The flaws of Medicare’s sustainable growth rate are well known to members of this Subcommittee. Congress has repeatedly enacted legislation to avert scheduled rate cuts that have been called for under the SGR every year since 2003. This has created deeper holes for the following years, and next year, with the scheduled 30 percent cut, is no different.

These cuts could be devastating for patients and physicians, especially in rural areas like my northern California district. Many physicians have warned they will have little choice but to stop participating in Medicare, leaving seniors without access to the medical care they need.

Republicans and Democrats alike have kicked the can down the road long enough. We cannot continue to patch over this problem with short‑term fixes of a few months or a year at a time. The uncertainty of Medicare payment policies is taking a toll on physicians, and with each passing year the cost of a long‑term solution grows larger. It is time that we work together to find a fiscally responsible solution to this problem.

In addition, we need the physician and provider community to be willing participants in this endeavor to reform the SGR. Medicare spending is on an unsustainable path, and we must find a better way.

This is the first of what will be a series of hearings the Subcommittee will hold on physician payment reform. It is my hope that by starting early, we will arrive at a payment system overhaul that can pass the House.

Today we will explore innovative delivery models that are taking place across the country. The testimony we will hear shares a common theme that coordinated care produces more efficient care with better outcomes at a lower cost, and that fee‑for‑service delivery systems encourage higher spending without regard to quality.

I believe that the future of Medicare depends on a transition away from the fragmented fee‑for‑service system to a system where the incentives are aligned with better patient care, not just more patient care. I am also open to hearing other ideas as we continue to explore alternatives to the SGR.

Chairman Herger. Before I recognize Ranking Member Stark for the purposes of an opening statement, I ask unanimous consent that all Members’ written statements be included in the record. Without objection, so ordered.

Chairman Herger. I now recognize Ranking Member Stark for 5 minutes for the purpose of his opening statement.

Mr. Stark. Thank you, Mr. Chairman, and I want to thank your staff for working with us to put together this first hearing on the SGR reform. It is not a partisan issue, it is a problem that has been around for more than a decade, and neither party has been able to enact a permanent solution.

That said, it is not the Democrats that haven’t tried, and last year we passed a permanent reform of the SGR system that would have gotten us out of this annual kick‑the‑can approach, but our legislation would have essentially reset the existing system and started over with a formula that divided physicians into two groups, primary care, including the preventive service and specialty care, and with different expenditure targets for each group. While the physicians would still be accountable for spending growth, access to primary‑care services would have been promoted by getting an extra allowance for the primary care. Unfortunately, only one Member on your side of the aisle, Dr. Burgess, was willing to join with us in that legislation, but it was endorsed by virtually the entire physician community.

Today’s hearing is going to focus on a component of reforming the physician payment system, delivery system reform, and I think we will hear the witnesses say that we have no chance of reforming that until we change the way we pay for medical care, and that the existing fee‑for‑service system merely incentivizes the provision for additional care.

So our witnesses today provide great examples of experimentation going on across the country. I want to thank them for taking the trouble to be here.

I also want to tell them that as an incipient receiver of cataract surgery in the next week, I can’t see you. I have your names down here, and you are kind of that nice blur, so if I misdirect a comment to you, please, please forgive me.

Again, thank you, and I look forward to hearing our witnesses. I want to thank them for coming today and being so patient because of the voting schedule that necessitated our stretching this out into the late afternoon.

Thank you, Mr. Chairman.

Chairman Herger. Thank you.

Chairman Herger. Today we are joined by four witnesses. The first witness will share ideas on how Medicare can encourage physicians to participate in care models supported by different payment systems. The following three witnesses will describe their efforts to promote high‑quality care at a lower cost under these types of payment systems.

Our witnesses are Stuart Guterman, who is vice president of payment and system reform at the Commonwealth Fund in Washington, D.C.; Dr. Lisa Dulsky Watkins, M.D., who is the associate director of the Vermont Blueprint for Health and an employee of Vermont Department of Health Access; Dana Gelb Safran, who is the senior vice president for performance measurements and improvement at Blue Cross Blue Shield of Massachusetts; and Dr. Keith Wilson, who is the chair of the governing board of the California Association of Physician Groups.

You will each have 5 minutes to present your oral testimony. Your entire written statement will be made part of the record.

Mr. Guterman, you are now recognized for 5 minutes.

STATEMENT OF STUART GUTERMAN, VICE PRESIDENT, PAYMENT AND SYSTEM REFORM, EXECUTIVE DIRECTOR, COMMISSION ON A HIGH PERFORMANCE HEALTH SYSTEM, THE COMMONWEALTH FUND, WASHINGTON, D.C.

Mr. Guterman. Thank you, Chairman Herger, Congressman Stark and members of the subcommittee for this invitation to testify on Medicare physician payment.

I am Stuart Guterman, vice president for payment and system reform at the Commonwealth Fund, which is a private foundation that aims to promote a high‑performance health system that achieves better access, improved quality and greater efficiency, particularly for society’s most vulnerable members, including those with low incomes, the uninsured, young children and elderly adults.

The Congress faces a challenging dilemma in considering Medicare physician payment. On the one hand Medicare spending is rising at a rate that threatens the program’s continued ability to fulfill its mission. On the other, the sustainable growth rate mechanism, which is intended to address that problem, produces annual reductions in physician fees that are equally difficult to accept. This dilemma arises from the underlying mismatch between the primary cause of rising spending, which is the volume and intensity of services provided, and the focus of the SGR, which is to set the fees that physicians receive for each service they provide.

Determining how much to pay physicians certainly is an important issue, but what is critical is determining how to pay physicians so that the Medicare program gets the best care possible for its beneficiaries.

We do get what we pay for in our health system, more volume and more intensity, with little reward for high performance either in terms of effectiveness or efficiency. We need to start paying for what we want; to reward providers for the kind of care they would like to be providing, but all too often are discouraged from or even penalized for under our current system.

In changing how we pay for health care, we must recognize the diverse array of organizational models that make up the health care delivery system and the differences in the environments in which those organizations operate.

Provider organizations vary widely in size, scope and degree of integration and in the extent to which they may be willing or able to assume broader clinical or financial accountability for their patients’ care. One size will not fit all, which means that payment and health care delivery reform must provide an array of payment approaches that apply to providers in the context of their current organizational structure, while at the same time establishing rewards and requirements that both encourage high quality and value, and provide incentives for those organizations to evolve as necessary to meet the needs of their community.

The availability of more sophisticated and more substantial rewards for high performance for organizations that can deliver more effective and efficient care can be used to provide an incentive to move toward more coordination and accountability and away from the fragmented delivery system that patients currently face. The right incentives can encourage providers to work together either in formal organizations or in less formal relationships in ways that enable them to take broader responsibilities for the patients they treat and the resources they use, and to benefit from doing so.

As organizational arrangements evolve, payment methods can be adjusted to encourage and reward increasing levels of accountability with continuous development and improvement over time, but even over time different payment approaches and organizational models may be required in different areas and different circumstances to accomplish the goals of health reform.

An important vehicle for developing an array of new approaches to payment, organization and delivery is the new Center for Medicare and Medicaid Innovation in the Centers for Medicare and Medicaid Services. The innovation center is mandated to pilot innovative payment and delivery system models that show significant promise for maintaining or improving the quality of care in Medicare, Medicaid and the Children’s Health Insurance Program, while reducing program costs.

These pilots provide a mechanism for identifying, developing, implementing, testing and spreading innovative approaches to health care financing and delivery that can help improve health system performance. The underlying philosophy should be one of rapid development and spread of innovative payment and delivery models with the ability to move quickly, learn as one proceeds, and try multiple strategies rather than focusing on a single model; in other words, for CMS and other payers, as well as providers, to move beyond business as usual.

Medicare, by promoting an array of innovations in payment, organization and delivery, could lead the Nation to higher health system performance and yield great benefits for individuals, providers and society as a whole.

I am honored to be here with representatives of three innovative organizations and interested to learn more about what they are doing. Thanks.

Chairman Herger. Thank you.

[The statement of Mr. Guterman follows:]

Chairman Herger. Dr. Watkins, you are recognized for 5 minutes.

STATEMENT OF LISA DULSKY WATKINS, M.D., ASSOCIATE DIRECTOR, VERMONT BLUEPRINT FOR HEALTH, DEPARTMENT OF VERMONT HEALTH ACCESS, WILLISTON, VERMONT

Dr. Watkins. Thank you very much. Chairman Herger, Congressman Stark, members of the subcommittee, thank you for this opportunity to address you today.

I don’t think there is any question that fee for service promotes volume and rushed care, as Mr. Guterman has pointed out. And the point of the Vermont Blueprint is to address that very issue with an emphasis on moving in a transition from episodic or acute care to planned and preventive care.

The Vermont Blueprint for Health is leading system delivery reform in our State and nationwide. We have been successful in some ways largely due to strong bipartisan support from our legislature and from our Governor over the last 8 years.

The 2003 launch of the blueprint, in response to the overwhelming, looming problems with the cost of chronic disease, as we look at the baby‑boom generation aging and increasing obesity‑related problems such as diabetes and heart disease, was a very specific chronic‑care initiative. It has since transformed significantly into a true spectrum of prevention with health maintenance that is appropriate to age and gender, now moving into pediatrics and “birth to earth,” if you will.

The overall goals are obviously to improve health care services both in terms of the outcomes that are able to be demonstrated clinically, as well as the experience with patient care; look at the health of the population as a whole; and control health care costs.

Our innovations in terms of payment reform have been twofold and very specific. We are continuing with fee for service because that is the nature of payment in our country today. But, in addition, we have two new streams of funding specifically for primary care, which has been the emphasis of our work thus far.

One, it revolves around true, enhanced payments on a per‑patient, per‑month basis attributed to those practices that are recognized as Patient‑Centered Medical Homes through the NCQA recognition process, a grade, if you will, from 0 to 100. The higher the grade, the higher payment per patient per month. That goes directly to the practice. And this is not a function of lab tests or cut‑offs that are punitive; this is truly a function of communication and access to the practice.

A second new stream of funding comes to the practice and the community through the hiring of individuals at a Community Health Team, a very novel approach to actually care coordination at the local level. These multidisciplinary, locally based care‑coordination teams serve multiple practices and actually do the outreach and coordination that desperately needs to be done in primary care, but is not compensated for and, therefore, often falls between the cracks.

As I said, these are two new funding streams, and the innovation in Vermont has required that all insurers who do business in the State of Vermont, our major commercial payers, Vermont Medicaid and now Medicare, will be joining us to actually pay for these innovations. So it is additional funding to the primary care practices to benefit the patients and their families. The Center for Medicare Innovation has made that possible through the Multipayer Advanced Primary Care Practice Demonstration, allowing Medicare to join with private insurers and Vermont Medicaid in these innovations.

We do have trends that are very encouraging in terms of cost and decreased utilization. A lot of that detail obviously cannot be shared in 5 minutes, but we are actually seeing decreased utilization of emergency rooms and inpatient days, both of which are extraordinarily expensive. And this is very encouraging as we look at our trends.

We have over 2 years of experience now in our first pilots. We are rolling out to the entire State because we have legislation that mandates that the insurers continue to allow us to do this work and actually support every primary care practice in the State of Vermont that chooses to be part of them.

Our evaluation infrastructure is extraordinarily robust. We are very excited to have probably more data than we will know what to do with, hopefully within the next year or so, both in terms of clinical data, experience of care, as well as a return‑on‑investment model that is allowing us to look at the financial impact and examine the efficacy of our program.

I don’t have enough time to describe the anecdotes, but I think I can really very clearly state that in terms of the experience of this program, that both providers and patients are extremely happy with it. Patients will describe the sense of feeling someone cares about them, really wrapped around them, and getting services that fall far outside the normal traditional health care experience of going to the doctor’s office. And the providers who have been involved in this process through these last couple of years have actually said in very clear terms and in public that the joy of the practice of medicine is back.

Thank you.

Chairman Herger. Thank you.

[The statement of Dr. Watkins follows:]

Chairman Herger. Ms. Safran, you are recognized for 5 minutes.

STATEMENT OF DANA GELB SAFRAN, Sc.D., SENIOR VICE PRESIDENT FOR PERFORMANCE MEASUREMENT AND IMPROVEMENT, BLUE CROSS BLUE SHIELD OF MASSACHUSETTS, BOSTON, MASSACHUSETTS

Ms. Safran. Thank you, Mr. Chairman, Congressman Stark, members of the committee. I am Dana Gelb Safran, senior vice president for performance measurement and improvement at Blue Cross Blue Shield of Massachusetts, and I thank you for the opportunity to speak today about the work that we are doing on payment reform.

As this committee considers the important issue of physician payment, and specifically the SGR, I am pleased to have this opportunity to share a model that has taken hold in Massachusetts.

This work and its early results suggest that it may indeed be necessary to think beyond physician payment to consider overall system payment in order to realize the goal of sustainable growth. A holistic view of payment may also be necessary to reduce the fragmentation of care that we all recognize as a key failing of our current system.

In 2007, Blue Cross of Massachusetts recognized that to address the unrelenting and unsustainable medical cost trends would require fundamental change in provider payment and incentives. With an annual medical spend of about $13 billion, we sought to develop a model that would do two things, significantly improve the quality, safety and outcomes of care, and significantly slow the rate of growth on that 13 billion. The alternative quality contract, or AQC, developed in 2007 and launched in 2009, was our effort to advance these twin goals.

Approximately 40 percent of our provider network has now contracted under the AQC model. There are five features of the model that differ from our traditional contracts. First, a provider organization that enters an AQC contract agrees to accept accountability for the full continuum of care for their patients from prenatal care to end‑of‑life care and everything in between. This doesn’t mean that the provider organization itself must be capable of providing every aspect of care, but they must agree to be accountable for both the cost and quality of care provided to their patients, regardless of where it is provided.

Second, the AQC contract is a 5‑year deal, which is considerably longer than our traditional contracts.

Third, payment is based on a global budget for a defined patient population. The AQC thereby moves way from fee‑for‑service incentives and establishes a model in which the provider assumes accountability for total medical spending on its patient population.

Importantly, each AQC provider’s budget is set based on that organization’s historical rate of spending for its patient population. In this way providers are assured that their starting budgets contain sufficient funds to care for their patients, but have a strong incentive to spend those dollars prudently.

A fourth distinguishing feature of the AQC is that the rate of inflation on total medical spending over the 5‑year contract is negotiated up front and is designed to come down to rates approximating general inflation over the 5‑year period.

A fifth and very important feature of the AQC is that it includes financial incentives tied to performance on a broad set of quality and outcome measures. In total, the model includes 64 nationally accepted, clinically important measures of hospital and ambulatory quality.

To our knowledge, the AQC is the first contract that requires providers to assume responsibility for the outcomes achieved through their care, not solely for the care delivered in the four walls of their setting. The importance of this feature cannot be overstated.

Finally, let me highlight some early results of the AQC. With respect to medical spending, year 1 results show the AQC is on track to achieve its original goal of cutting spending growth rates in half over a 5‑year contract period. Each and every AQC organization was successful in managing to their year 1 budget and achieving savings, despite the fact that AQC groups vary enormously with respect to size, organizational structure, geography and, importantly, their prior experience with accountability for medical spending.

With respect to quality, each and every AQC organization made significant improvements across a broad set of quality and outcome measures. By the end of year 1, quality of care in the AQC segment of our network was significantly higher than the non‑AQC segment, and rates of improvement were severalfold higher than prior improvement rates.

These early findings hold several important lessons, but perhaps foremost among them is that the model provides evidence that a payment system that creates provider accountability for both medical spending and health care quality and outcomes appears to be a powerful vehicle for realizing the goal of a high‑performance health care system with a sustainable spending growth rate.

I thank you very much and look forward to your questions.

Chairman Herger. Thank you.

[The statement of Ms. Safran follows:]

Chairman Herger. Dr. Wilson, you are recognized for 5 minutes.

STATEMENT OF KEITH WILSON, M.D., CHAIR, GOVERNING BOARD AND EXECUTIVE COMMITTEE, CALIFORNIA ASSOCIATION OF PHYSICIAN GROUPS, DIAMOND BAR, CALIFORNIA

Dr. Wilson. Thank you, Chairman Herger, Ranking Member Stark and members of the Health Subcommittee for inviting me to testify on potential new models of health care delivery and physician payment models for Medicare beneficiaries.

I am here representing the California Association of Physician Groups, also known as CAPG, and its over 150‑member multispecialty and IPA groups. Together we care for over 15 million Californians, or one‑half of the insured population of California.

I am also here as a practicing physician and regional medical director of HealthCare Partners, a large multispecialty medical group, and IPA serving much of greater Los Angeles Orange County area.

I would like to speak to the virtues of capitation in contrast to the unsustainable nature of fee‑for‑service medicine. I would also like to highlight the value of capitation leading to a system of coordinated, integrated care that is not usually replicated in the fee‑for‑service model.

In California we have over two decades of experience in making prepaid medicine work, and I would like to share with you some of the lessons learned.

Capitation is great at creating an environment in which the at‑risk provider groups are forced to focus on the total cost of health care and consequently figure out creative ways to impact the cost. This is usually best done by keeping patients as healthy as possible and out of the hospital.

We have designed systems of care that treat the patient based on their individual need and disease burden so that we may improve and stabilize their condition. We do this through a patient-centric model, allocating resources in a targeted manner.

My written testimony highlights a few of these creative interventions California groups have deployed, such as risk stratification and disease‑specific care management programs.

We have learned to protect the public from groups taking excessive risk and subsequent failure through the implementation of regulatory oversight by the Department of Managed Health Care. California groups are required to report quarterly on solvency metrics, such as tangible net equity, timely payments and cash‑to‑claim ratios, among others.

We have also learned to avoid denial of care through public reporting of quality metrics and patient satisfaction scores deployed by the Integrated Healthcare Association.

Health plans incentivize physician group performance through pay‑for‑performance quality metrics developed by multiple stakeholders.

Capitation, if I might describe it a bit, consists of a fixed payment paid directly to the medical group, usually in the form of a PMPM, or per‑member per‑month payment. The physician group, or IPA, is then accountable for providing care for patients assigned to them within that budget. This payment methodology allows a predictable revenue stream that enables groups to plan for capital improvements and investment in infrastructure, like health information technologies. Indeed, some of the most sophisticated and advanced IT infrastructure exists in California groups as a direct by-product of capitation.

CAPG has developed a Standards of Excellence program that allows groups to compare their internal processes and capabilities on a voluntary basis. This program also provides a roadmap to up‑and‑coming groups, identifying the tools and capabilities they will need to provide patient‑centered care.

We think the California model can be a model for the rest of the country as we seek an alternative to fee‑for‑service medicine and to promote the spread of ACOs. We see the ACO model, however, as being handicapped, as they will need similar infrastructure to California groups, but there is no source of revenue such as capitation to benefit from.

We call for the deployment of capitation as the law allows for groups that are ready to take risk. We also suggest a means of front‑loading revenue to groups and potential ACOs be sought and found so that they can develop the systems of care necessary to be responsible for a population of patients.

In closing, I would like to emphasize the superior performance of capitated model in delivering better quality, superior outcomes with great cost savings. One example of this is the comparative bid days between capitated Medicare in California yielding bed days of 982 per 1,000 versus traditional fee‑for‑service Medicare yielding bed days of 1,664 per 1,000. This relative value to overall system in terms of dollars and cents is astronomical.

I would like to thank you for the opportunity to speak to the committee today. I hope this information has been useful, and I would be happy to answer questions as I can.

Chairman Herger. Thank you.

[The statement of Dr. Wilson follows:]

Chairman Herger. I want to thank each of our witnesses for describing their involvement and efforts that use payment models that encourage coordinated, efficient care. One goal of today’s hearing is to understand the impact of Medicare paying physicians on a fee‑for‑service basis, including its contribution to the SGR problem.

With that in mind, I would like to ask the three witnesses involved with different payment models to briefly state their view of the fee‑for‑service payment method.

Dr. Watkins, if you could respond first, followed by Ms. Safran and then Dr. Wilson.

Dr. Watkins. I believe the fee‑for‑service model has been severely detrimental, especially to primary care. I believe that is true nationwide and not just in Vermont. The sense that primary care providers have of being on a hamster wheel, of having to see patient after patient and being rewarded for seeing more patients in a day, as opposed to the quality of the services they provide, is a never‑ending negative cycle.

Chairman Herger. Ms. Safran.

Ms. Safran. I believe you summed it up well in your opening remarks, actually, that fee‑for‑service payment system has delivered to us really what it was designed to, which is a system that incentivizes more services.

But now we realize that more services don’t necessarily provide to us better quality or better outcomes for the patient population, and that, in fact, we will need a different system of payment if, in fact, what we are looking for out of our health care system is not simply a larger quantity of care, but better quality and outcomes of care. And also we will have to move away from a fee‑for‑service system if we look to resolve the fragmentation that we have today, because paying each for their own individual piece adds up to pieces not tied together as a whole.

Thank you.

Chairman Herger. Thank you. Dr. Wilson?

Dr. Wilson. Yes, sir. As a practicing provider, I have worked under both fee and payment methodologies, fee-for-service as well as capitation, and I can say pretty unequivocally that I much enjoy the practice of medicine in a capitated environment than I do in a fee‑for‑service environment.

And as I have shared, you know, physician locker rooms with docs who practice fee‑for‑service medicine, the motivation behind those doctors’ behavior is vastly different than the doctors who practice under a capitated or a salary model. And I think patients oftentimes are harmed by fee‑for‑service models that are overly zealous, and they don’t lead to coordination and integration of care.

So in summary, I would just say that capitation and/or other means of payment, even if it is just a salary model, lead to a purer form of medicine being practiced than fee-for-service, and I think patients benefit more in that model.

Chairman Herger. Ms. Safran, your health plans go by the Alternative Quality Contract Program of increased quality and a slower rate of growth as the one we share. I have a few questions related to your success in achieving these goals. How much has provider-spending come in under budget?

Ms. Safran. Well, in year 1 of the first 5‑year contracts, every AQC provider organization came in under budget, and that ranged from 1 to 2 percent under their budget in what they were able to achieve in just the first year of savings.

Chairman Herger. Are you surprised that the AQC provider groups have fared so well on 64 quality measures of outpatient and inpatient care?

Ms. Safran. I was very surprised. I have spent my career as someone developing and implementing quality measures and have never seen anything like the magnitude of improvement on a very broad set of quality measures that we saw in year 1 of this contract. So it was really clear that not just the incentives that are in front of them that make a difference, though I will not say that they don’t, they are a very important piece, but also important is the fact that they are receiving, on an ongoing basis, information over the course of the year about how they are doing on those measures so that they are able to manage to success. And every one of those organizations has put in place leadership that is very much dedicated to working with the front‑line physicians on that broad set of quality and outcome measures.

Chairman Herger. How have the AQC participants been able to reduce costs through important improvements, such as decreased hospital infections, so quickly?

Ms. Safran. Well, in year 1 of the contract, the improvements on spending really came through ‑‑ more through the work on thinking carefully about where those providers were referring patients for things like standard laboratory tests and imaging and other forms of care in which there are no relationships in place, where, roughly speaking, it is a commodity service. And the provider now was quite aware of the fees that we pay for those services in different areas, and it became important to them to refer their patients to lower‑cost settings for services where it was a commodity like a lab test or imaging.

The harder work of reducing readmissions, changing overall utilization of care, reducing non-urgent ED use, is work that some of the more mature AQC organizations did make progress in, and significant progress, in year 1. But those types of more difficult changes are things that we know we are going to see greater progress on in years 2 through 5 over the contract.

Chairman Herger. Thank you.

Ranking Member Stark is recognized for 5 minutes.

Mr. Stark. Thank you, Mr. Chairman, and I would like to again thank the witnesses for their very informative testimony.

Dr. Wilson, you have huge numbers in your groups. Now, are the Kaiser physician groups part of your group?

Dr. Wilson. Yes, they are.

Mr. Stark. They are, I gather, I have been led to believe, the largest professional partnership and the largest professional corporation in the country; is that not correct?

Dr. Wilson. To my understanding, they are the largest professional physician group in the country.

Mr. Stark. I know that in my district, or in the county that I represent, there are 1.2 million people, and half of them belong to Kaiser. They always say if you are run over by somebody, you have a 50 percent if you take them to the Kaiser emergency room that you are going to the right place.

Do you think that the Kaiser model, the staff model, could be used in other areas? Kaiser has worked here in the Washington area with not any great success, because they have been unable to hire physicians, they have had to contract with groups, and they have had to rent hospital rooms the same as any other managed‑care plan.

But if we could establish some type of staff model outline, do you think that we could transmit that success to other parts of the country?

Dr. Wilson. The answer would be yes. I think, you know, there are obvious challenges in importing a new model of care to a delivery system, and, you know, often there is a requirement of critical mass before you can actually start to impact the culture of that environment.

Kaiser, you are right, is the largest physician delivery system in the State of California. The company that I work for, HealthCare Partners, is the second largest physician organization in the State of California, with practices in Florida and Nevada.

I know Kaiser has exported its model to other parts of the country successfully. Washington seems to be one of the exceptions in which it didn’t quite succeed, and, I guess, Maryland as well.

But I do think the model is transplantable. I think physicians coming out of training now are more likely to seek a Kaiser type of practice than they are to hang their own shingles. I think, you know, that the types of doctors graduating training have changed. They are different than the doctors that graduated with me.

But so in short, yes, I do think that model can be explored.

I do think there are other models in California, I think, that are potentially more easily exported than Kaiser, because Kaiser is a bricks‑and‑mortar kind of organization, and so it requires significant up‑front cost. And so, you know, the ability to just sort of plant that in an environment in which, you know, the economics haven’t been established is a little bit more challenging.

But, you know, a large number of California physician groups, or IPAs, Independent Practice Associations, which don’t have the overhead of a Kaiser model, but do bring the infrastructure, the coordination of care, the integration, the IT capabilities and the other things that capitation, as I spoke of, lends itself to, but it is probably more easily transplantable.

Mr. Stark. Thank you.

Ms. Safran, do you suppose that the recent Massachusetts universal care law, or whatever it is, adds to the performance that you noticed in the insurance plans, or adds to the participation, I guess I should say?

Ms. Safran. Well, without question, universal insurance has drawn our attention now in Massachusetts to the cost of health care and importantly to the rate of increase in that cost.

And so without a doubt the providers in the Massachusetts market are aware that attention is on cost, that payment reform is happening. They are very active conversations, not just because of our model, but in the State as a whole. So absolutely, I think that uptake of providers into our AQC model happened much more quickly because of the attention to costs that came upon us as we had universal insurance.

Mr. Stark. And in the great State of Vermont, is there something we can learn there that can be exported? You are the only single‑payer State; is that right? Or the only single‑payer plan, I guess.

Dr. Watkins. We have legislation that was passed in this most recent session and will be signed into law by Governor Shumlin. That legislation could best be described as a first step towards an integrated payment system for the State of Vermont.

Chairman Herger. Excuse me. The gentleman’s time has expired. Thank you very much.

I recognize the gentleman from Washington Mr. Reichert for 5 minutes.

Mr. Reichert. Thank you, Mr. Chairman. I will add my thanks to all of you for being so patient and waiting in our waiting room while we have been so busy voting.

I have just jotted down some common themes here. I know that all of us ‑‑ I think the good thing, as Mr. Stark has stated, we are all here, this is a bipartisan effort, recognizing that the patients are the focus of this effort, trying to provide high‑quality health care, cost‑effective and accessible, as we use those three descriptors.

But the witnesses today have been pretty consistent in mentioning coordinated care, coordinated team, community care, overall system payment, holistic system, holistic approach, a full continuum of care, patient-centric model, coordinated, integrated. I think that is what everyone is hoping for and wishing for, and it looks like some of you on the panel today have at least begun to accomplish some of those goals in making the patient the center.

I am really interested, of course, in the seniors in this discussion. And as we look forward to reforming the current formula, I think it is important that we ensure that our seniors continue to have access to quality and effective care and affordable care. So I think it is key ‑‑ and this question is for Ms. Safran ‑‑ it is key to communicate and educate our seniors. So under your AQC plan, is there an education component, you know, one where you would educate, especially seniors, or anyone under the plan for that matter, about their care provider now is an AQC plan member and, therefore, would deliver service in a different way?

Ms. Safran. The answer to your question is that we gave an enormous amount of thought to how and whether to do education for our members about the AQC, and in the end the plan has not done any kind of proactive outreach and education to our members about the AQC. And the reason for that is that the AQC has a contract with our physician network and, in some cases, with hospitals party to those contracts.

Our members have bought products from us that still stand, that are unchanged by those contracts, and that in our experience, when we have a communication with our members, it won’t surprise you to know members get confused and worried when they hear from their health plans. And so we really hold ourselves to a standard that we will communicate with our members when there is something that they need to do, when there is something that they need to pay attention to.

And as we struggled with what exactly would we tell them about the AQC, it wasn’t clear, in fact, that there is anything different that they need to do. And, in fact, when we had the impressive year 1 results, we thought again about communicating with them and saying ‑‑ you know, congratulating them on how fortunate they are to be in practices like this. But in the end we have left it to the physicians to communicate if they want, but really there is nothing the plan needs to advise the members about.

Mr. Reichert. There is nothing in part of the contract that would require the doctors to communicate any difference. And wouldn’t it be important for the patients to know that they are now in this holistic sort of preventive care arena, or they just, as they go through it, kind of realize that in communicating with their provider?

Ms. Safran. Well, I think they do realize it, and they realize it in a very positive way. That is to say, in order to be successful on the quality and outcome measures, these practices are interacting with their patients in a way that the patients, when they communicate with us, tell us that it feels like concierge care, but they never paid a concierge fee, because the practice is suddenly doing outreach to them between visits to let them know about care that they need, to find out how their management of their chronic condition is going and what barriers they are facing. So that is what the members and the patients are experiencing.

Mr. Reichert. I appreciate that.

I notice that my time is getting short, and my next question is going to be a little bit longer, Mr. Chairman, and I will submit that question to Dr. Wilson in writing.

[The information follows: The Honorable Mr. Reichert]

Mr. Reichert. Thank you. I yield back.

Chairman Herger. The gentleman yields back.

The gentleman from Wisconsin Mr. Kind is recognized for 5 minutes.

Mr. Kind. Thank you, Mr. Chairman. Thank you for holding this very important hearing, and I want to thank our witnesses for your testimony here today.

Listen, we have just gone through a very gut‑wrenching health care reform debate ourselves here in Washington, and incorporated a lot of aspects of what is happening around the Nation. I assume, Ms. Safran, the Massachusetts model, too, is something that was under consideration.

And I think the ultimate verdict on health care reform is going to be not only changing the way health care is delivered, but how we pay for it. I mean, it is replete with studies here that show that close to one out of every three health care dollars is spent on tests and procedures and things that don’t work. They don’t improve patient care. And oftentimes, because of the overtreatment patients are receiving, they are being left worse off rather than better off. That is close to $700 billion a year in a 2.3‑, $2.4 trillion system that we are not getting a good bang for the buck for.

And I have been encouraged hearing the testimony here today, and perhaps there is an opportunity for some bipartisan cooperation to move forward on a lot of the reforms that you are all testifying about, a more integrated, coordinated, patient‑focused care system.

Now, for the sake of full disclosure, I come from a country, western Wisconsin, that has the Mayo system in it, Gundersen, Marshfield, Dean, that are doing this already and producing tremendous results. And it sounds like that is a model that we should be encouraging. And, in fact, it is something we incented in the Affordable Care Act, those types of models of care that are more coordinated and patient‑focused, which is really at the heart of the Affordable Care Act, including payment reform.

And I am convinced that fee for service, as I am hearing from all of you today, is an unsustainable model of payment for our health care providers. It is not fair to them; it is not fair to the patient. We are not getting a good bang for the buck, and how do we get to a value‑ or quality‑based reimbursement system, that is going to be crucial.

And, Ms. Safran, you were talking about the quality measurements that Massachusetts was just establishing, I think 64 criteria so ‑‑ that you are using right now. My question to you is who is establishing those quality measurements, and what type of buy‑in have you gotten from the practicing physicians and the care providers in Massachusetts for that type of criteria?

Ms. Safran. So, that was my job, to establish which measures. And we really drew from nationally accepted measures wherever we possibly could, so that means NQF endorsed almost every single one of those 64 measures. We then put the measures through some additional paces to be sure that we think they are ready for the high‑stakes use involved, meaning attaching dollars to payment on, you know, a score. And it was important to us that that measure set include inventory and hospital measures, and that in both of those settings that the measures include clinical process, clinical outcome and patient care experience measures. So that is how we have ‑‑ and they have been completely accepted because of the rigor that we paid attention to in the measures that we chose.

Mr. Kind. Because some of the concern, I think, many of us had or shared in regards to what Massachusetts was moving forward on, so you are doing coverage before cost. And now it seems like you are trying to play catch up with the cost issue right now. And we are trying to get out ahead of that ourselves with the Affordable Care Act to not fall into a similar type of box as we move forward.

I know it is very unfair to ask it, you know, because volumes and books can be written on each topic, but if I can get just a quick response from you on a couple of key issues, I think it is important as we move forward.

The role of comparative effectiveness research. Important or not, Mr. Guterman?

Mr. Guterman. I think comparative effectiveness research is key, because if we are going to spend the vast amount of resources that we spend on health care, and if we are going to address the issue of the massive amount of waste in the health care system, we need to know how to spend that money more wisely so that we can get a better return on it for our patients. And comparative effectiveness research is intended to provide information to help decisionmakers, the physician and the patient, make the decision for the appropriate care.

Mr. Kind. Dr. Watkins.

Dr. Watkins. I completely agree with my colleague that it is absolutely essential. We have the opportunity, because of our involvement in the Multipayer Advanced Primary Care Practice Demo through CMS Center for Innovation, to actually work closely with our colleagues in other States and have a multi‑State collaborative that is actually beyond those States involved.

Mr. Kind. Ms. Safran.

Ms. Safran. No question that we need a better evidence base to guide us. Less than 3 percent of medical decisions are made every day ‑‑ every minute of every day are based on solid evidence. Comparative effectiveness is absolutely one important way to do that. I think there are others, but we absolutely need a better evidence base.

Mr. Kind. Dr. Wilson.

Dr. Wilson. I would agree with all that has been said before me. Yes, comparative effectiveness would be good, and I agree also that too little medicine is done through evidence‑based medicine.

Mr. Kind. Now, another big role that we had here, unfortunately, under the Affordable Care Act was talking about reimbursing providers in regards to counseling for advanced directives. Good idea, Mr. Guterman?

Mr. Guterman. When decisions get made about medical care, having that decision be made between the patient and the physician is always a good idea. And the more information people have in making those decisions, the better it is.

Mr. Kind. May I get a written response from the rest of the witnesses because I see my time has expired? Thank you, Mr. Chairman, for your indulgence.

Chairman Herger. Thank you.

The gentleman from Pennsylvania Mr. Gerlach is recognized for 5 minutes.

Mr. Gerlach. Thank you, Mr. Chairman.

Thank you for coming today and being part of the panel.

Let me ask, Ms. Safran, in Massachusetts, a State that has undergone tort reform relative to medical liability and medical malpractice cases, and are there protections, medical malpractice protections, for physicians in Massachusetts, like, say, Texas and California, where there are caps on noneconomic losses in medical malpractice cases?

Ms. Safran. I apologize. That is a question that is out of my area of expertise. I would be glad to get the answer, though. I don’t believe there has been significant tort reform in Massachusetts that has been discussed.

Mr. Gerlach. Yes, I don’t think so either, but I don’t know exactly if that is the case. But that really is the premise for my question, because I am thinking in the AQC model that you have, what has been the impact of an AQC contract with a group of physicians relative to how they otherwise may be practicing defensive medicine if their tort liability may still be just as high as it might be, say, in New York, Pennsylvania, other States where there are no tort reforms to protect them against the medical liability cases? What have you seen as the difference between a physician practicing in Massachusetts who is not in an AQC arrangement versus one that is relative to the types of defensive medicine costs that they produce?

Ms. Safran. Well, the answer is that it is early right now to know, to notice or see really any differences in the patterns of use. And so I think if we were to look at the data ‑‑ and we have a formal external evaluation by Harvard Medical School that is looking at the data to see how things are changing ‑‑ they would find that for the most part, the savings in year 1 were based on choosing lower‑cost settings where that could be done, not by doing the hard work of changing use.

However, there is a lot that these practices are doing to start to try to understand the vast practice pattern variation that exists even within a group of physicians who practice together, caring for the same condition, how differently they care for that. And we are helping to fuel that with data that we provide on a very regular basis to highlight these differences and what we hope is promote physicians discussing with each other what best practice would look like, and to form that consensus and reduce that variation.

Mr. Gerlach. Assuming the American Medical Association is accurate in its estimate that in any given year there is approximately 100‑ to $150 billion in defensive medicine costs that are incurred around our Nation each year, and you could probably extrapolate out from that overall figure how much of that is out of Massachusetts, is this Harvard study that is being undertaken, is it going to compare and contrast the national experience relative to defensive medicine costs with what is happening in Massachusetts both within an AQC setting and a non‑AQC setting?

Ms. Safran. Yes. I don’t know that they will bring in national data specifically, but they absolutely have information and will be studying over a long period of time to see how practice patterns change in the AQC compared with how things change or don’t change outside of the AQC.

Mr. Gerlach. I would like to yield the balance of my time to Dr. Price, if I may.

Chairman Herger. The gentleman yields to Dr. Price.

Mr. Price. I thank the gentleman for his time, and I appreciate his question because I think it is an interesting line. I just want to say that all of us agree that the status quo is unacceptable. It is just where we go from here.

I was curious about the response of the panel to the question about comparative effectiveness research and the overwhelming support for it. And I assume that would be the same for the Independent Payment Advisory Board. Mr. Guterman, you are wholly in favor of the Independent Payment Advisory Board?

Mr. Guterman. The notion of having a mechanism to translate the best policy ideas into focusing on Medicare programs to try to slow down cost growth is an interesting one. I think there are ‑‑

Mr. Price. You support the IPAB?

Mr. Guterman. Do I support the IPAB?

Mr. Price. Yes.

Mr. Guterman. I would like to see, frankly, the IPAB have broader powers because I suspect that a lot of the issues that they will have to deal with in terms of Medicare cost growth are driven by the same factors that ‑‑

Mr. Price. Dr. Watkins, do you support the IPAB?

Dr. Watkins. I don’t feel qualified to answer your question.

Mr. Price. As a physician running a large entity, you don’t feel qualified to answer whether or not the IPAB you support or not?

Dr. Watkins. I am sorry.

Mr. Price. Ms. Safran, do you support the IPAB?

Ms. Safran. I apologize. I don’t have enough information.

Mr. Price. Dr. Wilson, might you have an opinion on the Independent Payment Advisory Board?

Dr. Wilson. Unfortunately I am not adequately familiar with the expectations of that Board to render an intelligent response.

Mr. Price. I thank you.

Chairman Herger. The gentleman’s time has expired.

The gentleman from New Jersey Mr. Pascrell is recognized for 5 minutes.

Mr. Pascrell. Thank you, Mr. Chairman. Thanks for having the hearing, and thanks to the panelists. Excellent.

We are sitting here talking about changing the way we pay providers, and I have listened to my friend from Wisconsin over the last 3 years talking about containing costs enough times to not only believe him, but listening to the specifics of where he is coming from, and I think that is very, very important, containing costs.

We might start, I think, maybe the four of you could agree with me on this, by having patients look at their bills, if we are talking about containing costs. Nobody knows what ‑‑ particularly if they are covered ‑‑ what do I have to worry about what is in the bill? My insurance covers, the Lord covers me, whoever covers them. And you don’t look at the specifics of what is in that bill. And I think that that is a very dangerous practice that we have gotten into.

The first words out of the patient is usually, don’t worry about it, I am covered. And what we should be concerned about of what that means in the minutiae of the bill, how much things cost.

And so we are moving away. I think both sides agree that we need to move away from paying physicians for a specific service. Fee for service, I think, is a dog that is not hunting anymore, and we need to look for other models, and that is one of the many of the questions that have gone in that direction today.

I have said many times health care reform is entitlement reform. I think it has already started. It will help us to transform this health system. One‑third of the entire new Health Care Act is devoted to Medicare and Medicaid and how we can contain those costs. Some of the ideas being discussed were included in the Health Care Reform Act.

I am interested if these ideas are what you support, what is contained in the Health Care Act? One proposal I think we do have some bipartisan agreement on is the issue of the IPAB, the Independent Payment Advisory Board. At least I have gathered that from your written testimony.

I think this committee already has the knowledge, the experience and the jurisdiction to determine appropriate payments to providers as opposed to an independent body, and we may debate that. We may debate that. But I think that this group has done a pretty good job. If we can agree on this, I think we can find other areas of agreement in terms of provider payments.

We are here to specifically focus on physician payments, and I hope we don’t have to have another patch. I think the chairman shares my view. We have had enough patches over the last several years, and we need a permanent solution. It reduces the anxiety in terms of the doctor, and we need to reduce the anxiety in the patient. Of course, there is a lot of questions out there as to what is a guaranteed benefit, what is not a guaranteed benefit. We want to reduce anxiety in all parties.

On our side we passed a permanent fix for Medicare physician payment in H.R. 3961. We did that in 2009. The other side of the building, of the Capitol, they are still trying to clean out the offices, I think. I don’t know what they are doing over there.

So I have a couple of questions. On physician shortages, workforce, we spent a lot of time on that when we put this legislation together. Many of you know in the health care reform bill that we did change and try to provide incentives to respond to the shortage of physicians, of primary physicians, and also nurses. A National Health Care Workforce Commission was established and associated grants to help States improve their efforts to promote an adequate health care workforce. We can’t ignore the growing shortages. Here we are changing, reforming health care. Will we have enough folks to deliver the service? That is not a good idea.

My question is for the witnesses. In Massachusetts, Vermont and California, can you tell me how your models affect workforce shortages, and do they create more stability in the system for physicians? Who would like to take the first crack at that? Doctor?

Dr. Wilson. I will take it.

In California, yes, we are very concerned about physician shortage, especially in the primary care ranks. We anticipate, if you look at the numbers, 45,000 physician shortage in the next decade by 2020.

We think our model ‑‑ and there has been probably as much experience, if not more, in using midlevels as teams of care and using physicians to coordinate that care. And so that is one of the ways we anticipate mitigating this problem.

I still have anxiety because I think that looming physician shortage is going to be a challenge for the Nation and not just for California.

Chairman Herger. The gentleman’s time is expired. Perhaps the witnesses could respond in writing to the question, please.

Chairman Herger. The gentleman from Georgia Dr. Price is recognized on his own time, 5 minutes.

Mr. Price. Thank you, Mr. Chairman.

Let me just first say that I am astounded at the lack of responsiveness to my question about the Independent Payment Advisory Board by three of the witnesses. This is a major, major undertaking by this Federal Government to impose upon physicians what they may or may not do for their payments, and to have three supposed experts, individuals who lead large physician groups and health care groups, not be able to opine for this country about their stance on the Independent Payment Advisory Board is amazing. It is astounding to me, absolutely astounding.

So let me go to the other extreme. Do you believe that fee‑for‑service medicine ought to outlawed? Stu?

Mr. Guterman. No. We ought to look for different ways of paying. There are different ways, in fact, of modifying fee‑for‑service medicine so it serves the purpose better than unfettered fee‑for‑service medicine that typifies most of the health care system.

Mr. Price. And you believe one can have a coordinated care system in a fee‑for‑service model?

Mr. Guterman. I think it is more difficult unless you get ahold of some of the incentives that fee‑for‑service medicine provides.

Mr. Price. Dr. Watkins, do you believe that fee‑for‑service medicine ought to be outlawed?

Dr. Watkins. I do not.

Mr. Price. That is encouraging.

Dr. Watkins. I believe that in our program we have actually already demonstrated that with fee for service unchanged, we have improved the quality of care delivered, the perception of care on the part of the patients, and the perception on the working conditions, if you will ‑‑

Mr. Price. That is within the fee‑for‑service model right now.

Dr. Watkins. That is true.

Mr. Price. Thank you.

Do you believe, Mr. Safran, fee for service ought to be outlawed?

Ms. Safran. I believe that we have to move our system away from fee‑for‑service medicine for all the reasons that we have talked about this afternoon. Whether we have to do that through the use of law, or whether through a demonstration that we have a way to do it that works better and provides better quality and outcomes, I couldn’t say. I would hope that we can reform the system and move to another model of payment without necessarily legislating away the fee for service.

Mr. Price. I think we need to move to another model as well, but what I hear you talking about is coordinated care and whether or not one can have a payment model for physicians that appropriately compensates them for the wonderful work that they do, and whether or not that needs to be in the kind of model that you describe, I think, is really open to question.

Do you believe that one patient ought to be able to visit a single physician and contract for that service individually between those two individuals? Should that be legal?

Ms. Safran. I want to understand better how that would look and, for example, is that a physician ‑‑

Mr. Price. I walk into a doctor’s office. I say, I am feeling a little ill, I would like to have you evaluate me, will you do that for ‑‑ what is the charge ‑‑ 50 bucks, okay? Is that all right? Should that be legal?

Ms. Safran. That should be legal.

Mr. Price. Thank you very much.

Dr. Wilson, do you believe that fee‑for‑service medicine ought to be outlawed?

Dr. Wilson. No, I do not. If I were just to refer to our California model, we use fee‑for‑service medicine as well as capitated and sub-capitated medicine, and I think the sort of the overlying important issue here is how is care coordinated, and how is it managed.

Mr. Price. Exactly. And that may be completely different than the cost of it or how it is paid for, correct?

Dr. Watkins. Correct.

Mr. Price. Mr. Chairman, I was struck yesterday by an article from the Associated Press entitled “Obama Plan for Health Care Quality Dealt a Setback,” which highlights accountable‑care organizations, and in it the article states that at the Mayo Clinic, the administrator of the Mayo Clinic wrote that 90 percent of their members, physician members, would not participate because the rules as written were so onerous, it would be nearly impossible for them to succeed. And the American Medical Group Association went on to say that their members, including the Cleveland Clinic, Intermountain Utah, Geisinger Health Systems in Pennsylvania, et cetera, would find that significant change to be much more difficult to provide care. And I ask unanimous consent that that be included in the record.

Chairman Herger. Without objection.

[The information follows: The Honorable Mr. Price]

Mr. Price. I would just caution this panel and this committee and this Congress that the SGR system was this Congress’ solution to how to pay physicians a few short years ago, and it has run amok, clearly. It doesn’t work. What we ought to take from that, I believe, is that solutions imposed from Washington often times result in terrible consequences for patients, which is where we are right now with this system.

And I yield back.

Chairman Herger. The gentleman’s time has expired.

The gentleman from Oregon Mr. Blumenauer is recognized for 5 minutes.

Mr. Blumenauer. Thank you, Mr. Chairman, and I really do appreciate your bringing before us people who are on the front lines of trying to squeeze more value out of the system and give us different approaches in how that can be accomplished.

Half of us on the committee come from regions of the country that are low cost, high value. If they practice medicine the way they do in Congressman Kind’s district; my district in Portland, Oregon; Seattle; and some parts of the bay area, we wouldn’t have a Medicare funding crisis. We would have better outcomes. People would live longer. They would get sick less often. They would get well faster. And you have described ways ‑‑ and I do, Ms. Safran, at some point like to get information about your notion that only 3 percent of the medical decisions were based on objective evidence. I want to get that right.

I do agree with my friend from Georgia, the mess we have got is imposed by Congress. And one of the reasons why some of us supported the IPAB and, in fact, wanted it stronger is because Congress has proven itself incapable of being able to make some of the really difficult decisions with this fix and that fix, and the SGR is a perfect example, which I didn’t vote for, was wishing away outcomes.

We are on a path now where much of what you have talked about we attempted to incorporate in the reform legislation. It would have been better, but we had a complete collapse in the Senate, and we couldn’t legislate it, but we have got embedded some pilot projects and whatnot. The approach is in some instances repeal it and start over. Part of it is to trim back the bill. For example, there is some bipartisan interest in reining in what powers we have given to the IPAB because people are afraid it might work.

Another alternative is to actually accelerate the reforms that were envisioned, demonstration projects. Things that you are doing now appear to me to have been part of what at least some of us wanted to see, hope will happen, and, in fact, can occur under the framework, but it was made more complicated because we didn’t have a particularly functional legislative arena.

But it is the law of the land now. There are elements in place. I would like to know from each of you the extent to which elements that are there in the reform legislation now can incorporate your experience, build upon it, and perhaps be strengthened by it.

Maybe we can talk to the three practitioners here who are representing the systems.

Dr. Watkins?

Dr. Watkins. I would be glad to speak to that. The Community Health Teams, our multidisciplinary, locally based care coordination teams are actually clearly outlined in the ACA in section 3502. And we are very clear that that level of coordination is essential to providing quality care regardless of what the structure is, where the payment is being made, whether that is fee‑for‑service, if it is single payer. It doesn’t matter on some level. The need to do quality improvement and to push that side of the equation is going to be uniform regardless.

Mr. Blumenauer. Ms. Safran.

Ms. Safran. I think that the proposed regs have within them a working excellent framework that, in fact, bears a lot of resemblance to what I have described to you about the AQC. But fortunately, there is this comment period that hopefully can provide feedback to CMS and create the changes that will enable those who currently perceive that the risk/reward threshold is such that they would be concerned to participate to change that sum, because we have seen in our model that it is possible to do that, as we have talked about, and have very quick uptake in even a two‑sided model such as the one that we have. So I am optimistic that we can get it right.

Mr. Blumenauer. Thank you.

Dr. Wilson.

Dr. Wilson. I think the ACL model holds a ton of promise and opportunity, and I think it would be a great benefit to this country if it could be rolled out and adopted.

I have some concerns, as I mentioned in my testimony, about with the funding of it, and I think many of the groups that have spoken in that letter share those concerns. I think those groups also agree with the intent of the ACL model and the benefit it would bring to the American people. And so I think if some things can be fixed, it still has an opportunity to succeed.

Mr. Blumenauer. Thank you very much, Mr. Chairman.

Chairman Herger. Thank you.

The gentleman’s time has expired.

The gentleman from Washington Mr. McDermott is recognized for 5 minutes.

Mr. McDermott. Thank you, Mr. Chairman. Thank you for having this hearing and having these witnesses.

I was reading the material here, and I am a physician, and I am a general practitioner, and I would like to join, okay? So look at me as a somebody walking into the door in Vermont and Massachusetts and California.

I saw in the California stuff Monarch Health in Irvine covers all of Orange County, 2,500 physicians, 200,000 patients, and that is about 80 patients per doc if you just sort of divide it by 2,500.

Two questions. Do I have to bring patients in to your system to join it, or can I walk in the door and you will assign me a panel? That is the first question.

And the second question is how am I going to be paid for my patients? Because I have this general practice of kids and people between 18 and 50 or 65, and then I have got some seniors. Will I be capitated on all of them about the same way, or what Medicare pays and what the commercials pay? Or how does this work is what I want to hear from being a physician. Because Dr. Price has raised all the questions. People understand fee‑for‑service: Patient comes in, you do something, you put out your hand, they give you money, that is it. How does yours work? Please, the three of you, tell me what would happen to me.

Dr. Watkins. We are dealing exclusively at this point with primary care.

Mr. McDermott. Yes.

Dr. Watkins. So for our practices, when the practice goes through the process of being recognized nationally for its quality through the NCQA recognition process, once they get that recognition, a fixed dollar amount per patient per month ‑‑

Mr. McDermott. How much?

Dr. Watkins. It varies. Somewhere between $1.29 to $2.39, I believe, per patient per month, for every patient attributed to that practice covered by one of the three major commercial insurers in Vermont, Vermont Medicaid and soon to be Medicare.

Mr. McDermott. So it doesn’t make any difference whether they are commercial or Medicaid or Medicare, I still get the same $1.29 or $1.39.

Dr. Watkins. That is exactly right, and it is a function of what kind of score they got on that rubric.

Mr. McDermott. Do I have to bring my own patients, or will you set me up in a practice somewhere and say, go to that practice, they have got a bunch of extra patients?

Ms. Watkins. Yeah, I wish we had a whole bunch of doctors coming into the State that we could have that problem. We are actually dealing with currently existing practices, and they get enrolled through a process, a queue, if you will, that we are rolling out through the State.

The fee‑for‑service schedule still exists, so the patients who are seen in that practice are being ‑‑ generating income for the practice because of having their normal visits. But in addition, if those patients are attributed to the practice by the insurers, then they generate that income for the practice. So that is additional money.

On top of that, a Community Health Team is established in that area, also paid for by the insurers as a shared resource. They each split it approximately 25 percent of the cost.

Mr. McDermott. This social worker and a visiting nurse ‑‑

Dr. Watkins. Exactly. It is multidisciplinary team that is locally based in contrast to the remote disease management programs that the insurers also still have. But they really do one‑on‑one counseling and interventions, outreach, panel management ‑‑

Mr. McDermott. Let me stop you because I want to hear what happens in Massachusetts.

Ms. Safran. The answer is that your day‑to‑day existence as a physician under an AQC model and how you would see patients, who you would know who to see, and how you would get paid for that would be largely the same. What would be ‑‑ that is to say there is still ‑‑ as in Vermont, there is still a fee‑for‑service payment schedule, we still have a fee schedule with you, you still bill for that service. However, you are now part of an organization that has assumed accountability for the total cost of care for your population. So even while you are going about your day‑to‑day business of taking care of patients in much the same way, you are having a new level of information and support from your practice, however that is defined, about how you are doing, about how you are doing on your quality measures, about which of your patients need things that they haven’t gotten yet, about which of your patient have blood pressures that are out of control and you need to adjust their medicines, about how your overall level of use of lab tests and high‑cost imaging compares with other PCPs who practice in the same hallways that you do.

Mr. McDermott. How do I get paid?

Ms. Safran. You get paid by us, by Blue Cross. You get paid for the claims that you submit.

Mr. McDermott. Exactly the way they are talking about in Vermont; that is, a certain amount each month for every patient I got enrolled.

Ms. Safran. Yes ‑‑ no. Just paid for your claims. For the visits that you have generated, you are still getting paid for that; however, there is now accountability in your practice for whether you are at the end of the day spending too much, and the practice as a whole will have its own way of dealing with the individual clinicians. It is not proscribed by Blue Cross for how they address that.

Primary care physicians under the AQC have gotten enormous increases in revenue because of the quality dollars that we have put on the table that these organizations feed right back to primary care, because that is who is generating those quality dollars.

Chairman Herger. The gentleman’s time is expired.

The gentleman from Louisiana Dr. Boustany ‑‑

Mr. McDermott. Mr. Chairman, can I ask the gentleman from California to submit in writing ‑‑ I would appreciate knowing how you do it in California.

Chairman Herger. Yes. And all of our members, if we have questions, should be ‑‑ I would like to request to be able to submit our witnesses in writing, and that within a reasonable amount of time they be responded to.

Chairman Herger. With that, again, the gentleman from Louisiana Dr. Boustany is recognized for 5 minutes.

Mr. Boustany. Thank you, Mr. Chairman.

I am a cardiac surgeon, and my father was a physician, so I know a little bit about physician behavior. And I was involved very much in attempts to put different groups together back in the 1990s, and also initiated a number of quality initiatives at the hospitals where I practiced that allowed us to achieve top 100 status for heart surgery.

I am kind of concerned that these ACO regulations as we have seen them appear to be a little bit overly proscriptive and burdensome. And, Mr. Guterman, I would be curious to know your opinion. I know it is a first impression based on what has just come out, but could you give me your opinion on that?

Mr. Guterman. We have heard some feedback, as Mr. Price cited, that some folks are feeling that way. And we have called for CMS to work with the provider community to be able to come up with a set of rules that is viewed as reasonable from both sides.

Unfortunately, we can pay however we want, but we still ‑‑ in order to really achieve improvement in the health care system, we need to have both sides kind of build up enough thrust to escape the gravity of business as usual, and that applies both to the government and to the providers of health care.

Mr. Boustany. Thank you.

Do you think gainsharing might be a useful way to incentivize more integration and coordination of care?

Mr. Guterman. Before I was with Commonwealth Fund, I was at the Centers for Medicaid and Medicare Services, and we did develop a gainsharing demonstration. We think it can be promising. As with any innovation in payment approach, it needs to be monitored so that the right incentives get transmitted, but it certainly could be a promising way as a tool to achieve the kind of efficiencies and effectiveness that you want to achieve.

Mr. Boustany. I have had conversations with CMS, and it is felt there that no further statutory authority is needed to proceed with a gainsharing demonstration or model. But I have concerns that if we were to do so, physicians in hospitals that might be willing to do this would want statutory protection, because based on some of my previous experiences with this, oftentimes lawyers will say, well, we think you can do this, but it hasn’t been to court yet; we think it will pass muster.

Do you think if we are going to move forward, we need further statutory protections to allow this sort of model to go forward?

Mr. Guterman. I don’t think I have the expertise to answer that question definitively, but I do remember when I was at CMS, we ran into difficulties in the court in getting the first attempts at gainsharing demonstrations to be put into place.

Mr. Boustany. Thank you, sir.

And one other question for the panel, I know you have had success with your models, capitation and so forth. It seems to me a lot of what has been focused on here has been the primary care piece to this. And you have to bring in the specialties, and then you have got specialties like cardiac surgery and liver transplantation. Do you have surgeons, all those surgeons, in your plan, and are they on some salary? How does that work?

Dr. Wilson?

Dr. Wilson. Sure. Cardiac surgeons, neurosurgeons, surgeons that typically require a larger population base to fill out their practice typically don’t sign on as employee docs in practices of any reasonable size. And so typically those relationships exist in one of several contracted methodologies.

For some of our network, and I am now going to refer to my network specifically, we have sub-capitated contracts with our thoracic surgeons. They take on responsibility for a population of patients and provide that care and have their own quality metrics, and then they are responsible to us, and we hold them accountable for the care that they provide and the responsiveness they have to their patients.

We also conduct patient satisfaction surveys and look at their performances. And in other parts of the network, we may have case rates that define the cost of an episode of care based on whatever intervention is needed, and even still in some other parts of our network, we may have just a strictly fee‑for‑service arrangement. And all of the above.

Mr. Boustany. Is it the same thing in Vermont with the specialties, the surgical specialties, the procedure‑based specialties?

Dr. Watkins. We are a very small State, as I am sure you are aware. Our total population is just over 600,000. There are only a few people that actually practice medicine at that level. There is one academic medical center in the State and one in neighboring New Hampshire. The Blueprint for Health has, as I said ‑‑ and we are in our early days still focused exclusively on primary care, but we do have ongoing discussions around a much broader view of what payment reform means, obviously having to loop in specialists. So that is in the future.

Mr. Boustany. Thank you.

I see my time has expired, Mr. Chairman.

I think we probably need to look at how specialties are reimbursed. That is one of the big drivers of cost, and it is going to be different than what would apply to primary care. At least that is what my instinct tells me on this. So thank you.

Chairman Herger. And thank you. I believe that is something that the committee should be looking into as well.

With that, I want to thank each of our witnesses for your testimony today. Your experiences with delivery models that have shown to improve care and reduce spending would be of great benefit as the subcommittee seeks to reform Medicare physician payments.

Our work in this area has perhaps never been more important. As the Medicare Board of Trustees will report tomorrow, the current rate of growth in Medicare spending is unsustainable. The program will soon go bankrupt if changes are not made.

There has been a vigorous debate over the future of Medicare in recent weeks. I, along with many of my colleagues on the Republican side, believe we ultimately need to bring competition and market forces into the Medicare program in order to reduce costs, which is in sharp contrast to the approach the President has proposed.

Regardless of the outcome of the debate over Medicare’s long‑term future, we will continue to focus our efforts to finding the best way to fix the SGR.

As a reminder, any Member wishing to submit a question for the record will have 14 days to do so. If any questions are submitted, I ask that our witnesses respond in a timely manner.

[Whereupon, at 4:10 p.m., the subcommittee was adjourned.]