costly hospital stays. According to the 2000 Survey of Disease Management Practices, the average M+C plan has four disease management programs, with 95 percent of plans having diabetes disease management.

Netcare, a diabetes management program covering 7,000 diabetics in 7 managed care organizations, actually decreased hospital admissions by 18 percent, resulting in a 12 percent savings. Think of the impact on people's lives.

There has been some movement towards implementing disease management programs in fee-for-service. A coordinated care demonstration authorized by the Balanced Budget Act (BBA) resulted in approval of 15 programs. In addition, on February 22, Centers for Medicare and Medicaid Services (CMS) issued a Request for Proposal to conduct demonstration disease management programs targeted specifically towards congestive heart failure (CHF), diabetes, and coronary heart disease. The demonstration projects will operate for up to 3 years, after which a formal evaluation will be conducted by CMS.

These proposals hold the hope that we can achieve the twin goals of improving care and saving money, long recognized as central tenets of managed care. I am pleased to welcome Ruben King-Shaw from the Centers for Medicare and Medicaid Services, who will comment on these exciting new opportunities.

I will also welcome other experts: Dr. Wennberg from Dartmouth University will discuss regional variations in quality-of-care. Dr. Hillman from the Marshfield Clinic will explore their exciting work in incorporating disease management into fee-for-service Medicare. Dr. Henschke from Cornell University will present her firsthand efforts in managing lung cancer patients. Dr. Lord from Humana, and the President of the Disease Management Association of America, will discuss Humana's work in M+C. Finally, Dr. Anderson of Johns Hopkins University will discuss his work in this field.

I look forward to your testimony, and I specifically welcome Ruben King-Shaw for your first appearance before this Committee, but I hope not your last. As the testimony you will offer us today is testimony that speaks more to the future needs of our seniors and to the future evolution of Medicare than frankly any testimony we have had to date. So welcome to you, Mr. King-Shaw, and when Mr. Stark joins us, if he would like to make an opening statement, I will make room for that, and meanwhile I would like to recognize my colleague from Florida, Congresswoman Thurman.

Mrs. THURMAN. Thank you, Madam Chairman, and I just also want to thank Mr. Shaw for being here today, and for the benefit of the Members of this Committee, to let them know that Mr. Shaw came from Florida, was a very able Administrator, and was one who strengthened, I think, in many ways the health programs in the State of Florida through his time, and then certainly coming into the Federal Government, in which he helped us attain some very valuable waivers that he had been pushing before he left Florida. So, we certainly are pleased to have him before us today and for the work that he has done on behalf of the United States, but also on behalf of our citizens in Florida. Welcome.

Chairman JOHNSON. Thank you, Congresswoman Thurman. I was aware of his service in Florida. I am glad you were here to make some comment. I would like to recognize now my colleague and Ranking Member, Congressman Stark, for his comments.

Mr. STARK. Well, thank you. I apologize for being late, Madam Chair, and I want to thank you for this hearing. We are going to hear about Medicare beneficiaries, who are more likely to have chronic illnesses and perhaps even more than one of them. I hope that we can be careful not to focus on the short-term costs of covering and caring for these individuals. Without budget rules and scoring rules, it is tempting to do that. In the short term, it might be in Medicare's interests to curtail the costs by curtailing care, and that is not I think what the Chair has in mind, certainly not what this Ranking Member has in mind.

There isn't an incentive that I can determine, in the managed care industry as we know it, for plans to invest in the long-term health of their enrollees. If they keep getting adjusted each year, it is hard to see how they will recover major costs.

So, I think this is a topic that is long past due, and I think that you are brave to venture into a complex area where I am sure you are going to get a lot of opinions of what is wrong with every way that people suggest how to do it. I hope we can get at it, and maybe in a couple of years we will be able to see this become a standard part of Medicare, and I thank you for your interest in it.

Mr. KING-SHAW. Well, Madam Chairwoman, thank you very much for the opportunity to talk about something so important and so meaningful and so much a part of what I have been focused on for a number of years. To Congressman Stark, again, thank you, and Congresswoman Thurman, always good to see you again.

It is very, very appropriate that I take time to thank all the Subcommittee Members for being here and for the great leadership you have shown in this area. Clearly, disease management has enormous potential for Medicare, and has proven its ability to provide great results outside of Medicare for a number of years. In fact, there are really millions of individual seniors included who benefit from the power of disease management programs in the Medicaid and commercial sectors.

We in Medicare have been demonstrating various technologies--I will share them with you in a moment--but truly have some ways to go in harnessing the power of these disease management methodologies for the benefit of the people we serve and the mission that we have chosen, which is to care for poor people and old people and those who need public assistance for their daily health care needs. I think it is important, though you have my written statement that goes into great detail of the specifics of what we are doing at CMS, I think it is important to take a moment in just this first opening discussion about what do we mean when we say "disease management" in Medicare.

I think disease management is best described as a continuum, if you will, that can be both very robust on one end and particularly light on another. So, as I walk through some of the common elements of a robust disease management program, I think we get a sense of what a full, comprehensive disease management program would look like.

It would have elements of a clinically driven best practice or evidence-based clinical strategy. That is where it begins, with strong clinical leadership based on proven, effective clinical strategies. It would then include the integration of administrative, particularly data, and financial resources to support the patient-physician relationship.

This truly is a patient-centered strategy for improving health care outcome, treatment, and wellness. There is an important element of patient education in disease management, and as patients understand the pathology of their condition, they become full participants in the help and healing process. As you can see, they actually become a partner and take ownership of the health care itself.

A significant part of provider education is attributed to disease management, and there is the important discipline of risk assessment, truly knowing the population. You will hear a term, "population management," and an important part of population management is stratifying the population according to levels of risk or understanding of disease or degree of severity in these types of things.

There is an important part of disease management that focuses on outcomes and outcome measures. All successful disease management programs truly do have ways of identifying the objective, the clinical, the social, the cultural even, outcomes that are the target of performance. So, here are some quite rigorous, very effective ways of measuring those outcomes. Then clearly there are cost savings, and then the provision of comprehensive, integrated, but coordinated care across the delivery system.

So, these are the elements of what I would describe as a very robust disease management program, and I will share with you some examples that we are focusing on at CMS in a moment. There are elements of disease management, as I have just outlined, that can appear in isolation. You can have two or three of these deployed very effectively, and those would end up on the lighter scale of disease management. It is within that continuum of sources, of resources, of approaches, that you will find most disease management programs.

It is also a good question to ask, well, where is disease management most effective? I think Chairwoman Johnson has addressed those, and they are in the chronic conditions. They are most commonly found in asthma, congestive heart failure, coronary heart disease, Alzheimer's, cardiovascular, et cetera, diabetes, depression, hypertension, and increasingly substance abuse and chemical dependency, as well as lung disease and mental health such as depression conditions.

So, where you have in the Medicare program an increasing number of beneficiaries who are suffering from chronic diseases, it would be a natural progression, a natural advancement of the Medicare program, to begin to harness more effectively disease management methodologies. Where have these methodologies been proven to be most successful? It truly has been in the managed care or coordinated care or integrated care world.

Whether that has been in Medicaid or the commercial environment, or managed indemnity before that, it has truly been in the managed care arena where we have developed the most promising models for disease management. Why would that be the case? Why would managed care be the place where the expertise has grown up in such abundance around disease management?

Well, for one thing, these private plans have the flexibility to reconfigure resources around the patient-physician relationship. These private plans also have the ability to achieve greater returns on the continuity of care. They are more free to respond to the needs of the population. They can be more agile in financial models or contracting or partnerships. They can build coalitions with clinical and academic and pharmacological and community-based resources around the needs of a population or a patient, and they have the ability to maintain a platform that is conducive to further disease management operations.

So, it is within the context of a delivery system which is flexible and agile and patient-centered that we have seen the most effective deployment of disease management programs. So, if we are looking at one of the ways that Medicare can preserve the benefits of disease management, it would clearly be to shore up the M+C program itself, in that the provision of an actuarially sound methodology of financing M+C programs will preserve for seniors in those programs the benefits of disease management that they currently enjoy.

Clearly there is an application of disease management programs outside of M+C, and so the next few comments that I will share with you will give you some sense of what we are doing outside of the M+C environment. In addition to what you may have already read about is our preferred provider organization (PPO) demonstration solicitation that we have just announced.

We are looking at doing some things around congestive heart failure that will identify clinical outcomes among congestive heart failure patients, either in M+C organizations or outside in the fee-for-service world, that would give us the ability to direct resources, data, information, coordinated care for a better outcome in revised incentive payments, if you will, as a result of good clinical outcomes.

Similar efforts are underway with the ESRD, end stage renal disease patients, and here is an important part of disease management which is often missed. These are often extremely effective methodologies for addressing disparities in health care, disparities among men and women and among ethnic and racial groups.

So ESRD, which is disproportionately a condition where African Americans suffer, effective disease management programs are among the ways to address that disparity by truly integrating care and all of the other things that I listed up front. Similar types of interventions can address disparities in other ways, between rural and urban areas, between male and female.

There are a number of things that we are doing in coordinated care, like demonstrations. You heard Madam Chairwoman refer to those. There are some very interesting implications for direct contracting with provider sponsored organizations.

I mentioned early on that part of disease management is building teams, communities of care, if you will, and so where you have community-based organizations, be they medical or cultural or social or community support, that you can build a delivery system around, then you can be quite effective with those. So provider sponsored organizations, case rate methodologies, where you truly are able to build a financial model around a continuum of care based on a diagnosis, these are areas that we are beginning to do some work now.

None of this will substitute for a financially sound delivery system as whole, be it M+C or the Medicare program itself, but there are ways that we can begin to do a better job.

Just a couple of other examples that kind of will lay out the landscape of some of the power of disease management, and I will go around the country a little bit. Up in Boston there is a very effective diabetes program that truly focuses on the provision of annual retinal eye exams, an important part of diabetes management, as well as monitoring hemoglobin and cholesterol levels.

Down in Florida, that great Sunshine State, there is quite an effective program that is looking at cancer through disease management, and the measurement there has been acute care hospital days which have gone down 15 percent over a 2-year period through effective use of disease management, and also looking for admissions as a result of complications from cancers, which is already down 10 percent.

Then I'll stop in New York, because there is an application of a more interesting, perhaps, disease management program around the issues of mental health.

I am very pleased to be able to share with you this opening. I would love to be a part of whatever question and answer or further discussions you would like to have. I have had the privilege of being a part of disease management both at private and State and now Federal level. I am happy to be a part of this great hearing, and I can spend whatever time you would like, just respond to your questions, continue the dialogue.

Chairman JOHNSON. Thank you very much, Mr. King-Shaw, for your testimony. I did have a chance to read through it, and it offers us a lot of very good information.

I want to focus for just a minute--and I have several questions, so I want to just hit on these things lightly--but you stress in your testimony that the M+C programs and eventually the PPO programs are the only access Medicare has right now for patient-centered systems of care, and I think that is true. You talk about in the fee-for-service area building teams of care, but that team approach is only sort of automatically available to us through the more integrated care plans.

It has struck me, as I have worked in this area, that as important as any one factor in the ability of those plans to offer disease management is their information management technology. They actually can follow their patients more easily. They can communicate among their providers more easily. They can track and incentivize their patients to participate in their own care in a way that fee-for-service Medicare from Washington can't do.

Do you want to comment a little further on the information technology aspect of an integrated care system and, how that means that we really have to look at alternatives to fee-for-service medicine if we are going to accomplish these goals in the near term?

Mr. KING-SHAW. Well, that is clearly, clearly a powerful point, and one of the advantages that private plans and M+C organizations bring is that they typically have front end pieces that they can attach to their claims system to integrate all types of claims, and increasingly the types of interactions or encounters that happen outside of the regular claims operation.

So, as we do a better job at collecting lab results and lab values, not just the financial but the actual values, as these organizations have access to other types of qualitative data, they can array it and display that to identify progress, to measure the effectiveness of the interventions, to actually look at the risk. I mean, in every disease management program you have got those that have a condition and know it, those who have it and don't know it, those who don't have it but are about to get it or are at risk for getting it.

This kind of data that M+C organizations can integrate throughout the continuum of care makes them particularly qualified to maintain that kind of risk and outcome and performance data. It also enables them to do something with reimbursement and contracting and pricing of those relationships.

On the fee-for-service side, we have a long way to go. There are ways to do it. We have several people who pay claims in the Medicare program, A and B and DMERC, Durable Medical Equipment Regional Carrier, and all of that. So, integrating the data will be a challenge on the fee-for-service side, but there are organizations, disease management organizations, that bring that expertise. There are system integrators that would like to be able to bring that value to us on the fee-for-service side. There are some contractors that do have large pieces of the care continuum that can bring us that value, or team up with other organizations to integrate that data.

So, it does present challenges on the fee-for-service side, but it is without question where 84 percent of the population is, where we can do the most work.

Chairman JOHNSON. All right, thank you. In my opening statement I mentioned that 12 percent of our Medicare beneficiaries account for 75 percent of the spending, and in his testimony later on Dr. Wennberg will suggest a disease management approach to some of the end-of-life use issues. He notes the enormous variation across the country in the number of seniors that pass away in intensive care units (ICUs) in some areas and very uncommonly in ICUs in other areas; the disparate use in physician visits. You know, is that going to be a focus of one of your demonstrations, to really look at the management of end-of-life illness and the efficacy of one approach versus another?

Mr. KING-SHAW. It certainly could be, and I think it should be. When we issue solicitations or invitations, either in writing through the official means or through the conversations that Tom Scully, the Administrator, the Secretary, and I have around the country, we are always interested in ideas that people bring us, initiatives that we can support and work through.

This is one area that makes a lot of sense. The closest we have come--I mean, actually it's not commonly thought of as a disease management program, but in many ways it is--is the Program of All-Inclusive Care for the Elderly (PACE program) itself. Our PACE program is, you know, an all-inclusive program for frail elders, and in there is a great deal of knowledge and value and opportunity to strengthen disease management technologies and methodologies around people late in life.

So, the answer would be yes. How we do it, where we do it, would be a function of someone bringing to us that expertise that we can connect with and support and develop.

Chairman JOHNSON. We have known for such a long time that so much of our money is spent in the waning months of one's life, I do hope that we will think about how much the private sector does know in this area. I think they know less than they know in the area of diabetes and some other areas, so I appreciate that, but I think this does need to be a focus of our thinking as we develop approaches to managing the costs of care and improving the quality of life.

Lastly, let me just ask you if you--I noticed with your comments about the end-stage renal disease management care demonstration project that began in September 1999, you comment that it did improve outcomes. You don't comment on whether it cost money or saved money. You don't comment on why, with this project completed now and under our belts, we aren't thinking about rolling this out through Medicare across all of our ESRD providers, when clearly it did improve at least quality-of-care. So, if you would, comment on the cost aspect and why we aren't ready to move that out.

I would ask the same question in terms of diabetes. I have stood in doctors' offices. I have seen what fantastic, simple programs we have available that can help physicians monitor patients much more easily, can get patients involved in their care ever much more easily. When you look at what it would do to prevent blindness and all kinds of complications as people age, it does seem to me that there are areas in here where we might even use the national coverage process to change the way we--you know, what care it is we are willing to pay for.

Mr. KING-SHAW. Thank you very much for that, Madam Chairman. Actually, we are working on at least two different ESRD disease management initiatives. There is one in the variety of looking at a true capitated model that would enable, at a fixed rate per enrollee, ESRD providers to provide the basket of services that patients need. We are also looking at some more of the disease management coordinated, noncapitated models. We are looking at different ways, as I mentioned, you know, case rate methodology.

So, there are a number of different initiatives that we have underway, organized toward ESRD, so you will be hearing about them more. We are engaged with partners and interested parties to help us do that. So, as they cook a little bit more and become more structured, there will be ways for us to present those to you and anybody else who is interested.

There is actually quite a lot of work we are doing in the area of diabetes, both in the 15 BBA-sponsored diabetes--I am sorry--disease management programs, there is work being done in diabetes, and of course the Beneficiary Improvement Protection Act (BIPA) provided an opportunity for types of disease management. In that second group, we are actually including the cost of prescription drug coverage--

As far as the cost goes, in these past examples, they have proved to be at least cost-neutral. There is some spike in cost as you bring services to people who have under-utilized the system, and there is an investment cost, so you will very commonly see a spike early on in the treatment process. That levels out and actually reduces over time as you stabilize and provide all the basket of services, so it is our view that they actually are quite cost-effective, and over the life of the program actually at least a break-even, most likely even as a small benefit to the Medicare program.

Mr. STARK. Thank you, Mr. King-Shaw, for your testimony. Is there any reason now that providers shouldn't be required to put in place practice guidelines and patient safety plans as a condition of participating in Medicare?

Mr. KING-SHAW. Well, we actually have a new policy forthcoming, a new regulation forthcoming on conditions of participation. There are several guidelines that are sponsored by the various medical societies, and those best practices and guideline are freely available to physicians.

The Medicare program has traditionally not prescribed a way of practicing, or at least tries not to do that, and so by identifying any particular protocol or guideline or best practice, we would be stepping way outside of where the traditional role of Medicare has been, though we can work in a consultive way with quality organizations to identify best practices and be a part of research in evidence-based methodologies and that kind of thing.

Now, our carriers do have local medical guidelines that are developed in a very consultive way or consultative way with physician groups, and there is a Carrier Advisory Committee of medical professionals who help them do that. So there is considered effort going on at the carrier level, regional level, to embrace best practices and good medical decision making.

Now, the actual issue of proscribing them and mandating them, that is a different issue than Medicare has dealt with before from a clinical, physician point of view.

Mr. STARK. It is fair to say that--I believe at this point you basically completed one ESRD demonstration, and you have 17 other demonstrations currently working. If that is all you have got, does CMS really have enough information to make a determination as to whether disease management and case management has value for Medicare beneficiaries, either in terms of quality or in cost savings to the taxpayers? Do you know enough now to make that decision?

Mr. KING-SHAW. Yes, I believe that we have enough experience to know that there is great value in disease management methodologies when done well and when done in partnership with organizations who do it well. I believe like anything else a poorly designed, poorly supported effort, be it a study or a protocol or a project, is not going to derive the kind of results that a well thought out, well financed, well put together, clinically led program is.

So, I think what we have learned is that there are some best practices in disease management that we have imported from other organizations, that we have learned in partnering with other organizations, and there are some not so best practices. So, I think that that is sound and that is credible.

As we move forward, I think the objective would be to take from demonstration to operation, to mainstream, if you will, those models, those best practices that have worked well, while not shutting the door to the ever-evolving methodologies that are being generated in the private sector, that Medicare can be a part of. So, I think we have enough information to move forward appropriately, cautiously, with the right kind of responsible decision making, but we clearly, clearly can see greater benefit from disease management than what we are seeing today.

Mr. KING-SHAW. We have some. What I have described in the testimony are some disease management initiatives that have been launched. There are 15 of them that are being launched now as a result of BBA. There were others that preceded it in ESRD and a few other areas that have given us meaningful results. Even if we want to do it differently going forward, the results were meaningful in helping us guide that decision.

We have a number of others that are under development right now, and there actually are a number of disease management organizations that are operating within the M+C world that continue to bring good value to Medicare beneficiaries in M+C environments.

Mr. STARK. When you say "good value," do you suggest then that the M+C plans save money by using disease management?

Mr. KING-SHAW. When effective, yes. I mean, having spent some time outside of the Federal Government, I can tell you that yes, when effectively done, again with all the elements that I identified in my oral comments, they clearly produce cost savings to the program, both the insurer itself and the program that they operate under, either Medicaid or Medicare or commercial. They also can do a great deal in terms of reduced costs on the part of the beneficiary, of the patient, by better managing their condition or their disease.

Just as an example, to the extent that there is any out-of-pocket cost sharing on the commercial side--I come from hospital admissions--effectively reducing hospital admissions is a cost saver to the patient's out-of-pocket expense. To the extent that there is not a prescription drug benefit in the Medicare program outside of M+C, disease management that brings prescription drug coverage, as this new BIPA package would, or by helping people manage their diseases and manage their medications, so that they are not over utilizing or having contraindications or drug-to-drug interactions that would lead to other types of complications, there is cost saving on the part of the patient there, as well as the program overall.

So, I would say yes, most definitely, when effectively done, disease management is a cost saver to the program, to the patient, with quite, quite substantial benefits in clinical outcome, satisfaction, and performance. It has to be done well. You can't do a bad job with it and expect those kinds of results.

Chairman JOHNSON. Mrs. Thurman? I am going to recognize him after you, but since you are on the Subcommittee.

Mr. Shaw, I guess the problem--and I don't disagree with disease management at all. You and I know of a very good health plan that--AvMed, which is all over the State of Florida, but even in our Fifth District, we know what they have done with the congestive heart failure program, and what they have saved and what they have done.

Quite frankly, we talk about the fact that the M+C programs have had an excellent way of handling this, but all indications are, M+C programs are leaving. It would seem to me that it would be nice to think in a real true world, and everything was great, that that would happen.

My concern is that we are not seeing that happen, but it also seems to me that the M+C programs are no different than Medicare fee-for-service in many ways. They are both with doctors. They both have an insurer. From what I can gather with M+C, the insurer is the one somewhat that makes some of these decisions to and for the patient, and that drives what doctors might do.

So, why is this so hard, or why do we think this is going to be so hard to implement under fee-for-service Medicare? What are the components that we are missing in Medicare that would make this transition happen?

Mr. KING-SHAW. One of the elements of success in the fee-for-service world, where it has been successful--I am not going to represent to you that all M+C programs or all managed care programs do a great job at disease management and save a lot of money. There is, as I say, there are robust, there are all right, there are best practices, and less than best practices, but where they have been successful, wherever they have been applied, they have had some common elements.

One is an organized delivery system where you truly have a community of care, where there are a number of primary care physicians and specialists who truly have organized their efforts around the effective treatment of a disease, who know the population. They know the other members of the community of care. There are conversations, there is information sharing, there are feedback reports that give the providers and the caregivers and the patient and everybody else around that community, if you will, information about the patient's progress. The M+C organizations have that platform established, and many of them actually have networks that are especially carved out because they are effective at diabetes or hypertension or congestive heart failure.

So, in the fee-for-service world our delivery system is not so well organized. It is quite a disparate system, and so you need to have an organizer, you need to have a partnership with a disease management entity, which doesn't have to be M+C--it could be somebody else--and the patient, to assemble that community of care around the needs of the individual. It is not a given. Then to integrate data which is actually captured in many different parts of the system, to bring them together. That can be identified by diagnosis or by patient or by substance or by the DM community.

All are doable. I mean, there is technology. There are people who know how to do it. You know, there are resources to do those things. It is all doable. It is just not a ready-made platform, the way it is outside of the fee-for-service sector.

Mrs. THURMAN. In Medicare, it sounds to me like there needs to be some kind of a benefit payment structure within our Medicare fee-for-service to provide for that. Is that what we are kind of saying? I know we talked about primary care, talked about the gatekeeper. Those were kind of some of the buzz words at the time.

Is there anything in our Medicare payment services now that would allow us to do that? For example, we have struggled with the issue of whether or not we should pay for every year an exam. Right now I can't remember if Medicare--I don't think we ever offered that once-a-year exam, so that at the beginning, the person comes in at the beginning of the year, you have an opportunity--what are some benefit issues that we could be doing under Medicare fee-for-service, that would help in fact organize as you are suggesting?

If we can find out and we can put them in the right direction, we are in better shape, and then you have somebody that also can organize this to some--are we doing anything in the benefit plan to help to do that?

Mr. KING-SHAW. Excellent question. The principal piece on the benefit side is preventive care services, and that is by no coincidence a part of the President's principles for reforming and strengthening and modernizing Medicare. It is with that preventive piece, the screening piece, that you do a lot of your risk measurement up front and your monitoring that is such an important part of disease management.

So, for example, we have very specific screening tests that are covered under Medicare but they are specific. General health care screening is not included. That would be one.

Clearly, prescription drugs. When you have many of these conditions, the prescription drug cost for wellness and prevention and maintenance is an integral, important part. I think that the power, the potential power of the new round of BIPA demonstrations does include prescription drugs in the community of care, if you will. Without a prescription drug benefit on the fee-for-service side or any clinical trial as something to attach to, you have left a huge hole out there.

Then the last piece, again, is you have to have an integrator, a care manager, somebody who is truly organizing all of this on behalf of the patient-physician relationship. There we are testing methodologies that would have physicians actually empowered through primary care case management type of things and financial resources brought to bear, to enable him or her to perform that integrating function.

Mrs. THURMAN. In the M+C programs we actually provide them those incentives to do that through the payment structure and/or whatever, so--

Mr. HOUGHTON. Madam Chairman, first of all, thank you very much for letting an alumnus come back to this Subcommittee, an outsider, and I really applaud you for having this hearing. It is just under so many things that we need to talk about and discuss.

Mr. King-Shaw, thank you so much. We are honored to have you here, and you are doing just a wonderful job. I would like to ask you a question. You mentioned in your testimony the disease management for lung cancer, and I know Dr. Henschke is going to be talking about this a little later, but in terms of just the human part here, cancer, lung cancer kills so many people and is often so expensive to treat, particularly in the final stages. How can your agency really take steps to help those patients get good care, but care that won't break the bank? That is really the only question I have.

Mr. KING-SHAW. Well, again I would say it begins with the screening piece. I am familiar with some of the work being done up at my alma mater, Cornell University, around this area, and in fact the kind of screening, that computerized tomography (CT) scanner screening for lung cancer, is a proven, effective way of risk assessment which is a part of the overall package. So not having the ability to do that for lung cancer specifically is an issue, and so we would look to be able to do a better job at screening as a part of disease management, in order to be more successful at it. That is one.

I would also say that as we partner with community-based organizations, again, one of my comments was, partnering with academic medical institutions, community-based care providers and those types of things, there are folks out there who know very well how to manage and treat this condition. It is expensive, and so when we talk about making things less so or moving the care earlier in the development of the condition, so that your interventions can be more effective and the downstream costs can be minimized, but there is a certain amount of financial commitment that, you are going to have to make to effectively manage or treat lung cancer patients.

So, I think the short answer is, we would partner with those folks who know how to do this, again until we can build more infrastructure inside. We would have to look at our ability to provide some of the important screening up front, the capabilities, and you know there is the case that, as I said, Medicare law does not specifically allow us to do this.

There is always the opportunity to look at our overall benefit structure it and modify it, in this case for lung cancer but I would suggest for many other conditions as well, through the national coverage decision process. Where we have a need to look at technology or methodologies and go through evidence-based review of its potential to contribute to life and wellness in the Medicare program, we have a mechanism to do that. We need to have a law that says it is covered, first, but once we have that, there is a process that we have already established that can help us bring to the Medicare program technologies and strategies such as this one, for lung cancer patients or for anybody else.

Mr. HOUGHTON. Just to follow up on that just a bit, since it is not quite a third but almost a third of all the cancer deaths really are from lung cancer, this is such an important area, break down a little bit what you mean by partnering.

Mr. KING-SHAW. Well, for example, if we were to do a provider sponsored, in this case demonstration for disease management around lung cancer, one of the places I would look to is Cornell, who is doing this. There are other types of academic or provider organizations that are doing this.

So to partner, it would mean bringing them in as either a care manager, or we would develop a patient population we would place under their management. They would develop a proposal that would look at what resources they would have to bring, educators, care managers, et cetera; a system for providing some of the related care needs of lung cancer patients.

We would work out a financial mechanism, whether that would be a case rate or a capitation, or that would be some type of bundled rate or fee-for-service or some administrative reimbursement that covers the cost of integrating these things. There is no risk involved. There are many different financial relationships you can build.

Mr. HOUGHTON. These are things that could be done, not are being done now. Is that right?

Mr. KING-SHAW. Yes, that is correct. These are things that could be done. We are doing them, applying those technologies, those methods, to things other than lung cancer. A lot of what I have talked about in diabetes or hypertension and congestive heart failure are those very same types of applications. We are not doing it currently for lung cancer. We could.

Chairman JOHNSON. Thank you, Mr. King-Shaw. I just did want to ask one final question. I know you have got a proposal out there for a number of disease management demonstration projects. I wondered if you could just give us a quick run-down of how many Medicare beneficiaries you are going to target for each demonstration, whether they will be distributed across the regions of the country, across minority populations, urban/rural, and what incentive will there be for physicians to participate?

Mr. KING-SHAW. I can maybe give you some sense by picking a few at a time. The PPO demonstrations, we anticipate there being 12 geographic markets spread throughout the country, because every market has a different nuance. Twelve geographic areas, twelve markets should give us, I think, a well-rounded comprehensive, and we would look at large and small towns and big cities. There are some rural methodologies out there that people would want to bring, so I would hope to have some rural participation as well in those 12.

A number of the, it is the BBA, what is currently the 15 demonstrations, have been everywhere from--we have some in Virginia, you have some in the Midwest and in New England, you have got those down--we understand that there is about, I think, 6,700 Medicare beneficiaries that we would anticipate being a part of those.

Under the new BIPA ones, there is a cap of 30,000 beneficiaries. I can get you all of this information in writing with a much more detailed spreadsheet that would give you the number of lives and markets and locations once the contracts are awarded, sometime after July.

In the testimony, if you don't have it, I can provide it, too, there is a grid that gives you the geographic location and the disease class of the current 15 BBA demonstrations. I can also give you some more of the history of the lives that were involved in some of the past demonstrations.

Project Site	Rural/ Urban	Beneficiary Location	Projected Beneficiaries to Be Served	Targeted Diseases
Avera McKennan Hospital Sioux Falls, SD	Rural	SD, IA, MN	634	Congestive heart failure and related cardiac diseases
Carle Foundation Hospital Urbana, IL	Rural	Eastern IL	1,518	Various chronic conditions
CenVaNet Richmond, VA	Urban	Richmond	614	Various chronic conditions
CorSolutions, Medical, Inc. Buffalo Grove, IL	Urban	Houston	1,963	High-risk congestive heart failure
Erickson Retirement Communities Baltimore, MD	Urban	Baltimore County, MD	396	Various chronic conditions
Georgetown U. Medical Center Washington, DC	Urban	DC, MD suburbs	1,025	Congestive heart failure
Health Quality Partners Plumsteadville, PA	Both	Eastern PA	1,070	Various chronic conditions
Hospice of the Valley Phoenix, AZ	Urban	Maricopa County, AZ	1,092	Various chronic conditions [Note: Demo not limited to end-of-life care]
Jewish Home and Hospital New York, NY	Urban	New York City	365	Various chronic conditions
Mercy Medical Center Mason City, IA	Rural	Northern IA	607	Various chronic conditions
Medical Care Developments Augusta, ME	Rural	ME	1,218	Congestive heart failure or post-acute myocardial infarction
Quality Oncology, Inc. McLean, VA	Urban	Broward County, FL	1,426	Cancer
QMED, Inc. Laurence Harbor, NJ	Urban	Northern CA	571	Coronary artery disease
University of Maryland Baltimore, MD	Urban	Baltimore, MD	339	Congestive heart failure
Washington University St. Louis, MO/StatusOne Health Hopkinton, MA	Urban	St. Louis, MO	5,422	Various chronic conditions

Chairman JOHNSON. Well, thank you very much. You did mention in response to my colleague from Florida's comment, that under the fee-for-service system there would have to be some compensation for this management capability that the managed care systems are able to provide. I assume in your demonstration project, you will get a better handle on what it will require for physicians to add the extra time it takes to spend on patient education and to coordinate care, or a non-physician assistant. So, I think those costs that are currently being absorbed by the Choice plans will be isolated in these demos and will get a better handle on that.

Mr. KING-SHAW. Yes. In fact, in some of these demos there is an administrative fee which is a part of the demonstration to the best of our understanding right now to cover those costs. You are absolutely correct, as these demonstrations unfold, we will get a much better handle of what the financial resources that are required on the part of physicians and other clinicians to be effective disease managers. We can then build a model that would incorporate that.

Mr. MCDERMOTT. We had sporadic reports recently in Seattle of patients having difficulty finding physicians who would take payment for Medicare. What I am interested in understanding is, do you think that in the face of our attempt to cut reimbursement in this session of the Congress that we can expect that there will in fact be more patients who have access to the kind of health care you are trying to deliver? Do you think you are going to get more doctors involved in that kind of chronic management if we cut our rates by 5¼ percent?

Mr. KING-SHAW. Well, I mean, the sustainable growth rate that Congress gives us to work with resulted in those negative updates, the physician fee schedule that you are referring to. Absent a change in that formula or corrective action then that's what we have to live with. So, I think that we need to recognize that there is a threat to the integrity of a provider network in Medicare with the financing and the financial pressures under--on top of the system right now. So, should we be concerned about that threat? Yes. One of the things that we are doing at CMS through our 10 regional offices and out of the outreach, is we are seeking to obtain very quantifiable specific data about participation rates in Medicare, either as a result of the current numbers or as anticipation of more oblique numbers going forward. As we collect that very specific about those who are just saying they are going to leave, but actually leave, actually disenroll, we can provide that information to leadership for consideration.

Beyond just looking at the number of physicians who leave Medicare or not is the important question of is there a restriction of panels? Do you see physicians reserving less and less time in their weekly schedules for Medicare patients? Are they closing their practices to any additional Medicare patients? The conversation seems to have remained at, are we going to lose doctors through Medicare? Perhaps we may not lose a doctor through Medicare--from Medicare. We may have that very same physician restrict the ability of Medicare patients to get their attention, and that is as much of a concern to us.

Is that a threat? Absolutely. Are we going to try to articulate that in clearer objective ways? Absolutely.

Mr. MCDERMOTT. What is the Administration's proposal to deal with the 5.4-percent reduction?

Chairman JOHNSON. Thank you very much for your testimony. I did discuss before the hearing started, the things that the Virginia hospitals are doing, and I will look forward to hearing from you as to how that fits in, and the other reports that are coming out now, the one from Ernst & Young and Cap Gemini on disease management and fee-for-service beneficiaries. So, we look forward to working with you on these issues in the months to come, and hopefully making some significant progress. Thank you very much for your testimony this morning.

Chairman JOHNSON. I would invite the final panel up, Dr. John Wennberg, the Director of the Center for Evaluative Clinical Sciences, Dartmouth University; Mike Hillman, Dr. Hillman, the Medical Director of the Business and Community Health, Marshfield Clinic, Marshfield, Wisconsin; Dr. Claudia Henschke, Professor of Radiology, Director of the Division of Chest Imaging, and Director of the Division of Health Policy and Technology Assessment at Cornell University; Dr. Gerard Anderson, Professor of Health Policy and Management, International Health, Johns Hopkins University; and Dr. Jonathan Lord, Senior Vice President and Chief Clinical Strategy and Innovation Officer of Humana.

We welcome you all to this important hearing and look forward to your comments. We will move right through. We have that roughly 5-minute rule, and then we will follow that by questions.

Dr. WENNBERG. Thank you, Chairman Johnson, Congressman Stark. I am glad to be here today. I have been asked to comment on geographic variations in traditional Medicare and their implications for the design of chronic disease management programs.

In my written testimony, I document extensive unwarranted regional variations in the patterns of practice. The amount of care patients receive depends as much on where they live as it does on the disease they have.

First, there is extensive under use of effective care. That is, care that works and all patients should get. Second, there is extensive misuse of discretionary care such as elective surgery, care that should depend on what patients want, but seems to depend too much on what providers prescribe. Third, there is extensive over use of physician visits, testing, imaging, hospitalizations, and stays in intensive care. The frequency of use in a given region has to basis in medical science and is determined by the supply of resources rather than medical need.

Finally, Medicare spending varies extensively. In 1996, per capita spending in Miami was nearly 2½ times that of Minneapolis, but greater spending does not buy higher quality-of-care. These regions score equally poorly on such measures of quality as the percent of diabetics who get needed eye exams or heart patients who get needed drugs. Greater spending is not associated with greater rates of elective surgery. Rates are about the same in high-cost regions such as Orange County, California, as in low-cost regions such as Portland, Oregon.

What then does greater spending buy? It buys more visits, more tests, more stays in hospitals, and more stays in intensive care. In some regions Medicare enrollees average more than 20 visits to medical specialists during the last 6 months of their lives. In other regions the average is less than three. In some regions nearly 30 percent of Medicare deaths occur in ICUs; in others, fewer than 7 percent do. This all adds up to a lot of money. If the pattern of conservative practice observed in regions with low spending were the norm for the Nation, we have estimated a savings of over $40 billion in 1996. The implications seem quite clear. If disease management programs in traditional Medicare are to have system-wide impact on overall qualify and costs, they will need to provide remedy for each category of unwarranted variation.

The causes and remedies for variation are different according to the category. Disease management programs organized by health maintenance organizations (HMOs) have been quite successful in reducing under service of such things as diabetic eye exams and beta blockers. They should well work in traditional Medicare, particularly if the claims data can be mobilized and patient registries can be mobilized to assist in that process. Variations in discretionary surgery and other preference sensitive treatments pose a greater problem. In some regions virtually no patients with breast cancer receive a lumpectomy, while another region's almost have to. Such variation occurs because patients aren't involved in a meaningful way in the choice of treatment. Patients need to understand their options.

A basic problem is that Medicare fee structure rewards procedures, not counseling. Disease management demonstration projects should be given flexibility to deal with these flaws that perversely interfere with informed patient choice.

The principal cause of geographic variation in visits, testing, and hospitalizations of the chronically ill is variations in the supply of resources relative to the size of the population saved. More physicians means more frequent visits. More hospital beds means more hospitalizations. Greater use of care means more Medicare spending. We interpret these patterns as evidence for inefficiency in the use of resources, not health care rationing. Medical science provides no guidelines regarding appropriate use and studies conducted at the population level show no gains in life expectancy associated with a twofold variation in spending across the United States for Medicare. For these reasons, we believe there is widespread overuse of such services.

Dealing with the overuse of what we call supply sensitive services poses a great challenge. The problem is finding the appropriate level of resources. Only staff model HMOs have dealt effectively with this problem. Staff model HMOs practice what Alan Enthoven has called "private sector health planning." That is, they regulate the capacity of their organizations. Since their benchmarks for resource inputs are consistently lower than the prevailing rates in their regions, the cost of their care has been correspondingly lower than fee-for-service medicine. For the Nation to achieve such efficiency, health care organizations serving fee-for-service populations would need to become accountable for their own capacity.

While the task of comprehensive reform of the management of chronic disease is formidable, we need to get on with it. I applaud the Subcommittee's willingness to address the complexity of this task. I applaud the efforts by CMS to invite chronic disease management companies to undertake demonstration projects in fee-for-service Medicare. We need to learn how well the network model can improve the quality-of-care in each category of service, but the complexity of the task warrants additional demonstration projects carried out by provider organizations serving traditional Medicare populations. In my written testimony, my colleagues and I have recommended that such a demonstration project be undertaken.

I want to thank you for the opportunity to testify, and also to thank you personally for the kind comment that you made on our paper in health affairs.

Dr. LORD. Good afternoon. My name is Jack Lord, and I am the Chief Innovation Officer for Humana. I am also the President of Disease Management Association of America.

Health benefits companies like Humana have turned towards disease management programs to help members get appropriate and effective care. Humana, like many other health plans, has changed its approach to medical management after years of understanding that the real needs that people have is to have supported self management. That approach emphasizes members' control of their own care and help to make better decisions.

Dr. Wennberg and I have collaborated for the last decade at the American Hospital Association and an organization called Health Dialog to produce tools that help people make better decisions.

Disease management programs also provide for personalized support for the people who are sick so they can get more effective care, and certainly self-care opportunities for the well. The availability of technology, e-health and the Web make those systems far more effective.

Disease management was evolved to help deal with some of the symptoms of a systemless world. Fragmentation, variation, lack of adherence to clinically proven practices, lack of patient involvement and the absence of predictive tools, where we had to rely on data from our rear view mirror as opposed to looking forward, characterized the way health care has been practiced in this country in many regions.

Disease management does support self management of individuals, focuses on what Dr. Wennberg calls effective care, uses evidence-based treatment protocols to provide information to both patients and practitioners, emphasizes the coordination of care, and uses advanced sciences to help track patients and look at outcomes. That science could be used to help predict future needs of people.

The impacts of disease management programs include better care planning, both at the individual level as well as at a population level, healthier behaviors on the parts of individuals and their families, better clinical outcomes, physical function and quality of life, better access in care coordination, and ultimately lower cost, reduced hospitalizations, surgery and invasive procedures.

Research shows that disease management is effective. Humana has been an industry leader in this effort, and we have put our effort and resource behind that. Whether it is in specialized diabetic care for Hispanics in San Antonio or in the under served areas of this country in terms of rural health care, we have seen results. Diabetes programs show that patients who are managed through disease management programs have increased frequency of hemoglobin A1c testing, foot exams, eye exams, and cholesterol exams, and demonstrate reduced hospitalization. Congestive heart failure programs show significant reductions in inpatient stays, admissions, emergency room visits, as well as the reduction of disease-specific claims and co-morbidities. These are outlined in our written testimony.

Humana's own experience reflects the research. Congestive heart failure, 90 percent of patients show improvements or stabilization of their disease, and a 60-percent reduction in hospitalization. Coronary artery disease patients show significant reductions in cholesterol levels, and patients who have chronic renal disease show greater percentages achieving dialysis targets when people are in disease management programs than outside of those programs.

The bottom line is, what is right for patients and what is right for you and me? People are more engaged in their own care. They get effective care. That is, care that has been proven to be right. They avoid unnecessary or harmful care, and they have an opportunity to have improved compliance both in their drug regimens as well as the medical regimens that are prescribed by their physicians. The net result is improvement in self-reported health and real functional status for individuals.

We have outlined some stories in the written testimony, stories that reflect our sensitivity around the privacy of our members, but also give you a glimpse of the kinds of care and the kinds of outcomes that are achievable.

One quick example. Mrs. V. We have an example here of a patient who had successful behavior modification when enrolled in a disease management program for congestive heart failure.

The key to success is targeting the right patients and being sure they are connected to the right care. The M+C programs have had advantages because of the data and the integration of services. We can use claims to target that information, and we can use outreach programs like our Personal Nurse program, where we provide essentially a concierge for those people who have complex significant chronic disease.

The bottom line to all of this is disease management has demonstrated advantages for the chronically ill Medicare beneficiary. Most M+C programs have offered some form of disease management programs, and those efforts should be continued. There is a tremendous opportunity to extent disease management programs beyond the M+C program to a fee-for-service program, and have an impact on getting the right care to people and lowering the cost of the care that is provided to Medicare beneficiaries across the country.

Dr. HILLMAN. Representative Johnson, Mr. Stark, on behalf of Marshfield Clinic, thank you for conducting this hearing. My name is Mike Hillman. I am the Medical Director for Business and Community Health Services at Marshfield Clinic.

The hallmark of the Medicare population is age. In our society, an almost constant companion to age is chronic disease. Our current health care system, largely shaped by the health care reimbursement market, is not designed to prevent or meet the needs of those who are chronically ill. It is a fundamentally reactive system. It emphasizes response to acute problems instead of prevention, diagnosis of disease instead of early screening, symptom relief instead of health behavior change.

The behavior of our health care system as a whole is exactly the behavior that the CMS reimbursement system rewards, and not just for the Medicare population. Make no mistake about it, CMS reimbursement policy is mirrored by most commercial insurance carriers.

In addition, leveraging Medicare resources by selectively denying medical services or reducing reimbursement along faulty geographical assumptions is unfair and does not work. Dr. Wennberg has elegantly debunked the faulty logic behind these assumptions.

However, an even greater problem is the Resource Based Relative Value Scale, RBRVS fee schedule, which is based on a model of medical practice centered on traditional patient/physician encounters, instead of the value of care that is actually provided. This model is terribly outdated.

When you think about it, physicians are the second most expensive resource in a patient's health care team. The patient is the most expensive. Therefore, the use of patient/physician encounters as the primary vehicle for delivering health care is shamefully wasteful.

The Anticoagulation Service described in my testimony, illustrates a population health intervention that is 100-percent telephonic, yet delivers superior quality with dramatic savings to CMS. Patients with chronic conditions are best served by a systematic multi-disciplinary approach in which the patient plays an active role. This approach requires a large front-end investment in information systems and process change: process change that defines roles and expectations of patients, physicians, nurses, and others in accordance with what each is most qualified to do in the most value-added way.

I have submitted testimony to you that describes some of the information and population health tools and strategies used at Marshfield Clinic, including a detailed account of our Anticoagulation Program, a program that has dramatic and positive effects on both health care quality and cost. I detailed this program for three reasons.

First, if we look at disease management separate from population health management, we would never have chosen to engage in this effort. Anticoagulation is not a disease. The process of managing anticoagulation has a profound quality-of-care and cost-benefit effect that extends across the boundaries of many diseases. Isolated disease management interventions are not optimal. However, disease- or condition-specific population health interventions, when provided in a coordinated manner, make a lot of sense.

Second, the effectiveness of any population health intervention is synergistically enhanced if it is part of an integrated and coordinated system of care, the record of which should be immediately available electronically and can be accessed 24-7-365 by an "actionably" qualified health care provider; that is, someone who can understand the information and act on it, such as a registered nurse.

Third, it is essential to measure the value, the quality, and quantity per unit cost of a population health intervention. Cost should be a part of any quality or process improvement platform. It certainly is in other industries, but in other industries there is a market that rewards companies for providing services or products of superior value. That is not the case with the current CMS reimbursement policies.

One final thought. I believe that a reimbursement system that stakes its financial solvency on the currency of patient provider encounters is at risk. At the same time, a care system that devalues the currency of patient provider relationships is at perilous risk.

Dr. ANDERSON. Chairwoman Johnson, Ranking Member Stark, Members of the Subcommittee, thank you for inviting me to testify this afternoon.

I am Gerard Anderson, a Professor at Johns Hopkins University and Director of the Robert Wood Johnson National Program Partnership for Solutions: Better Lives for People with Chronic Conditions.

In my testimony this afternoon, I want to focus your attention on the large number of Medicare beneficiaries with multiple chronic conditions and how this creates challenges and opportunities for disease management. Our analysis suggests that 63 percent of Medicare beneficiaries have two or more chronic conditions, and this is in contrast to only 5 percent of children and 20 percent of adults with multiple chronic conditions.

So, when we think of disease management in the Medicare program, we need to be considering the complex, multiple conditions of a disabled and aged population. This is probably the most critical differences between disease management programs in the private sector and in the Medicare program. It is much easier to design a disease management program for a patient with a single chronic disease, such as diabetes, arthritis, or congestive heart failure than it is to design a disease management program for a patient with diabetes, arthritis, and congestive heart failure.

If Medicare is going to pursue a disease management program strategy, then these programs must be able to demonstrate they are equipped to handle Medicare beneficiaries with multiple chronic conditions. In the working age population, multiple chronic conditions are the exception. In the Medicare population, they are the norm.

Caring for Medicare beneficiaries requires that disease management programs make certain modifications. For example, and as we have heard today, many disease management programs rely on self-management as a backbone to their success. However, many Medicare beneficiaries are unable to self-manage because of their dementia or their problems with multiple chronic conditions.

Medicare beneficiaries are very likely to see many physicians. For example, 1 in 5 Medicare beneficiaries sees 14 or more doctors during the year. Therefore, all disease management programs should have the information capability to allow physicians to know what other physicians are doing when they treat a patient in common.

Now we know that doctors recognize the need for better care coordination. We, ourselves, conducted a National Survey of Physicians, surveying physicians who provide more than 20 hours of patient care per week. These physicians told us they were having difficulty coordinating care with other doctors and other health professionals. Two-thirds of them told us they were not well-trained in care coordination. The payoff to the Medicare program of better coordination is fewer unnecessary hospitalizations, fewer nursing home placements, and fewer drug-drug interactions.

In our survey of physicians, 44 percent of them told us that poor care coordination results in adverse drug reactions; 36 percent said that it resulted in unnecessary hospitalizations; and 24 percent of them said it leads to unnecessary nursing home placements.

Lack of care coordination is also a problem expressed by people with chronic conditions. We did a survey of Americans, and we found that about 16 million Americans go to the pharmacist every year only to be told of a drug-drug interaction.

Now, think of the Medicare beneficiary going to the pharmacist, those fortunate enough to have drug coverage, they go to the drug store only to be told that their drug can't be filled because another medication, probably ordered by a different doctor, is going to give them a potential problem. So what do they do? Do they fill it anyway? Do they ask the pharmacist? Do they call the doctor who ordered the prescription? Do they call their primary care physician? Do they phone a friend? What do they do? Disease management programs must be able to help this Medicare beneficiary standing at the pharmacy counter.

An alternative to disease management programs for fee-for-service Medicare is to pay explicitly for care coordination. For example, our data suggests that cost utilization and poor outcomes really started about four or more different chronic conditions. So perhaps an enhanced payment, a monthly management fee, for example, would be appropriate for physicians who are willing to take on the clinical and possibly other service coordination activities for this group of complex patients. These physicians would have to meet certain criteria in order to be able to be eligible for payment; for example, having appropriate office staffing, information and communication systems.

I would like to leave you with a fact and a concept. The fact is that two-thirds of Medicare spending is for Medicare beneficiaries with five or more chronic conditions, two-thirds of Medicare spending. The concept is that Medicare is a program for people with chronic conditions. It just doesn't know it.

Dr. HENSCHKE. Madam Chairman, thank you very much for having this important hearing and for including me. For the record, I am Claudia Henschke, Professor of Radiology of Weill Medical College of Cornell University.

Each year, approximately 160,000 Americans die of lung cancer. That is more than 50 times the number of people who died in the attack on New York City in Washington on September 11. The overall cure rate of lung cancer is dismal, somewhere around 10 percent.

About 85 percent of the lung cancers found in our usual care today are of late stage, and their cure rate is essentially zero. None of the other major cancers--that is colon, breast, prostate--for which screening is provided has such a poor outcome.

The prognosis of patients found with early-stage lung cancer is much brighter. It is well accepted that early stage, Stage I, nonsmall-cell lung cancer has a 5-year survival rate of over 70 percent. Thus, early detection is compelling as the probability of cure is significantly increased.

However, today's usual care results in less than 15 percent of the nonsmall-cell lung cancer being found in early stage. Low-dose CT screening, on the other hand, finds about 80 percent of cancers in this early stage, and this high percentage has been well documented in studies in the United States, Japan, and Europe. This improvement is due to the many more detailed images obtained by the CT Scan, currently about 300 images per person and, thus, lung cancers can be found as small as a grain of rice, as compared to being recognized when they are the size of a grapefruit. This resulting dramatic shift from finding 15 percent of cancers in the early stage to over 80 percent, suggests a concomitant improvement in the cure rate. However, further follow up is still needed of the currently ongoing studies to confirm the exact amount of this improvement.

Analysis of Medicare cost data has shown that the cost associated with treatment of late-stage lung cancer is at least twice the cost of treatment of early-stage lung cancer. Thus, there is considerable financial incentive for early detection as well. The charge of a low-dose screening CT is currently set at $300 at our institution, although in some places it is lower and in other places higher. This test is painless, the images are acquired in a single breath hold in less than 20 seconds, and this equipment is already available in private practice offices, community hospitals, as well as major medical centers throughout the country.

In my opinion, the most realistic scenario suggests that the cost is less than $3,000 per life year saved, much less than the benchmark value of $50,000 for renal dialysis, and the worst-case scenario is still less than that benchmark amount.

Today, under usual care, thoracic surgery is performed on many individuals with no cancer at all. By following the recommended management plan of nodules, either incidentally detected by chest X-ray or CT, many unnecessary biopsies and surgeries may be avoided by assessment of nodule growth on subsequent CT scan one or several months later. A rational lung cancer management plan of screening and standardized workup, in terms of actual nodule growth, provides the benefit of early diagnosis and early treatment and thus could save many lives.

Current cost of care of the 170,000 annually diagnosed patients with lung cancer averages at least $50,000 per case, totaling more than $8.5 billion a year. The majority of these dollars are spent on late-stage treatment, with a very poor outcome. This does not include the work of many benign nodules, which often undergo surgery as well.

We are most concerned about the currently planned National Cancer Institute (NCI) randomized trial for assessment of CT screening for lung cancer. It will be the most expensive screening trial ever planned, well over $200 million, and it will take at least 10 years to complete. It is, however, unlikely to provide an answer, as it has the same design flaws that recently caused the firestorm about mammography screening. Our published article points out these fundamental flaws, and this article was widely endorsed.

Even the front page article in the New York Times noted that our article caused the NCI to continue to endorse mammography. It is simply not rational for the NCI to embrace the design considerations when it comes to mammography and yet ignore these same considerations when it comes to lung cancer. Now is an opportune time to intervene before the planned trial starts, so as to avoid the misleading results and resulting confusion seen in mammography screening.

However, despite numerous attempts for open discussion of the currently planned trial or design alternatives that are less costly and more efficient, we have been ignored. Such alternative designs allow for assessment of the effectiveness of CT screening as a part of a practice management plan. These designs provide the benefit of CT screening to all participants and allow for careful assessment of the improvement in the lung cancer cure rate and the associated costs.

These alternative studies will lead to more definitive answers in much less time than the contemplated NCI trial. It is important to recognize that our group in New York has been doing lung cancer screening over 10 years. We have found that the costs to perform the trial being contemplated by the NCI to be at least six times the cost per patient as other alternatives.

We think this is a very important topic for the Subcommittee to address and appreciate the opportunity to present our views. A thoughtful approach to the careful evaluation of the benefit and cost of CT screening now has the potential to save more lives than all of the other treatments developed for cancer to date. Such a benefit should not be delayed for years by a very expensive and probably inclusive trial.

I suggest to the Subcommittee that the issue of cancer screening and how such screening is evaluated is the most important health care issue of our time. With our rapidly changing technology, we need to make rapid and accurate decisions regarding the scientific application of these potential screening tests.

The prevailing methodology has overwhelming design flaws and an open scientific debate is essential. The confusion about mammography screening for breast cancer, despite seven large trials involving more than $500,000 women over 30 years make this point abundantly clear.

Chairman JOHNSON. Thank you very much, Dr. Henschke, and thank you all for your testimony.

Dr. Wennberg, I have been interested in your work documenting the really tremendous variations across the Nation in patterns of practice and the lack of any evidence of parallel variations in quality. Yet, solutions to this irrational and costly variations have been difficult to develop.

Do you think that disease management, because the protocols are developed through professional experience based on outcomes research and best practices, could help us not only establish a more uniform approach to core illnesses nationwide, but reduce the costs in some regions without compromising quality?

Dr. WENNBERG. That is quite a question. I believe that the evidence seems to be pretty clear that when we have scientific consensus that something should be done based on clinical trial evidence, as the best quality of evidence, and that particular intervention does not involve trade-offs that imply preferences, that disease management programs have definitely shown themselves capable of getting the beta blockers out, getting the A1C hemoglobin done, and so I think that we can count on a quality improvement along those dimensions.

The cost issues are more complicated. First of all, the costs that we see that are associated with the variations in regional costs have nothing to do with beta blockers, failures to do them, and so forth. It has to do with the intensity with which chronically ill people are treated across the board. I have always been aware that there is a balloon effect in health care, namely, if you improve the way that a certain subgroup of the population is treated, the rest of the population is likely to get the spillover effects of the supply-side problem.

For example, we have observed in some of our studies that patients have engaged in decision support systems for shared decision making will become more conservative in their treatment choices, but the overall workload of surgery in the region continues at the same level. In other words, other patients that aren't involved in the study are getting it. So, I am concerned that, for example, a successful disease management program may be apparently working, in terms of reducing overall cost, but unless the control group is carefully defined, namely, as those others at risk of receiving the care that is in that region that isn't being used by that population, you can get a very different opinion on that.

I think that, and I said in my testimony, that I think ultimately the cost issues are going to have to come back to an open debate about what is an efficient capacity of the system, and some of our systems have just twice as many resources in them as others do. Until we come to terms with that, we will continue to see regional variations.

As we continue to increase the capacity of the system by training more physicians and building more technologies, we can count on the costs going up, and the reason is because this kind of care is not driven by science. It is not driven by well-articulated medical theories about intervention. It is done basically by the simple hypothesis or the simple fact that if you have twice as many physicians in a region, you have twice as many office hours to offer, and you therefore have twice as many visits, and visits associated with all sorts of other kinds of activities.

Chairman JOHNSON. I appreciate what you are saying, and the significance of your response. On the other hand, as Dr. Anderson says, Medicare is increasingly going to be about managing chronic illness and is--

Chairman JOHNSON. A chronic disease management program, though we don't have chronic disease management capability. As we get that capability in place, and we begin to manage those chronic illnesses, and then if we do, as you suggest in your article, which is a little different than any disease management demonstration I am aware of, look at end-of-life illness management from the same point of view, then I think we are going to, at a very profound level, change the way we practice.

Now that brings me to my second question. Disease management does depend on patient participation. A number of you had really marvelous, pithy ways of describing this. Dr. Lord, you said supported self-management in a systemless world and the supported self-management, and then you did point out that somebody with Alzheimer's can't self-manage. This issue of self-management, outside of Medicare you can create systems in which the right of physician to educate a patient about self-management can be absolute, and it is no surprise that it is outside of the fee-for-service reimbursement system of Medicare that this capability for physicians to act differently in order to get patients to act differently has developed.

All of you know perfectly well our coding process, all of the experts we have involved in coding, all of the complexities of coding, we can't even--and I see my colleague, Mr. McDermott isn't here, but we were on the phone when we asked experts who have been in the Medicare program for 10 years what the difference between a comprehensive physical is and a detailed physical, and they can't tell you till this moment.

I spent a year and a half trying to get my intermediary to figure out what partial hospitalization is versus outpatient mental health for seniors, and we can hardly do that.

Now, the idea that Medicare could define, and one of you mentioned a management fee, could define a management fee or could define a physician visit education component in a fee-for-service system that whether it is in government or in the private sector focuses on encounters is, in my mind, simply not possible or else we cannot wait for it. If we did, it would be so complicated that there would be mostly war over whether this was or was not eligible for a management reimbursement.

That is one of the reasons why I am so focused on systems. I brought systems out in terms of technology, and some of you talked about the need for that, but this issue of patient involvement goes very directly to physician activity. If reimbursements don't encompass that activity, you will never get management education. In the disease protocols that I am familiar with, that management education function moves from the physician to the disease management company, who then educates the patient in the guidelines of the doctor.

So, I don't know that you can do this through fee-for-service. I don't really see any opportunity to do that because while you can, a system can contract management or can develop management within its capability, I don't see how Washington can develop the definition of management, and how the complexity of our coding system for a moment will enable us to reimburse for this in a way that the Inspector General won't destroy in the course of events.

So, I would like for you to comment on that issue of physician involvement and the degree to which disease management does require a different attitude toward physician education of the patient.

Dr. WENNBERG. Well, let me say that I am not here defending the current fee-for-service system. The questions about how that payment system is organized is really what a lot of this debate is all about, and I would think some way of paying for the management of chronically ill people, where we have organizations that are responsible for that, can work in many ways. For example, at least several of the organizations that are represented around this table have fully salaried physicians and have health care organizations that are already serving defined populations. The question is how do we modify the current payment systems to make it work.

Capitation is one strategy, but capitation has always been presented as a competitive model, and many parts of the country there simply is only one system, and we have got to figure out somehow how to make that system work. Clearly, the kind of models we are talking about, patient education, group visits, is a wonderful idea, and it works, but you can't bill for it. In fact, it is very efficient, and it breaks this kind of supplier-induced demand problem between the doctor supply and that because they are suddenly no longer being paid just for doing piecework. That is where we need to get to.

So, the question is how can we get there? In our proposal that we put in the Health Affairs article, we basically wanted to allow certain health care organizations that are intimately involved now in chronic disease management, in fee-for-service environments, to see if they could not come up with some suggestions for modifications in the fee structure that would support the fundamental reforms which, Madam Chairman, I hear you asking for.

Dr. LORD. Several comments. First, with respect to self-management, I think one of the things that we have been focused on, in terms of program design, and an area that Jack and I have collaborated on for the last several years, is trying to level the ball field so that people have a fair shake in the health care system, understanding their disease and understanding their choices.

I think if anybody on the panel holds up a hand-mirror about their experiences in the system or their family's experience, it is confusing. It is very confusing when you are sick. It is even more confusing and scary when you are facing a fateful decision. How can we help people at that time of absolute need just deal with the confusion and the lack of "systemless," the combination of fragmentation of care, coupled with what was described by Dr. Anderson as multiple co-morbidities? It creates real problems and challenges for folks.

Now the world has changed. The world has changed from a technology perspective, the world has changed from access-to-information perspectives, the world has changed in a number of ways that we can work with, collectively and individually, with people who are facing significant illness. I think there are opportunities within the Medicare structure to create a fee-for-service model that would pay for someone to serve as a concierge or coordinator or adviser to people who have chronic illness. It may be another function that hasn't been defined yet in the health care system, but it is something that if you think about people's experience, they really need. It may be unreasonable to expect that is only a physician's role out into the future, and I believe, through some of the demonstration projects that CMS is presenting, we have an opportunity to try some different approaches that really help deal with a very common and a very human issue that all of us have touched or faced somewhere in our family's lives.

Dr. ANDERSON. In the long run, I agree with you that we have got to change the payment system, but in the short run, we have to deal with the existing fee-for-service system. So, what I would take a look at is the Medicaid program, which has been running primary care case management programs quite successfully for a number of years, and has dealt with the payment issues with this, has dealt with the coding issues in the primary care case management program. So there is a model for Medicare to take a look at to do many of these functions.

The way I would set it up in the Medicare program is to take a look at people that had four or five different chronic conditions, different chronic conditions. These people see an average of 10 to 12 doctors in the course of the year. They need their care coordinated desperately.

The care that is actually being provided to them is not very good, as my example about the prescription drugs illustrated, but I could also give you examples about unnecessary hospitalizations or unnecessary nursing home patients. There would be savings from care coordination if we could figure out a way to get these 10 doctors to talk to each other. Part of it is information system, but we need a primary care physician to be responsible for saying, "What is the endocrinologist doing, what is the cardiologist doing for my patient?" To get that to happen, I think you need to pay them.

Chairman JOHNSON. Those are very interesting comments. I think they underestimate the problem of getting the information from all of the people involved when you have got a lot of chronic illnesses, and I think they completely ignore the liability concerns. If you have Medicaid, you are sheltered from liability. I don't know who would want to take the liability on their shoulders of coordinating the care, when you have multiple chronic illnesses, and possibly disagreeing with one of the doctors so that you can better integrate the care.

So, I think this is a pretty big and difficult issue. It is one that systems are solving themselves. So, right now we can reimburse the system, and the system can do it. In the long run, of course, we have to have a way for the whole system to do it, but I feel real urgency about pressing ahead and encouraging systems that can take on this responsibility to move rapidly because this is--I agree with you--this is already a chronic care program.

Dr. HILLMAN. Yes, I agree completely with you. I think to rely on physicians, first of all, to educate patients is a misuse of health care resources. Physicians have no training in patient education, patient behavior paradigms, that type of thing. It is just not part of physician training.

Likewise, to ask physicians to be coordinators of care is also probably a misuse of their capabilities. I think that there are other types of health care providers that can provide these functions as long as they have coordination in terms of having an electronic medical record. For example, that is portable from site-to-site or physician to physician. Those information systems allow a case manager, such as a registered nurse, well within their scope of practice, to perform these functions.

I don't think that it is going to be beneficial to put an individual in a role where they are going to be adversarily questioning other people's judgments. If the system keeps the care in mind itself, as opposed to the encounters in mind, is what our current reimbursement system does, I think we will do a lot better.

Chairman JOHNSON. Let me recognize Mr. Houghton, since he has to leave and has taken a very, very great interest in the issue of lung cancer detection. Congressman Houghton.

Listen, I am sorry to do this, Pete. Thank you very much for your letting me--I have just got to get out of here--

Dr. Henschke, if I understand it, you have got two points; one, get it early, and then don't go into these expensive trials which are going to push off the inevitable. I would like to ask you really two questions. The first is this.

We talk about lung cancer, and then obviously you get into the idea of smoking. Smoking inevitably enters the discussion, and don't smoke, and you won't get cancer. Do you agree with this? Also, why should we put money into research on early screening detection, when perhaps it would be better spent on prevention, and cessation programs and things like that?

Dr. HENSCHKE. Well, I certainly agree that we should put a lot of effort in smoking cessation programs particularly in those of younger individuals. However, there are 50 million currently smoking individuals in this country and some 50 million former smokers. Even if we stop smoking today, if no one smoked, we would have lung cancer deaths for a considerable time, 20 or 30 years in the future, and we should do something for these individuals, and we can save many of those lives.

So, we think that screening should go hand-in-hand with smoking cessation, that actually you can give them a lot of information, and people who come to screening programs also are interested in stopping. So, these two should go hand-in-hand.

Mr. HOUGHTON. The second question, and I will be brief, there was a report presented to the National Cancer Institute in August last year that presents really a very pessimistic picture. It talks about lack of progress in research, and high-death rate, and unenthusiastic attitude of doctors, and researchers, and other health care providers, and also total lack of communication and cooperation among those involved in treating and managing the disease that you might want to comment on that.

Dr. HENSCHKE. Well, I was a participant of that program project review for lung cancer, and, yes, lung cancer has, there has been a pessimistic attitude in these past years, but now with screening really making its changed the attitudes. At that meeting, there was emphasis on collaborative efforts, there were a whole set of priorities that were detailed that are very good priorities. The problem is that funding for lung cancer has been much less than funding for the other cancers, even though, for example, it kills more than seven times as many cancers--it causes seven times as many deaths as breast cancer, it gets about a tenth of the funding or so.

So, the pessimism is more due to the lack of funding, and we do have now a lot of information that we could obtain about the biology and the innovative treatments that could be used in view of these new techniques. So, there is a lot of excitement, there has to be funding, and there has to be implementation of those priorities that were set by that report.

Chairman JOHNSON. Thank you for being with us today, Congressman Houghton. Congressman Stark?

Mr. STARK. Well, thank you again, as I said. I am glad to see that the Marshfield Clinic, it used to be the Doege Clinic?

Mr. STARK. I grew up next door to him in the summers, a long time ago. He is no longer--Marshfield is easier to spell.

I am troubled, and I want to say at the outset that Dr. Lord had nothing to do with this, but what was absent in his testimony and what can happen in case management as a result, I suppose, of clinical strategy and innovation, was the Chipps case that Humana was involved with, where they terminated 100 critically ill children to save $78.5 million for the Humana program. Fortunately, the court decided to whack them with punitive damages for $78.5 million, but that was overturned. My question is of concern of might this be used, and I would be more concerned in the for-profit part of medical delivery than I would in the not-for-profit because the incentives would not be so high there is how do we prevent mischief?

If you begin to identify people with chronic diseases, as I presume you would in the workplace before they mature into Medicare, do we run the risk of tremendous selectivity, companies like Humana or Aetna, Marshfield Clinic, Johns Hopkins saying we don't want you or finding whatever ways they can to discourage these people? Are we all going to have the red mark of "C" on our foreheads saying we are chronic and therefore become the great unwashed of the people running around hat in hand looking for health care.

Now, this is a panel of physicians, and I am far more comfortable with your training and approach to taking care of me than I am your company treasurer or whomever may make these decisions at some point to, say, terminate or design recruiting or advertising programs to subtly select. There is a new health care gang out, Sterling, I guess it is, who does a fee-for-service Managed Care Plus Choice. They have got some cute tricks--50-percent co-pay for durable medical equipment. What does that tell you? Nobody in a wheelchair or walker should apply or 50-percent deductible, as many have for mental illness procedures.

I guess I am worried that this could turn on us if we are not careful, and that is my question, how do we prevent and, Dr. Lord, I impugned your company here by sort of indirection, and I will let you respond, but I am concerned that we not begin, and the privacy issues come up this morning. I don't think that is as bad for a Democrat that is probably blasphemy, but I really think that we have got to sacrifice some privacy to get the kind of research that I would like to see in outcomes research done.

How can we assure that this won't just kind of categorize the people we end up getting back to the Hansen's disease farms and sort of putting all of these Medicare critical people off in one corner, and then we will have trouble getting them into the best of the plans?

I am sorry, Dr. Lord, go ahead. You were not there. I want to stipulate, you did not come aboard until this case was behind you.

Dr. LORD. First of all, the Chipps case really has nothing to do with today's testimony, but beyond that, I think in terms of the disease management programs that we provide, we provide to all beneficiaries, regardless of plan design and regardless of program--government, commercial, TriCare, programs that are provided, as my 20-year-old daughter would say "disregardless" of how people have shown up at our doorstep and provide a set of services that really are intended to try to get rid of waste that exist in the system.

I think the theme-line, from Jack through all of the panelists here, is that there is waste and inefficiency in the system because it does not act like a system. The more that we can do a few things, one, help provide information, coordinate services, allow people to be sovereign in terms of making some choices that are right for them, which in many cases people have been disenfranchised of choice, how can we do that and how can we make that work on a systematic base?

I believe that it is the incentives that exist for, for-profit enterprises, nonprofit enterprises, but most importantly people, that we somehow rationalize the kinds of care that we provide and allow the fact that we live in a world with a lot of abundance and don't live in the paradox of abundance that creates waste and get rid of the waste that exists in the system today.

Dr. ANDERSON. I think it is not that most Medicare beneficiaries have one "C" on their forehead, Mr. Stark, but it is probably two or three or four "C's." We have essentially got to deal with the issue of multiple chronic conditions, not just the single "C," and we have got to deal with it in two different ways. In fee-for-service Medicare, I think we do have to pay for coordination of care. If we don't pay for it, we make the person or their caregiver the defacto care coordinator. I think in many cases self-care coordination is fine, but I would like to have the advice and really the guidance of a physician in many cases, and I think I, unfortunately, need to pay for those types of activities.

Mr. STARK. I would like that. I mean, as a patient, I would rather talk to one of you guys than I would some kind of social worker who has been trained to tell me the kind of stuff I can find on the Internet. I am not very comfortable or I wasn't before I went to see Dr. Walsh reading about it on the Internet, and he is not the most charming, bedside manner guy in your institution, I might add, but, nonetheless--

Mr. STARK. Yes, thank God, but nonetheless, what I am suggesting is that we patients would just as soon talk with the guy that has got the knife, what is going to happen, Doc? Don't send me over there to somebody who is going to just give me the stuff I can read. I want to know what are you going to do relative to me.

Dr. ANDERSON. I am taking into account your specific circumstances, because your collection of chronic conditions that you have, which is different from the next person, and you have got--

Mr. STARK. Does Marshfield still--Dr. Hillman wants to say something--does Marshfield deal with fee-for-service? Do you take fee-for-service patients?

Mr. STARK. I guess what I want to ask, and then you can say whatever you want, is would Dr. Anderson's idea of having a fee, a physician whose job it would be to be a coordinator work in your system, for example?

Dr. HILLMAN. Most definitely. Just to reinforce that, I forgot which management guru said that you can't manage what you don't measure. I can tell you 100 percent that what you don't reimburse, you certainly aren't going to measure, and you are certainly not going to manage, and we have to do that.

Marshfield Clinic is a 501(c)(3) clinic, and as a public trust, we see everybody. One of the things that you had asked a question before of Mr. King-Shaw was why couldn't physicians be required, for example, to follow clinical practice guidelines and provide care plans in order to participate in Medicare? I can tell you that, for example, in our area, which is one of the underreimbursed areas in the country, that our competitors would welcome that because they would say, "Hey, look. We are no longer qualified to take care of Medicare patients. Ship them to Marshfield," which is what they do right now anyway.

That is why we have had to develop the systems that we have, and that is why we have made the investment to develop an electronic medical record, to develop the epidemiological database that we have, basically, so that we can take care of people in a more effective manner.

I would also point out one other thing. You may feel better right now, and I agree that if you were going to have a surgery or a specific care intervention that is dangerous to you, you would feel more comfortable talking to a physician, but the majority situations that arise in chronic care aren't related to that. They are related to behavioral changes, to monitoring the effectiveness of dosage changes in the medications, and those things don't need to be done by a physician. We are wasting a huge amount of health care resource by not employing the right type of provider to provide those services. As the Anticoagulation program that I detailed in my testimony showed, those things can be done by nurse case managers, and the patients like it a lot better. It is done on a 24-hour basis, it is done when it is convenient for the patient. It is backed up by another nurse call center that has access to the patient's medical records so that people know what is going on, not just from their physician at Marshfield, but among any of the other 38 regional centers that Marshfield Clinic provides care at, many of which are in disproportionately socioeconomic-challenged populations.

Dr. Anderson, in reviewing and looking over the testimony by Ruben King-Shaw, it struck me that many of the demonstration programs that they are embarking on in fee-for-service seemed to concentrate on maybe one specific illness, as versus what you are suggesting is I think, which I actually think is a very good idea, it seemed to me that where you would want to start is where those are four or five so that you could have a real idea of how you were managing.

I think, for the most part, a doctor that deals with somebody with CHF for whatever, I mean, pretty much manages that patient. So, the real management of disease is when you are talking about many kinds of disease that would be a problem. So, I would hope that maybe one of the messages this Subcommittee could carry back in a demonstration issue is to maybe look at a demonstration where you are looking at a patient with several chronic conditions, as versus one. That does concern me a little bit. I think that is a very good idea.

The liability issue, and, of course, we have all been through this Patient's Bill of Rights, and this issue and that issue, but, Dr. Lord, because you do this now, that is what your company does is supposedly manages for managed care, and how do you work through this? I mean, doctors, maybe you as an individual or as Humana can't be held liable, but the fact of the matter is your doctors and others could. So, I am not sure that I understand this liability issue when it comes to a managed or when you are trying to manage different disease management. I kind of got lost in that argument there. Can you help me a little bit here?

Dr. LORD. Sure. The disease management function is to support the care between practitioner and patient, and it is to provide access to resource, in terms of information for both groups as they enter what Dr. Anderson described as a very complex world. Very few people have just a single disease to contend with. They have multiple pieces of challenges going on clinically, as well as in their family life, as well as economically, that all make a full picture. The only person who could be making the kinds of decisions that are right for that individual are, first, the individual and, secondly, with the advice of their practitioner, whether that is a physician or another type of practitioner.

What we have tried to do is get out of the management business and be in a position to provide best-in-class information to both the patient, as well as to the practitioner, to provide information that helps reinforce things that the patient should be doing.

For instance, if a patient is receiving a drug after a heart attack, they need to take that drug on a regular basis. We can send out an automated reminder that lets them know they haven't gotten the refill. Why can we do that? In our commercial programs, our pharmacy benefits manager lets us know within about 24 hours every time we fill the position. We can go ahead and use automated systems and use some logic around our electronic data warehouses to provide that information to people.

Now, we are not prescribing the drug, we are reminding the individual about their care. Health plans are not care providers. They are not hospitals, they are not doctors, but what we can do is a much better job, and what we are trying to do is a much better job of getting information back to people. We are the hub and spoke of a lot of the transactions that take place in the health care system. We know and we have insights about what works for people and what are best practices, and we can serve that up in ways that both practitioners can take advantage of, as well as patients. I think that really is the focal point for our business as we go forward, and clearly it is the insight that we want to try to give to people who face the complex problems that Dr. Anderson described.

Mrs. THURMAN. It is not insurmountable to believe that Medicare fee-for-service could do very similar. I think that Dr. Anderson mentioned that. Dr. Hillman, you seem like you want to just jump right in here. Did you have something you wanted to add to this?

Dr. HILLMAN. Yes, and I will be a little bit careful because I am going to be a little bit provocative.

Dr. HILLMAN. I think that information is very helpful, but, quite frankly, information is of limited use. For example, I don't know how many people know how many teeth they have in their mouth. You don't need that information to know that you have to brush them twice a day.

When you have multiple chronic diseases, and you have multiple facets of information about complex systems and drugs, and a lot of these people that are seeing 5 and 10 physicians are taking 15 and 20 medications and that type of thing. There is only so much information that you are going to be able to pass on to something that they are going to be able to act responsibly with before they become overwhelmed, dejected, and decide to forget the whole thing. That is why I think that case management is a very critical part of this.

Mrs. THURMAN. Earlier you thought this couldn't be done in one of your responses. So, I am curious to what you think case management is. I got the indication that you thought only a doctor could do it or--

Dr. HILLMAN. I think a physician doing case management is not an appropriate use of health care resources. That is why I detailed the Anticoagulation program, because it is basically a nursing program that has medical direction, has prescribed protocols. All of the interactions that the nurses have with patients are documented in the electronic record, which is confirmed and electronically signed off with the providers, but they all work on very specific guidelines.

The point about that program that I think I failed to make in my written testimony is that that case manager for anticoagulation basically is acting as a chronic disease manager, because when we looked at hospitalization rates between the control group, the usual care group, versus the group that was in the Anticoagulation Service, we looked at global hospitalizations. The difference there was huge, and I have the numbers in the written testimony. The reason we looked at global hospitalizations is because we found that in the education process or the behavioral training or development process of patients, that we were able to get them to call the nurses the minute something else changed in their health care. By getting that information sooner, the nurse was able to advise them on what to do either about their medication or about seeing a provider on an outpatient basis or adjusting some other aspect of their regimen that allowed them to avoid those hospitalizations.

I agree with basically everything that Dr. Anderson said, but we actually have a program that basically, with a little bit of expansion, accomplishes what he said. Unfortunately, we get no reimbursement for this whatsoever. While we have 1,000 patients enrolled in this program right now, and many of those patients incidentally have a trial fibrillation and heart valve replacements that have been caused by chronic diseases related to ischemic or coronary artery disease, diabetes, and hypertension. That is the value of the case manager.

Mrs. THURMAN. I would just say, based on the testimony on page 5, it says they are talking about giving M+C organizations that meet specific quality indicators extra payments, recognizing the cost of successful outpatient management. In this case, it was just the CHF. So, it sounds to me like they are noticing it in one area, but it should be recognized, I guess, in the fee-for-service for any kind of demonstration program we would do there as well.

Dr. HILLMAN. That is why we didn't participate in that disease management demonstration. It was too narrowly focused. There was a huge risk associated with it, in terms of its budget neutrality, and you were required to provide medications, and I think that is a fair criticism of that demonstration project. I don't really see that we are going to get much out of it, quite frankly.

There have been some questions raised. To just pursue Karen's questions in two aspects. First of all, I want the record to reflect very clearly that all of you at the table who are involved in disease management programs are providing disease management services, whether they are sort of narrow and computer-driven or whether they are more interactive and have a human being there actually doing a lot of following, and advising and communicating, and that Medicare does not reimburse you for them, for that aspect of your service.

I thought it was very interesting that you pointed out in Mr. King-Shaw's testimony, and I noticed it, too, that in the demonstrations, they are going to pay for this function, but in the Choice plans. It is one of the ways in which the Choice plans bear costs that Medicare doesn't bear, and it is one of the reasons I am so intent on at least reimbursing them at 100-percent fee-for-service because if they are going to perform, they have additional costs they have to bear.

I was very interested, Dr. Hillman, with your description of the amount of technology you have put in place just to have electronic records available throughout the very large serving area of your system, which I believe is multi-county, is it not, in Wisconsin?

Chairman JOHNSON. It is a big system over rural and urban areas, but without that technology, you could not possibly implement disease management protocols, correct?

Dr. HILLMAN. That is correct. Here is the perverse incentive of the whole thing. Our reimbursement for Medicare fee-for-service is so low, about 70 percent of our costs, done by the CMS methodology. We have to raise our commercial fee-for-service rates, which increases, indirectly, the number of uninsured, which indirectly increases the number of people that are on Medicaid, which indirectly causes even lower fee-for-service payments on the services that we started providing to begin with. This is an untenable situation, and the only reason that you have it at Marshfield Clinic is because we are so mission-driven and passionate about delivering the quality-of-care that we do, that we have to believe, at some point in time, what goes around comes around.

Chairman JOHNSON. You are the only system I know of nationwide, and that doesn't mean there aren't any, it just happens to be that the others haven't come to my attention, that is systemically involved in disease management with no reimbursement and serving a very low-paying, but also a needy population.

Mr. STARK. Are your Medicare fee-for-service rates lower than Wisconsin's Medicaid? I am curious. I don't--

Dr. HILLMAN. No. Despite the fact that we get probably I think it is 50 cents on the dollar for our Medicare reimbursement, Medicaid is actually a little bit less, although--

Dr. HILLMAN. We do not. We are completely outpatient. I will tell you we do have a capitation contract with the State for medication, at least Security Health Plan, our subsidiary does, and that plan actually does retain some net earnings above what they pay us. So, we are able to sustain it on a capitated basis, but we do not have a gatekeeper system with that. We use the system that I described with the anticoagulation management in order to make that margin.

Mr. STARK. If Medicare pays you 50 cents on the dollar, what is the next lowest commercial contract on fee-for-service; does it pay you 60 cents? You don't have to tell me the name of it, but the private insurer that then pays you the next lowest.

Chairman JOHNSON. That is 70 cents versus 50 cents for Medicare and less than that for Medicaid?

Chairman JOHNSON. Let me go back to the malpractice issue that I had raised because I didn't actually raise it in the context that Karen heard it. Within a plan, I understand that there would be whatever the plan's liability is under that State law or whatever we do in Patient's Bill of Rights. If you are trying to coordinate care across individual physicians reimbursed under Medicare, now I think you do have a problem. If they are not part of the same group practice, if they are not part of the same system, I do not know how you identify that responsibility, and how you reimburse it. I think in identifying it, you would not be able to provide the nurse practitioners and stuff because the liability is--I mean, to me, that is a real can of worms.

Dr. HILLMAN. The only way we can do it so to be self-insured, and that is what we do. That is why we have such a high interest in maintaining quality-of-care.

Chairman JOHNSON. That is interesting. You are self-insured for malpractice as well.

Before I conclude, I just want to say that I really appreciate Dr. Henschke's comments. We will work with you on your thoughts and opinions on the clinical trials program that is being proposed, if only because 10 years, give me a break. With the pace of medical change, at the end of 10 years we will know about a procedure that is no longer the state-of-the-art, so truly a ludicrous proposal on their part.

If you were to advise us as to how we could do a better job in terms of Medicare being a force for early diagnosis of lung cancer, what would you suggest we do?

Chairman JOHNSON. Well, the big complication, of course, is money, but, nonetheless, what would you suggest that we do in order to have a program that did do for lung cancer, basically, what we have done for breast cancer and colon cancer.

Dr. HENSCHKE. I think one could develop demonstration projects. Medicare, I have talked to Medicare. They were very interested in the results, but they said it is Congress who has to mandate any screening policy. So--

Chairman JOHNSON. That is true. For instance, sometimes we are able to mandate screening policies when there are a combination of factors that will identify those who are prone. So, sometimes we have done that. We do that in colonoscopies. Certain procedures are available--am I correct, staff? Yes, certain procedures are available if you meet certain criterion, and other lower cost procedures are available if you don't meet those criteria.

So, if you will give that some thought and get back to us, we will be very grateful.

I thank the panel for their thoughtful comments today, and I thank the Members for their participation on a Tuesday. I notice the Democrats are in town, and the Republicans aren't. I thank you for that and commend you.

[Whereupon, at 5:29 p.m., the hearing was adjourned.]
[Submissions for the record follow:]

COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois E. CLAY SHAW, Jr., Florida NANCY L. JOHNSON, Connecticut AMO HOUGHTON, New York WALLY HERGER, California JIM MCCRERY, Louisiana DAVE CAMP, Michigan JIM RAMSTAD, Minnesota JIM NUSSLE, Iowa SAM JOHNSON, Texas JENNIFER DUNN, Washington MAC COLLINS, Georgia ROB PORTMAN, Ohio PHIL ENGLISH, Pennsylvania WES WATKINS, Oklahoma J. D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin	CHARLES B. RANGEL, New York FORTNEY PETE STARK, California ROBERT T. MATSUI, California WILLIAM J. COYNE, Pennsylvania SANDER M. LEVIN, Michigan BENJAMIN L. CARDIN, Maryland JIM MCDERMOTT, Washington GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York WILLIAM J. JEFFERSON, Louisiana JOHN S. TANNER, Tennessee XAVIER BECERRA, California KAREN L. THURMAN, Florida LLOYD DOGGETT, Texas EARL POMEROY, North Dakota
Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel SUBCOMMITTEE ON HEALTH NANCY L. JOHNSON, Connecticut, Chairman
JIM MCCRERY, Louisiana PHILIP M. CRANE, Illinois SAM JOHNSON, Texas DAVE CAMP, Michigan JIM RAMSTAD, Minnesota PHIL ENGLISH, Pennsylvania JENNIFER DUNN, Washington	FORTNEY PETE STARK, California GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia JIM MCDERMOTT, Washington KAREN L. THURMAN, Florida
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

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