Statement of Anmol S. Mahal, M.D., President, California Medical Association, Freemont, CA

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

May 10, 2007

Mr. Chairman and Members of the Committee, on behalf of the California Medical Association, I want to thank you for inviting me to testify before the Committee on the important Medicare issues facing our nation.  I hope to provide some insights about our California experiences to help the Committee in its deliberations.

I also want to extend a special greeting to my Congressman, Mr. Stark.  Mr. Chairman, we sincerely appreciate your efforts to work with us to design a Medicare physician payment system that will appropriately reimburse physicians and ensure the highest quality medical care for our Medicare patients. 

I.  Introduction

Mr. Chairman and Members of the Committee, California physicians are keenly aware that Medicare is in precarious financial condition and we are extremely concerned about the program’s ability to continue fulfilling its mission.  We understand that Congress faces competing goals for the Medicare program.  The government must rein-in Medicare spending at a time when the baby boomers will begin enrolling in the program – thereby increasing the volume of services.  But Congress must also fix the physician payment system to ensure those same baby boomers have access to doctors in the future. 

Physicians face similar challenges on an individual level.  Eighty-three percent of Medicare patients have chronic conditions and the numbers are growing.  In ten years, physicians will spend nearly half their time treating Medicare patients with multiple chronic conditions.  Physicians are concerned about their capacity to appropriately treat these increasingly sick patients with diminishing resources and reimbursement.

As California physicians, we agree we must do our part to provide the highest quality care in the most efficient possible manner. We must join Congress in being responsible stewards of the Medicare program, just as we are stewards and advocates for our patients.  We at the CMA are committed to working with Congress to improve the Medicare program by sharing our knowledge of evidence-based medicine and our experience with programs that attempt to manage costs and care – such as the physician peer comparison programs in California.

   II.  California Medical Association SGR Overhaul Plan

To that end, the California Medical Association recently unveiled a long-term plan to overhaul the SGR system.  Included in the plan are recommendations for Congress to establish a series of demonstration projects that would test different systems for appropriately managing costs, incenting the efficient use of resources, and better coordinating patient care.  Ultimately, the successful programs would replace the SGR as the volume control mechanism. We fully understand that the Committee is searching for better tools to control the growth in the volume of physician services, such as the physician peer comparison programs. 

The Chairman has asked me to comment on a program in which I participate in Northern California, which compares my practice patterns to my peers.  The program is educational in nature and physician performance on utilization, quality and patient satisfaction are rewarded through bonus payments.   Many safeguards would be necessary before such a complex program could be considered in the Medicare fee-for-service system. 

I also should make clear at this point that the California Medical Association has not yet taken a position regarding physician peer comparison programs.  We are currently in the process of thoroughly evaluating the peer comparison programs operating in California. We certainly believe that peer comparison information provided to physicians on a confidential basis for educational purposes would be beneficial to physicians and the Medicare program in general.  However, peer comparison programs that tie reimbursement to utilization performance should be examined through Medicare demonstration projects because of their complexity and potential impact on patient care. 

III.  A California Physician Peer Comparison Program

As a primary care physician, I participate in a physician peer comparison program through a large Independent Practice Association (IPA) in northern California.  The IPA provides confidential comparative information to individual doctors on how their quality, utilization, and patient satisfaction compare to their peers.  The IPA’s program is called the Primary Care Management Program. 

Many California medical groups and IPAs who run sophisticated managed care systems employ utilization profiling methods, but the vast majority of these groups use them only for educational purposes.  The educational aspect of comparative information is vital to the success of these programs.  Such information has helped physicians better understand their practice patterns compared to their peers and allowed many physicians to improve their practice. 

Overall, the group in which I practice employs two tools to manage the care of its patients.  The first tool is a physician peer comparison tool that fosters self-improvement.  The second tool is a financial reward for meeting quality measures and utilizing services consistent with one’s peers.  Such financial incentives have proven crucial to maintaining access to primary care physicians in my community and in helping physicians begin to invest in health information technology. 

Compensation - Primary care physicians (PCPs) affiliated with the group receive compensation in two distinct ways.  They receive fees for the services they provide to patients (fee-for-service payments), and also receive a quarterly fee that rewards the effective management of their patient population.  As for the fee-for-service payments, PCPs are paid for the services they actually provide, so there is no incentive to underutilize, and they also receive a per member payment that is based on their performance on specific metrics. 

The quarterly fee for effective management is called the Primary Care Management Fee (PMF), and is based on many different metrics specific to the physician’s practice. These metrics reside in one of four profiles: The Utilization Profile, the Clinical Profile, the Participation Profile, and the Satisfaction Profile.  I will describe each of the four. 

Utilization Profile – The Utilization Profile measures the cost of all health care services used by the group’s physician members.  Its components include physician professional services, pharmacy and facility costs.  PCPs with fewer than 200 adjusted members are not considered statistically relevant and are excluded from the calculation.

The Pharmacy component of the Utilization Profile includes a synopsis of the PCP’s prescribing patterns and resulting PMPM costs.  The cost reported here represents 50% of the actual total pharmacy costs.  By contrast, facility costs are reported at the group level due to statistical unreliability at the individual level.  The facility costs assigned to each physician represent 50% of the total facility cost.  Admission rates and lengths of stay are included in the calculation.  The total cost figure is the sum of professional, pharmacy and facility costs, and the final calculation shows where the physician’s utilization costs stand relative to the panel average. 

Clinical Profile – The second profile—the Clinical Profile—measures the group’s clinical initiatives. These metrics report individual performance against that of the physician’s panel, region and system, and holds the physician to the system average.  There are currently eight clinical measures included in the profile.  They are designed to maintain a high standard of care and to improve patient outcomes.  The eight measures include: Breast Cancer Screening, Cervical Cancer Screening, Diabetes HbA1c, Use of Appropriate Asthma Medication, Childhood Immunizations, Comvax and Pediatric Use, Cholesterol Screening, and Chlamydia Screening. 

Participation Profile – With respect to the Participation Profile, physicians earn points for participating in the group’s activities. 

Satisfaction Profile – The fourth and final profile is the Satisfaction Profile.  As its name suggests, the Satisfaction Profile is based on a Patient Assessment Survey in which physicians are rated by their patients.  Patients are randomly selected to participate in the survey.  In order for a physician’s scores to be counted, at least 20 surveys must be returned.  The most heavily weighted question asks the patient if he or she would recommend the doctor to family or friends.

Patient Calculations – Because the costs associated with treating patients in a given practice are calculated on a per-member basis, it is essential to acknowledge that not all members are the same.  Accordingly, the program makes adjustments based upon the demographics of the physician’s patient population, including an adjustment based upon the number of Medicare patients the physician is treating.  On this last point I think it is important to note that Medicare patients are weighted as four commercial private patients.  Adjustments for age and sex are computed based on system wide data.

Stop Loss Adjustment:  There are some costs that are shared among an entire region rather than assigning them at the physician level.  Maternity, HIV/AIDS, wellness (i.e., screenings and immunizations) dialysis, oncology, colonoscopy, and ophthalmology costs are allocated to all PCPs equally.  This Stop Loss Adjustment was created to prevent a few very costly patients from inappropriately overstating the total cost in a PCP’s profile.

 IV.  Recommendations for Physician Peer Comparison Programs

Based on California physician experiences, I would like to offer the Committee a few recommendations to consider when implementing a Physician Peer Comparison Program. 

I would also like to differentiate between a physician peer comparison program that provides confidential, educational feedback to physicians as a tool for self-improvement and a comparison program that ties reimbursement to efficiency.    CMA physicians are interested in self-improvement and we believe that the educational aspects of peer comparison can be extremely helpful to physicians and effective in improving practice patterns.    We would support such programs. 

However, as you can see from the background we provided to the Committee, comparison programs are extremely complex if implemented appropriately.  Therefore, we would prefer to see any comparison programs that are tied to performance payments  to be examined in a Demonstration Project environment before being adopted by Medicare. 

The CMA recommendations for Peer Comparison Programs are set forth below:

1.  Overall, Physician Peer Comparison Programs are not a panacea for Medicare’s financial problems.  However, they could be an effective tool for identifying outliers and encouraging the efficient use of resources.  These programs can also produce accountability at the individual physician level, which has been a source of criticism for the SGR.  Some California programs have produced a savings and allowed physicians to further invest in meeting quality measures and adopting health information technology. 

The Medicare program should not focus myopically on whether physicians are doing too much.  Instead, it should assess whether they are doing enough of the right things, such as providing evidence-based care and preventive care.  If physicians are providing preventive care, hospitalizations will be reduced, patient outcomes will improve, and Medicare will gain significant savings. 

2. Physician education must be the focus of the program.  Comparative information is a strong tool to foster self-improvement.  California peer comparison programs have been effective in educating physicians and helping them to improve. 

3.  Programs that provide positive incentives are the most effective.  Medicare’s goal should be to encourage all physicians to participate.  In many communities, Medicare cannot afford to lose primary care physicians.

4.  Paramount to a successful program is reliable data that can be verified.

The data must also be statistically valid based on the number of patients per physicians. 

5.  The program must couple utilization and clinical/quality criteria. 

An extremely important and positive component of the California program is that it combines utilization criteria with clinical/quality measures.  Physicians should not be inappropriately incented to withhold preventive care merely because it would drive up their utilization scores.  Physicians providing more preventive services will have higher utilization, but their overall hospital costs will be less.  This is a major point on which we disagree with the GAO. Utilization and efficiency cannot be viewed independent of clinical quality.  It is important to note that in California, preventive quality measures are the general focus of all physician profiling programs and their associated bonus payments.

6.  The program must examine the total cost of care provided to a patient -- facility costs, pharmacy costs and physician services – for both primary care and specialty care.  . 

An important component of the California program in which I participate is that it calculates the total cost of care for each patient.  Lower physician utilization is not necessarily better for the patient and—ultimately—may not save money.  For instance, patients with asthma should see a doctor often to manage their disease.  As physician office visit utilization goes up, the total cost of care goes down by reducing unnecessary ER visits and hospitalizations. 

On the other hand, many physicians have criticized the profiling program in which I participate because it is difficult to hold a primary care physician responsible for the services provided by a specialist to whom they referred a patient, or a hospitalist caring for a patient upon admission to the hospital or during home health visits.  Primary care physicians cannot control patient care beyond their practice and, therefore, it is not appropriate to hold them accountable for such utilization.

The utilization to which a physician is held accountable requires precise and complex evaluation tools.  Nonetheless, the educational aspects of such information is extremely beneficial.     

7.  All data must be risk-adjusted for age, sex and health status. 

However, it is important to note that risk adjustment methods are still inadequate to fully capture differences in patient health status.  Patient compliance issues must also be considered.  Most sophisticated managed care groups in California only do risk adjustment for age and sex.  It is important to note that my IPA attributes four commercial patients to one Medicare patient. 

8.  There must be a “stop-loss” type of adjustment for HIV/AIDS, oncology, maternity, screenings and immunizations, dialysis, colonoscopy so the costs are spread out across the entire system.  It would be truly perverse to penalize individual physicians for treating seriously ill patients. 

9.  Patient Satisfaction Surveys are an important component of any program.

10.  Specialty Referral Issues Must Be Carefully Considered

The Specialty Referral tracking system in my group is controversial.  The group tracks referrals to specialists and accounts for those referrals in a physician’s overall score. Some specialty referrals are more “costly” to the primary care physician than others.   In some instances, referrals to specialists are appropriate and result in lower costs.  In other instances, they may be unnecessary. But some physicians and patients have questioned whether the specialty referral incentive system has inappropriately denied patient access to specialists.  One positive aspect of the program is that primary care physicians receive credit for referring patients to specialists to receive treatments included in the set of clinical/quality measures.  This sort of primary care gatekeeper approach would be extremely difficult to replicate in the Medicare Fee-for-Service program, where patients can directly access specialists. 

11.  Physician-Designed and Directed

Programs that involve clinical utilization and quality information must be designed and directed by physicians to ensure that the highest quality care is provided.

12.  Demonstration Programs To Protect Patients

For all of the reasons I have discussed, CMA would support programs that soley focus on confidential education.  However, programs that financially reward certain practice patterns must include safeguards against incentives that would reward physicians for withholding care to the detriment of their patients. Therefore, efficiency programs tied to payment should be tried on a Demonstration basis first. 

  V.  Geographic Variation

One further note, the CMA recommends that the Committee not only examine practice variations between individual physicians, but also variations in care between geographic regions.  There are dramatic and costly variations in care across the country.  We need to better understand why this occurs through careful demonstration programs, and work together to reduce inappropriate differences.

 VI.  Conclusion

Physician Peer Comparison Programs can work if the emphasis is on confidential physician education and self improvement.  Such programs must couple both utilization and clinical/quality criteria.  They must also examine the total costs of providing care to patients – physician, hospital and pharmacy—and should be risk-adjusted. 

While the CMA has not officially endorsed peer comparison programs that tie payment to efficiency, we support the educational aspects of such programs.  If Congress is interested in going one step further by adopting pay-for-performance based on utilization, we would recommend demonstration programs. Because of the sophisticated quality and clinical issues, it is essential that physicians are involved in the design and implementation.  Many safeguards must be included to protect appropriate patient care. 

Mr. Chairman and Members of the Committee, I hope this California information will prove helpful to the Committee.  On behalf of the California Medical Association, I thank you for your time.  We look forward to working with you. Thank you.