<DOC>
[108 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
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S. Hrg. 108-237
HEALTHCARE ACCESS AND AFFORDABILITY: COST CONTAINMENT STRATEGIES
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HEARING
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SPECIAL HEARING
JUNE 11, 2003--WASHINGTON, DC
__________
Printed for the use of the Committee on Appropriations
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COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas MARY L. LANDRIEU, Louisiana
James W. Morhard, Staff Director
Lisa Sutherland, Deputy Staff Director
Terrence E. Sauvain, Minority Staff Director
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Subcommittee on Departments of Labor, Health and Human Services, and
Education, and Related Agencies
ARLEN SPECTER, Pennsylvania, Chairman
THAD COCHRAN, Mississippi TOM HARKIN, Iowa
JUDD GREGG, New Hampshire ERNEST F. HOLLINGS, South Carolina
LARRY CRAIG, Idaho DANIEL K. INOUYE, Hawaii
KAY BAILEY HUTCHISON, Texas HARRY REID, Nevada
TED STEVENS, Alaska HERB KOHL, Wisconsin
MIKE DeWINE, Ohio PATTY MURRAY, Washington
RICHARD C. SHELBY, Alabama MARY L. LANDRIEU, Louisiana
Professional Staff
Bettilou Taylor
Jim Sourwine
Mark Laisch
Sudip Shrikant Parikh
Candice Rogers
Ellen Murray (Minority)
Erik Fatemi (Minority)
Adrienne Hallett (Minority)
Administrative Support
Carole Geagley
C O N T E N T S
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Page
Opening statement of Senator Arlen Specter....................... 1
Opening statement of Senator Tom Harkin.......................... 1
Statement of Karen Davis, Ph.D., president, The Commonwealth Fund 3
Prepared statement........................................... 6
Statement of John Mentel, M.D., Chair, Department of Applied
Informatics, Mayo Clinic....................................... 14
Prepared statement........................................... 16
Statement of Dave Hickman, director, Clinical Integration, Mercy
Medical Center................................................. 18
Prepared statement........................................... 20
Statement of Dr. James F. Fries, director, Arthritis, Rheumatism,
and Aging Medical Information System, Stanford University...... 23
Prepared statement........................................... 26
Statement of Dr. Donald R. Hoover, professor, Department of
Statistics, Rutgers University................................. 30
Prepared statement........................................... 33
Statement of David L. Bernd, chief executive officer, Sentara
Healthcare..................................................... 34
Prepared statement........................................... 36
HEALTHCARE ACCESS AND AFFORDABILITY: COST CONTAINMENT STRATEGIES
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WEDNESDAY, JUNE 11, 2003
U.S. Senate,
Subcommittee on Labor, Health and Human
Services, and Education, and Related Agencies,
Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:35 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Arlen Specter (chairman)
presiding.
Present: Senators Specter, Craig, and Harkin.
OPENING STATEMENT OF SENATOR ARLEN SPECTER
Senator Specter. Good morning, ladies and gentlemen. The
Appropriations Subcommittee on Labor, Health and Human
Services, and Education will now proceed. Today's hearing will
focus on the high cost of health care and cost-containment
strategies, with particular emphasis on administrative costs,
disease management, automation, and end-of-life care.
A recent article in Health Affairs reported that the median
U.S. per capita healthcare spending was $4,631 in the year
2000, compared to $1,983 for 30 industrialized member
countries. As we are proceeding in the Senate to focus on
Medicare reform and prescription drugs, this is an especially
timely subject.
My distinguished ranking member, Senator Harkin, had
suggested that the subcommittee focus with particularity on the
very important subject of healthcare costs and accesibility,
and we have devoted some three hearings to the subject. And in
accordance with longstanding practices between Senator Harkin
and myself, going back for more than a decade as he has been
chairman, I have been chairman, he has been ranking, I have
been ranking, in what we call the ``seamless change of the
gavel,'' when he has a suggestion of a particular interest and
wants to direct the subcommittee's focus to that, there is
always an automatic yes.
I have other commitments this morning. I have already
shaken hands with the distinguished panel and thanked them for
coming, and at this point I am going to turn the hearing over
to you, distinguished colleague.
OPENING STATEMENT OF SENATOR TOM HARKIN
Senator Harkin [presiding]. Well, thank you very much, Mr.
Chairman, and thanks for being so accommodating in having these
three sets of hearings. This is third and final one in the
series, in terms of what is happening, in terms of coverage,
lack of coverage, cost of insurance. And this one, today,
winding up talking about what is driving the costs and how we
contain them.
Thank you, Mr. Chairman. And I want to thank all the panel
members for being here for this important discussion.
Again, today we are going to focus on what drives health
costs, how we can achieve some cost savings through creative
and innovative efforts.
During the last couple of months, I have held a series of
roundtable meetings around the State of Iowa. A lot of people
have come to these. And what I am hearing is different than
what I have heard in the past 20 years. It is almost like a
crescendo now of different things--bankruptcy because of
medical bills, businesses forced to scale back their benefits.
I can remember this businessman in Mason City, who told me
that 10 years ago he covered all of his employees. I think he
had 25 employees, a small business. Ten years ago, he covered
them all, with all healthcare benefits for them and their
families. Because of the increasing cost of health insurance,
he had to scale back; could not cover the family, just covered
them. Now he has to cut it back even further for higher
premiums, higher deductibles, in order to have some basic
coverage at all. And as he said to me, he said, ``You know,
these aren't just my employees. These are people I go to church
with, my kids go to school with. You know, these are my
friends, as well as my employees.'' And he said, ``It's just
tearing me up that we can't afford to cover them any longer.''
School districts. I have heard from school districts, where
the cost of their health insurance last year went up 60 percent
in 1 year. Sixty percent in 1 year. And so they have either got
to take that out of teacher salaries, or something, to pay for
that.
Healthcare providers, who are also strained, are providing
care to the uninsured, and their reimbursement rates are low.
So everything seems to be coming together right now.
Health-insurance premiums seem to be out of control. Premiums
doubled for a family of two children just in the last 4 years.
Doubled. Last year, they rose 14.7 percent. As I said, many
small businesses, 30 percent increases in 1 year.
The healthcare system is being squeezed. The emergency
rooms are getting overcrowded. Hospitals are strained from
providing uncompensated care. Our public safety net is
stretched to the limit. Unfortunately, uninsured individuals
are more likely to receive too little care too late, which
costs us more in the end.
Again, when we look at it, we spent $1.4 trillion on
healthcare in 2001, about 14 percent of GDP. And we are
projected to spend over 17 percent of GDP by 2012. We spend
nearly double per person than other industrialized nations. But
many of them have higher life expectancies and healthier people
than we do. So something is wrong when we are spending all this
money than other countries and yet they have longer life
expectancies and healthier people.
The issue impacts every one of us, even those of us that
have good insurance programs. I think that may be part of the
problem. Those of us who have good insurance programs, like the
Federal Employees Health Benefits program, we say, ``Oh, no
problem,'' and we just keep going on. But then you start seeing
how much it costs every year.
I think partisan politics have got in the way of a lot of
this, too. I say that quite frankly. But the problem is, we are
all in this together, and somehow we have got to address it, as
a Nation.
Oh, these are just--this chart here--I am trying to make
it--oh, that is just showing the percent of GDP, going from 14
percent up to 17 percent by 2012. And 2012--well, let us see,
that is 9 years from now, right? Let us see, 9 years ago would
have been 1994. That does not seem that long ago.
So it passes pretty fast.
So I thank you all for coming. I have said enough. I am
here to listen to you and to have a discussion with you. All of
your statements will be made a part of the record in their
entirety. And I would like to just go down the list here and
recognize each of you, if you could just give us your best
thoughts on what is driving the costs, what we ought to be
focused on, maybe, your best suggestions. And then we will get
into a discussion afterward on cost containment, what is
driving the costs, and what we can do to help control some of
those costs.
Believe me, nothing is too far out for us to consider. Some
of the best ideas I have heard have sort of been on the edge,
you know, of things that people have recommended. For example,
I just said earlier, I think, Dave, to you, that I had had
breakfast with someone a week or so ago who has devised a new
system just for controlling one part of chronic care, which is
diabetes. And the initial results were incredible, the amount
of savings, just from management. So there are a lot of things
like this I think we can really look at.
So, again, I thank you all for taking time and for being
here to discuss this. And I will just start here. I have Dr.
Davis. I will just start, and then go this way, since that is
the way my list is structured.
STATEMENT OF KAREN DAVIS, Ph.D., PRESIDENT, THE
COMMONWEALTH FUND
Senator Harkin. Dr. Davis is president of The Commonwealth
Fund. A native of Oklahoma, Dr. Davis received her Ph.D. in
economics from Rice University.
Welcome, Dr. Davis, and please proceed.
Dr. Davis. Thank you. I would like to thank Chairman
Specter and Senator Harkin for this opportunity to testify.
As we know, rising healthcare costs are a major concern,
not only to policymakers, but employers, healthcare leaders,
and people who are insured and uninsured alike. We have a mixed
public-private system of insurance. We have relied on managed
care and market competition to shape our healthcare system, and
yet we have the highest healthcare spending per capita in the
world, as we have heard already. And during the 1990s, health
spending in the United States rose faster than in other
industrialized nations.
The key to containing costs, in my view, as well as getting
better value for what we spend, may well lie in fundamental
changes in the supply side of the market. I think we need to
shift our attention to reducing errors, eliminating waste and
duplication in clinical care, modernizing and streamlining
administration, promoting transparency and accountability for
performance, and aligning financial incentives for physicians,
hospitals, and other healthcare providers to reward high-
quality and efficient care.
As you mentioned, health-insurance premiums are going up,
on average, about 10 percent to 15 percent a year. There is a
new study out today saying it is 15 percent in 2002, 18 percent
for the same benefit package.
But companies, insurance companies, are trying to recoup
some losses they made the mid-1990s. They are building up
reserves and profits. The underlying rate of increase in
healthcare costs is somewhat less, but still troubling. As you
said, the United States spent $1.4 trillion, 14 percent of GDP,
in 2001. That was a jump from 13.3 percent the year before. In
fact, we had per capita increases in healthcare costs of 8.7
percent. Now, maybe that does not seem dramatic after we have
talked about 60 percent increases of premiums or 15, 18 percent
increases in premiums, but it is considerably faster than
inflation in the economy, as a whole. There is also some
evidence that the rise in healthcare costs are going up,
slowing down a little. But even that that, they are projected
to go up 7 percent a year per capita for the rest of this
decade. So I do think it is an important problem. I am pleased
you are having hearings to better understand.
If you break it down by service, prescription drugs are
still going up faster than any other service. Now, it seems to
have reached its peak at about 15\1/2\ percent in 2001, so it
is coming down a little bit, but it is still faster than
anything else. But I think the wave of the future is reflected
in the acceleration in hospital spending. So while it is not
the number-one, it is accounting for half of the increase in
overall healthcare costs.
Now, use of healthcare services was pretty flat. In fact,
it even went down a little bit in the mid-1990s. But it is now
going up. Particularly, there is a major growth in hospital
outpatient services, there is more emergency room use, and we
also know there are more prescription drugs and there are more
physician services being provided.
But I would call your attention particularly to the rapid
increase in specialized procedures under Medicare. That is
consultation, ambulatory surgery, brain MRIs, pacemaker
insertions, heart echography, whatever you want to look at. You
are seeing major increases. For example, brain MRIs went up
over 15 percent in 1 year. And I think it raises the question
whether, when we squeeze the fees of physicians--under
Medicare, under managed care--and real incomes of physicians
declined from 1995 to 1999, they are now recouping some of that
lost income by working more hours, seeing more patients,
providing more services. Specialists, on average, in 1999 made
$219,000--some more, some less, but, on average, about
$220,000. Primary care physicians, your first, front line of
care, was $138,000. So there, there is a lot squeeze.
But I think we have to be concerned about this growth in
procedures. We do not know whether we are now providing some
necessary care that people were not getting before, or whether
we have moved into unnecessary care. We actually do not have a
scientific basis for deciding what is the appropriate amount of
care.
I would also mention administrative expenses.
Administrative expenses are going up 11 percent a year. That is
high. We currently spend $111 billion on administrative costs;
and that, too, will double, by 2012, to $223 billion, just on
administrative costs, alone.
Now, if you will compare private insurance with public
program, private insurance administrative costs, as a percent
of outlays, are about two-and-a-half times higher than we run
in the public program, so it is particularly a problem in
private insurance. Every company is marketing, paying sales
commissions, but they also have people moving on and off the
coverage, changing plans, changing providers. It is
administrative costs. Now, I am just talking about
administrative costs to the insurers. I am not really talking
about all the administrative costs to the hospitals and the
physicians of all of those different rules, all of those
different claims forms.
But if we look at overall spending in public programs,
versus private programs, you look at Medicare. It has slowed
down with all of the changes that the Congress has made. And in
fact, Medicare, over the last 30 years, has gone up less
quickly than private insurance outlays per enrollee. And if you
just----
Senator Harkin. For what period of time? Over the last----
Dr. Davis. 30 years.
Senator Harkin. 30 years.
Dr. Davis. Right.
Senator Harkin. Well----
Dr. Davis. There was a recent study by Marilyn Moon in
Health Affairs that just documented that trend. At the back of
my testimony, I have got some charts that give you the actual
figures and display that.
But if you just take 2003, the Federal Employees Health
Benefit premiums are going up 15 percent per participant.
Medicare is going up 4 percent. So that difference you see,
just between FEHB and Medicare, illustrates kind of what is
going on between private insurance and Medicare.
You mentioned that the United States is spending $4,631 a
person. That is 69 percent more than Germany, 83 percent more
than Canada. It is 134 percent more than the average
industrialized Nation. What is troubling to me is it is even
going up a little bit faster than other countries. Canada had a
1.8 percent real increase in the 1990s. We had 3.2 percent. We
also have people paying more out of pocket, and we have more
private insurance. Out of pocket, people paid $700 per person
in the United States, and that is twice the average for other
industrialized countries. So it is not as if we are not already
having patients pay a lot.
The truth of the matter is, Americans get less care than
other countries. Now, we think other countries are rationing
care. But Americans get fewer days of hospital care per capita,
and they have about the same physician visit rates, maybe a
little bit less. Why are we higher then? Why do we spend more
if we go to the hospital less and go to the doctor about the
same? First of all, our administrative costs are higher, but we
are also paying higher prices. You know, we may be paying
twice, for a given drug, what somebody is paying in Australia.
There was one study that said there are certain physician fees
in the United States that are three times as high as they are
in Canada.
But the other issue is that we perform more complex
specialized procedures. We do four-and-a-half times as many
coronary angiographies, we have more MRIs per capita. So it is
that specialized care that accounts, in part, for our higher
costs.
Now, we, at The Commonwealth Fund, support a survey every
year of people in Canada, the U.K., Australia, New Zealand, and
the United States And what we are finding, this last survey, in
2002, sicker adults are reporting more medical errors in the
United States than these other countries. They go to more
doctors, take more medications, and more things go wrong. So
this complicated, complex system of care can sometimes be bad
for patients.
We are also seeing a lot of inefficiency. People in the
United States are more likely to report repeating the same
tests because different doctors ordered it. We just do not have
the systems of coordinating that care and getting rid of that
duplication and inefficiency.
That is why I stress we need to be a high-performance
health system. We need high quality, safe, efficient, and
accessible care.
prepared statement
My suggestions are, first of all, public reporting of cost
and quality data--on physicians, on hospitals, nursing homes,
other healthcare providers' health plans. We need broad-scale
demonstrations. We need to invest in information technology. We
need quality standards. We need to pay for higher quality. And
we need to invest in research to learn what works. I think
these steps would go a long way toward ensuring that the United
States is a high-performing health system worthy of the 21st
century.
Thank you.
[The statement follows:]
Prepared Statement of Dr. Karen Davis
Thank you, Mr. Chairman, for this invitation to testify today on a
problem of concern to policymakers, employers, health care leaders, and
insured and uninsured Americans alike: rising health care costs. The
search for effective cost-containment strategies hinges on
understanding recent trends in health care costs. Insight is also
provided by contrasting the experience of the United States with that
of other countries. The U.S. system, with its part-public, part-private
system of insurance, managed care, and market competition, is a
departure from the stronger government role favored by other
industrialized nations in both financing health care and shaping the
health care delivery system. Nevertheless, many of the pressures that
increase health care outlays affect all nations--from population aging,
to shortages of nurses and other skilled personnel, to advances in
modern medicine.
What we all want from our health care system is not necessarily
cheaper care, but assurances that resources are being invested wisely
to buy higher-quality, more patient-responsive care that achieves
better outcomes. We should aspire to a high-performance health system--
one that is high-quality, efficient, and accessible to all Americans.
In the past, we have focused primarily on the demand side of the
market. The key to containing costs, however--and to obtaining greater
value for what we spend--may well lie in fundamental changes in the
supply side of the market. In other industries, the path to lower costs
lies in greater production efficiency, and financial rewards accrue to
those firms that succeed in producing a high-quality product more
efficiently. But in health care we rarely reward or insist on either
greater efficiency or higher quality. In the future, we should shift
our attention to reducing errors, eliminating waste and duplication in
clinical care, modernizing and streamlining administration, promoting
transparency and accountability for performance, and aligning financial
incentives for physicians, hospitals, and other health care providers
to reward high-quality and efficient care.
trends in national health expenditures
Rising health insurance premiums have drawn the nation's attention
to the problem of rising health care costs. After years of relatively
modest increases in employer health insurance premiums, Medicare, and
Medicaid, double-digits have returned to health care. States are
feeling the fiscal squeeze from the economic slowdown and the sudden
surge in Medicaid and public employee health benefit expenses. The
California CalPERS public employees health benefits program, for
example, recently experienced a 26 percent premium increase.\1\ In
2003, premiums in the Federal Employee Health Benefits Program are up
15 percent. \2\ Some employers are responding to sharp increases in
premiums by shifting a portion of the costs to employees; others have
stopped paying for health insurance altogether.\3\
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\1\ CalPERS, Facts at a Glance: Health. California Public Employees
Retirement System, May 2003.
\2\ Mark Merlis, The Federal Employees Health Benefits Program:
Program Design, Recent Performance, and Implications for Medicare
Reform. Henry J. Kaiser Family Foundation, May 30, 2003.
\3\ Edwards, et al. The Erosion of Employer-Based Health Coverage
and the Threat to Worker's Health Care. The Commonwealth Fund, August
2002; Kaiser Family Foundation and Health Research and Educational
Trust, Employer Health Benefits 2002 Annual Survey. Kaiser Family
Foundation, Menlo Park, CA and Health Research and Educational Trust,
Chicago, IL 2002.
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Why does the health care system appear to be so costly and why do
costs appear to be growing so fast? Like most things in life, the
answer is not all that simple. Many factors affect spending and
contribute to its growth--insurance underwriting cycles, the price of
services, use of services, new technologies, the administrative costs
of a fragmented system. Moreover, the relative importance of these
factors changes over time.
It is important, though, to distinguish between increases in health
insurance premiums and the underlying increase in the cost of providing
health care. Premiums are often affected by what is known as the
``insurance underwriting cycle.'' Benefit payments and premiums do not
always move at the same rates. If insurers underestimate what will
happen to health care costs and price their premiums too low, it can
take several years for insurers to catch up and recoup losses. In
addition, in times of tight competitive markets, insurers try to retain
or gain market share and keep premiums as low as possible, even taking
losses in the short run. As insurance companies consolidate and
competition weakens or reserves become too low, premiums are raised and
grow faster than payments for benefits.
That is what we have been seeing over the past few years. In 2001,
insurance companies raised premiums 10.5 percent, which for the third
straight year was faster than the growth in benefits.\4\ In 2002, large
employers reported a rise in premiums of 12.5 percent.\5\ Insurance
companies have been building reserves and recouping from their losses
in the mid 1990s, when stiff competition among plans led to revenue
shortfalls.\6\ However, they have probably caught up by now, profits
have risen, and premiums may again grow more in line with benefit
spending.\7\
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\4\ Stephen Heffler et al., ``Health Spending Projections for 2002-
2012,'' Health Affairs (Web Exclusive February 7, 2003.)
\5\ Bradley C. Strunk et al., ``Tracking Health Care Costs: Growth
Accelerates Again in 2001,'' Health Affairs (Web Exclusive September
25, 2002.)
\6\ Cara S. Lesser and Paul B. Ginsburg, Health Care Cost and
Access Problems Intensify. Center for Studying Health System Change,
Issue Brief, No. 63, May 2003.
\7\ Heffler et al.
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The more important question is what is happening to expenditures
for health care overall. In 2001, the nation spent more than $1.4
trillion for health care, or 14.1 percent of the gross domestic product
(GDP). This was a major jump from 13.3 percent of GDP in 2000, due to
accelerating health care costs as well as relatively weak nominal GDP
growth.\8\ By 2012, health spending is projected to more than double.
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\8\ Katharine Levit et al., ``Trends in U.S. Health Care Spending,
2001,'' Health Affairs, (January/February 2003).
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Recent concern about rising health care costs, however, is partly a
reflection of their departure from the relatively low growth we
experienced in the mid- to late-1990s. From 1993 to 1999, spending rose
an average of just 5.4 percent per year.\9\ The 8.7 percent growth in
2001 is still well below average increases in each of the three decades
before 1990, and there are some early signs that things are beginning
to slow down again somewhat.\10\ Nevertheless, with health care
representing a growing share of GDP, and with increasing numbers of
uninsured Americans, we need to understand better what our money is
buying.
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\9\ Levit et al.
\10\ Heffler et al.
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One of the most significant contributors to recent spending growth
is health care price inflation. At a time when overall inflation is
growing at just 2 percent a year, hospital prices have risen 3.2
percent and drug prices have gone up 4.5 percent.\11\ When personal
health care spending is adjusted for price inflation, the overall
picture changes dramatically. Real spending on health care increased by
6.2 percent in 2001, closer to the high rates of 5.5 to 7.7 percent
typical of the 1970s and 1980s. What is behind these trends? And how
realistic are the projections that costs will moderate to about 4
percent real growth by the turn of this decade?
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\11\ Levit et al.
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The first insight is gained by looking at trends in different
health care services. Because of increasing prices, new drugs coming on
the market, and more prescriptions being written, spending on
prescription drugs is growing faster than all other services. Increased
spending on prescription drugs accounted for about one-third of overall
spending growth in 1999, and about one-fourth of spending growth in
2002.\12\ Growth in prescription drugs spending, however, seems to have
reached a peak of 15.7 percent in 2001, and every indication is that it
is now slowing. Over the next five years, growth is projected to
increase at 11.2 percent--still a major expense, but not the powerful
cost-driver it was in the past few years.\13\
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\12\ Bradley Strunk and Paul Ginsburg, ``Tracking Health Care
Costs: Trends Stabilize but Remain High in 2002.'' Health Affairs (Web
Exclusive, June 11, 2003.)
\13\ Heffler et al.
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Perhaps more ominous is that hospital spending, after being
virtually flat in the 1994 to 1997 period, increased 8.7 percent in
2001.\14\ Hospital care represents one-third of personal health care
spending and contributed about half of the total increase in 2001
spending. Most of that increase occurred in the outpatient
department.\15\ Hospitals are labor-intensive institutions. In tight
labor markets, hiring and retaining nurses and other skilled personnel
in short supply puts upward pressure on wages. Once the economy
recovers, upward pressure on wages could cause an even greater
resurgence in hospital costs. Managed care may have succeeded in
reducing hospital admissions and shortening lengths of hospital stays
in the mid-1990s, but those were one-time savings. Without a new
strategy for reducing use of this costly service, the aging population
and new technological advances are likely to stimulate greater
utilization.
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\14\ Strunk et al.
\15\ Strunk et al.
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utilization of health services
After a number of years of stability, growth in the use of health
services is on the rise again. We are seeing greater use of the
outpatient department, more use of the emergency room, more physician
visits, more specialized physician procedures, and more prescriptions
written. Use of emergency rooms may be related to the rise in the
numbers of uninsured.\16\
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\16\ Schur, C., P. Mohr, and L. Zhao, Emergency Department Use in
Maryland: A Profile of Use, Visits, and Ambulance Diversion, Report to
the Maryland Health Care Commission, Project HOPE: Bethesda, Md.,
February 2003.
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Use of hospital services experienced absolute declines from 1994 to
1996, presumably as a result of managed care practices. By 2001,
however, the quantity of hospital services increased 8.0 percent and is
abating only somewhat to an annual rate of 6.8 percent in the first
half of 2002.
Some have suggested that the increasing volume of physician and
hospital services is a response to the loosening of managed care.\17\
Certainly, the public responded negatively to managed care's
constraints on use of specialists and to ``drive-through'' births, and
managed care enrollment has shifted from more tightly managed health
maintenance organizations to more loosely managed preferred provider
organizations.\18\
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\17\ Cara Lesser and Paul B. Ginsburg. Health Care Cost and Access
Problems Intense: Initial Findings from HSC's Recent Site Visits.
Center for Studying Health System Change, May 2003.
\18\ Kaiser Family Foundation and Health Research and Educational
Trust, Employer Health Benefits 2002 Annual Survey. Kaiser Family
Foundation, Menlo Park, CA and Health Research and Educational Trust,
Chicago, IL 2002.
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The other possible explanation, however, is that physicians and
other health care providers are reacting to the reduced prices for
their services achieved by managed care, as well as by public programs
such as Medicare and Medicaid, by increasing the volume of services
provided.\19\ This so-called target-income hypothesis suggests that
physicians respond to reduced fees by working longer hours, seeing more
patients, having patients come back more frequently, and performing
more billable procedures.
---------------------------------------------------------------------------
\19\ SM Codespote et al., ``Estimated Volume and Intensity Response
to a Price Change for Physician's Services.'' Office of the Actuary,
Health Care Financing Administration, August 13, 1998.
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Average physician net income in 1999 for primary care physicians
was $138,000, down 6.4 percent from 1995 after adjusting for
inflation.\20\ Specialist physician incomes, on average, were $219,000
in 1999, down 4 percent from 1995. By contrast, professional and
technical workers in the economy as a whole experienced a 3.5 percent
increase in income over this four-year period. It is reasonable to
hypothesize that after taking such a hit as a result of contraction in
fees, physicians began to respond in the 1999-2002 period by increasing
the volume of services provided.
---------------------------------------------------------------------------
\20\ Marie C. Reed and Paul B. Ginsburg, Behind the Times:
Physician Income, 1995-99. Center for Studying Health System Change,
Data Bulletin 24, March 2003.
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Some support for physicians' target-income behavior is suggested by
recent data on changes in use of physician services by Medicare
beneficiaries. These trends are not influenced by managed care, which
has achieved only low penetration in this group of insured. Last year,
the number of physician visits to Medicare beneficiaries rose 4.3
percent, nearly twice as fast as in the previous year. Some lab tests
grew 22 percent; brain MRIs grew 15 percent; heart echography grew 11
percent; and disturbing to see, emergency room visits were up 6.5
percent. Ambulatory surgical procedures also increased significantly
from 1997 and 2001.
Why the increase? It is hard to believe that Medicare beneficiaries
suddenly demanded 15 percent more brain MRIs in 2001 than in 2000. More
plausibly, Medicare payment rates are still sufficiently attractive to
induce physicians who provide orthopedic, cardiac, opthamology, and X-
ray and laboratory procedures to work longer hours and see more
patients--all with a view to offsetting the earlier period of fee
contraction.
We do not know if these are unnecessary services or if they are now
filling an unmet need, or some of both. Physicians also may be
providing more and newer technologies--technologies that may be
improving life expectancy or quality of life. The fact is that we do
not employ a scientific basis in this country for determining the
clinical criteria for reimbursable services. The recent decision by the
Centers for Medicare and Medicaid Services (CMS) to institute
guidelines for coverage of implantable cardiac defibrillators is a
beginning step, but it applies to a newly emerging technology, not to
existing benefits.\21\
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\21\ Melody Petersen, ``U.S. to Back Heart Device in More Cases:
Medicare Move is Less Than Industry Wanted,'' New York Times, June 7,
2003, p. C1.
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Utilization in the health care system has often been driven by
technological advances. New drugs, for example, make it possible to
control high cholesterol and other chronic conditions. New advances in
cardiac care reduce mortality and yield health and economic gains for
society.\22\ Clearly, there are many people who would benefit from
better access to life-saving drugs, screening tests, and surgical
procedures. An informed response to the renewed surge in health care
utilization will require far more sophisticated analysis than has yet
been undertaken.
---------------------------------------------------------------------------
\22\ David M. Cutler and Mark McClellan, ``Is Technological Change
in Medicine Worth It?'' Health Affairs (September/October 2001): 11-29.
---------------------------------------------------------------------------
Use of prescription drugs has also been on the increase. From 1997
to 2000, nearly one-third of the increase in per-person prescription
drug spending came from an increase in the number of prescriptions.
More people are taking cholesterol lowering drugs, an aging population
is taking more drugs to combat chronic illness, and more people may be
taking drugs that are not indicated, or are even contraindicated, given
their array of health problems.\23\
---------------------------------------------------------------------------
\23\ Chunliu Zhan, et al., ``Potentially Inappropriate Medication
Use in the Community-Dwelling Elderly: Findings From the 1996 Medical
Expenditure Panel Survey'' Journal of the American Medical Association,
2001, 286: 2823-2829.
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administrative costs
Finally, more attention needs to be given to the rapid increase in
administrative costs, up 11.2 percent in 2001. The fragmentation of the
U.S. health insurance system--with people moving in and out of coverage
and in and out of plans, and changing their usual source of care
frequently--all contribute to high administrative costs for insurers
and for health care providers.\24\ In 2002, the U.S. health system
spent $112 billion on administrative expenses, and expenses are
expected to hit $223 billion in 2012.
---------------------------------------------------------------------------
\24\ Karen Davis, ``Time For Change: The Hidden Costs of a
Fragmented Health Insurance System.'' Invited Testimony, Senate Special
Committee on Aging, March 10, 2003.
---------------------------------------------------------------------------
Private insurance is the dominant mode of health coverage for the
working-age population, while public programs cover elderly and
disabled individuals as well as certain low-income populations,
especially children and pregnant women. Administrative costs for
private insurance include marketing, sales commissions, profits and
reserves, as well as the cost of enrolling individuals and paying
claims. Government programs, by contrast, do not incur marketing and
sales expenses and do not require premiums high enough to generate
profits and reserves. Medicare enrollment is stable, typically
beginning at age 65 and ending at death. Not surprisingly, government
programs have much lower administrative costs than private insurance.
On average, administrative expenses for private insurers are 11.9
percent of their health care expenditures. The costs of administering
government programs (including not only Medicare and Medicaid but
Veterans Administration, Department of Defense, Indian Health Service,
and other direct health services delivery programs) average 4.6 percent
of health expenditures--less than half that of private insurance.
public vs. private sector spending growth
Most health care in the United States is provided in the private
sector; only the Defense Department, Veterans Administration, Indian
Health Service, and state and local governments provide care directly
in public facilities. However, the government is a major purchaser of
care, paying about 45 percent of the national health bill. Medicare (18
percent) and Medicaid (16 percent) alone purchase more than one-third
of all care and therefore constitute a major influence on the use of
services, the quality of care provided, and costs of care. Private
health insurers purchase more than another third of care (36 percent)
and consumers most of the rest, either directly out-of-pocket (15
percent) or through philanthropic giving. Consumer out-of-pocket
spending is actually an even larger share than reported, because the
numbers do not reflect the premiums consumers pay for Medicare and
private insurance. It reflects only their deductibles, coinsurance,
copays, and payments for services not covered by insurance.\25\
---------------------------------------------------------------------------
\25\ Levit et al.
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The public sector has been growing faster than the private sector
in the last few years (9.4 percent vs. 8.2 percent in 2001), but these
numbers reflect changes in enrollments as well as use, prices,
administrative costs, and other factors. For example, Medicaid rolls
grew 8.5 percent in 2001 as a result of the new SCHIP program covering
low-income children, Medicaid expansions to some of their parents, and
a weakening economy that brought more low-income persons onto the
rolls. Without this increase in Medicaid enrollment, the numbers of
uninsured would have been even greater than what they were. But it
meant also that Medicaid spending overall went up 10.8 percent, placing
a squeeze on both federal and state budgets.
Private health insurance experienced a similar growth in 2001 (10.5
percent), but enrollment declined sharply rather than increased.
Private insurance expenditures rose because of increased use of
services and higher provider payments, insurance profits, and
administrative costs. Responding to the weakening economy and double-
digit premium increases, employers cut back the share of premiums they
paid or dropped coverage altogether. Many employees found they could
not pay their increased share. Because they lacked insurance, some
consumers may have forgone care.
Despite the higher administrative expenses of private insurance and
the higher payment rates to providers, the belief that private
insurance is more ``efficient'' is strongly entrenched. However, a
recent study comparing the growth in per-enrollee payments for
comparable services in Medicare and private insurance found that
Medicare outperformed private insurance over the long term.\26\
Following the implementation of the hospital prospective payment system
in 1984, Medicare per enrollee spending has moved slower than employer-
based insurance. The physician fee schedule, implemented in 1992, also
contributed to lower spending. In 2002, Medicare fees were about 77 to
79 percent of private rates; physician program participation, however,
reached about 90 percent of physicians in the same year.\27\ The
implementation of the newer prospective payment systems for nursing
homes, home health care, and the hospital outpatient department are
expected to continue to have a dampening effect on spending. A newly
released study projects that in 2003, Medicare per-enrollee costs will
have risen at about one-third the rate of employer premiums and less
than one-third that of the Federal Employee Health Benefit Program
(FEHBP). Administrative costs in FEHBP are estimated at nearly three to
six times those in Medicare.\28\
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\26\ Christina Boccuti and Marilyn Moon, ``Comparing Medicare and
Private Insurers: Growth Rates in Spending Over Three Decades,'' Health
Affairs (March/April 2003): 230-237.
\27\ Medicare Payment Advisory Commission, Report to the Congress:
Medicare Payment Policy. March 2003.
\28\ Mark Merlis, The Federal Employees Health Benefits Program:
Program Design, Recent Performance, and Implications for Medicare
Reform. Henry J. Kaiser Family Foundation, May 30, 2003.
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international comparisons
The United States has by far the most costly health care system in
the world, both per person and as a percent of our nation's total
economic resources. In 2000, we spent $4,631 per person on health care,
69 percent more than in Germany, 83 percent more than in Canada, and
134 percent more than in the average of all members of the Organization
of Economic Cooperation and Development (OECD).\29\ Higher U.S. costs
cannot be attributed to aging; in fact, the U.S. population is
``younger'' than the populations of most European countries.
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\29\ Gerard Anderson et al., ``It's the Prices, Stupid: Why the
United States is So Different from Other Countries,'' Health Affairs
(May/June 2003): 89-105.
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Nor is the situation improving. Despite a decade of experimenting
with managed care in the U.S., health spending rose faster than in
other countries. Between 1990 and 2000, U.S. health spending, adjusted
for inflation, increased by 3.2 percent a year, compared with the OECD
average of 3.1 percent. By contrast, real spending per capita increased
by 1.8 percent in Canada and by 2.1 percent in Germany. Moreover, most
countries with above-average rates of increase in the 1990s were those
that had particularly low spending on health care, such as the U.K. and
Japan.
The United States is alone among major industrialized nations in
other respects. Over half of health care spending is paid for
privately, compared with about one-fourth or less in other countries.
Ironically, because the United States is so expensive, the government--
while it accounts for only 45 percent of all health care spending--
spends as much as a percent of GDP on health care as do other countries
with publicly financed health systems. For example, U.S. public
spending as a percent of GDP is 5.8 percent, compared with 5.9 percent
in the U.K. and 6.5 percent in Canada.\30\
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\30\ Anderson et al.
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The United States is also alone among major industrialized nations
in failing to provide universal health coverage. But even when people
are insured by private insurance or Medicare, that coverage is less
comprehensive than the coverage typically afforded in other countries.
As a result, Americans pay more out-of-pocket for health care than do
people in other countries--an average of $707 per person in 2000 versus
$405 in Canada, $335 in all industrialized countries, and $171 in the
U.K. Yet, some advocate increasing cost-sharing for patients as a way
to give patients greater incentives to control utilization of health
care services. Clearly, other countries have found effective mechanisms
for keeping health care costs to a much lower share of their economic
resources without putting financial barriers in the way of patients
seeking care.
Our typical assumption is that such countries are rationing
effective care, have long waiting lists, and poorer health outcomes. It
is true that patients in the United States wait shorter times for
surgery than any other country. But our waits for a doctor's
appointment when sick are actually longer than in other countries, and
more Americans rely on emergency rooms for care.\31\
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\31\ Cathy Schoen et al., Comparison of Health Care System Views
and Experiences in Five Nations, 2001. The Commonwealth Fund, May 2002.
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What is not well appreciated is that Americans receive less
hospital care, on average, than people in other countries and see the
doctor about as frequently. The annual number of physician visits per
capita in the United States is 5.8 visits, about the same as the OECD
nations' average of 5.9 visits and less than the 6.4 average number of
visits in Canada. Fewer Americans are admitted to the hospital in a
given year; when they are admitted, they stay a shorter time than
patients in other countries. Consequently, the number of acute care
hospital days per capita in the United States is 0.7, compared with the
OECD's 1.0-day average, and less than the 0.9-day average in the U.K.--
a country where long waiting times for hospital care and surgery are a
major issue.
So if we get the same or less care than people in other countries,
why do we spend more? It has led some analysts to conclude, ``It's the
price, stupid.'' We do pay our physicians more than other countries.
Fees for physician procedures are more than three times as high as in
Canada.\32\ We pay more for the same drug than other countries--
sometimes twice as much for the same drug--even when it is produced by
an American company. The United States spends $556 per person on
pharmaceuticals, compared with $385 in Canada and $262 in other
industrialized countries.\33\
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\32\ Victor R. Fuchs and J.S. Hahn, ``How Does Canada Do It?'' New
England Journal of Medicine, September 27, 1990: 884-890.
\33\ Gerard Anderson et al., Multinational Comparisons of Health
Systems Data, 2002. The Commonwealth Fund, October 2002.
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We also have higher administrative costs than other countries.
Canada averages about 1 percent of health care spending on
administrative costs.\34\ We manage to devote 6 percent overall on
administrative costs.\35\ And that does not count the administrative
personnel who work in hospitals or doctors' offices--a much higher
number in the U.S.'s fragmented and complex public-private insurance
system than in the simpler, unified payment systems of other
nations.\36\
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\34\ Committee on Ways and Means, U.S. House of Representatives.
Health Care Resource Book. U.S. Government Printing Office, Washington:
1993.
\35\ Levit, et al.
\36\ Steffie Woolhandler and David Himmelstein, ``The Deteriorating
Administrative Efficiency of the U.S. Health Care System.'' New England
Journal of Medicine, May 2, 1991: 1253-1258.
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But the story is more complicated than just higher prices and
higher administrative costs, both of which are powerful explanations of
our higher costs. While we have about the same number of physicians per
capita as other countries, and fewer visits, a much higher fraction of
our doctors are specialists. Not surprisingly, therefore, we greatly
exceed other countries in the numbers of specialized procedures
performed. For example, United States doctors perform 4.8 times as many
coronary angioplasties per capita as Canadian doctors, and the United
States has three times as many MRI units per capita as Canada.\37\
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\37\ Gerard Anderson, Uwe Reinhardt, Peter Hussey and Varduhi
Petrosyan. ``It's The Prices, Stupid: Why The United States Is So
Different From Other Countries.'' Health Affairs (May/June, 2003):89-
105.
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Of course, variations across countries in use of procedures does
not tell us whether we do too many procedures or they do too few. The
United States has about the same mortality from heart attacks as the
average OECD country. But many factors enter into such mortality
(France and Japan have rates considerably lower than other countries).
On most measures of mortality, the United States performs more poorly
than other countries, ranking 37th overall according to the World
Health Organization ranking of health system performance.\38\
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\38\ World Health Organization, World Health Report, 2000. Health
Systems, Improving Performance. World Health Organization, Geneva 2000.
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The question remains whether we get value for the highly
specialized, intensive style of care practiced in the United States.
The Commonwealth Fund 2002 International Health Policy Survey of Sicker
Adults does suggest that we pay a price for our uniquely American
approach to health care. Americans are more likely to be seeing
multiple physicians and taking multiple medications. More things can
and do go wrong when care is provided by multiple parties. Of the five
nations surveyed (United States, U.K., Canada, Australia, and New
Zealand), the United States had the highest serious medical error rate.
Survey respondents in the United States were also more likely to report
having tests duplicated and not having their medical records available
when they went for care.\39\
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\39\ Robert Blendon et al., ``Common Concerns Amid Diverse Systems:
Health Care Experiences In Five Countries'' Health Affairs (May/June
2003): 106-121.
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Despite our costly health care system, other countries have moved
more rapidly to adopt electronic medical records and electronic
prescribing. The Commonwealth Fund 2000 International Health Policy
Survey of Physicians found that 59 percent of primary care physicians
in the U.K. have electronic prescribing, as do 52 percent in New
Zealand, compared with 17 percent in the United States.\40\
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\40\ The Commonwealth Fund 2000 International Health Policy Survey
of Physicians. http://www.cmwf.org/programs/international/
2000_intl_chartpack.pdf.
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conclusion
If we have the world's costliest health system yet still fail to
provide everyone with access to care--and fall far short of providing
the safe, high-quality care that it is possible to provide--the
conclusion that there is room for improvement is inescapable.\41\ Only
by facing this fact squarely and putting into action the best ideas and
experiences across the United States and around the world can we
achieve a vision of American health care that includes: automatic and
affordable health insurance for all, accessible care, patient-
responsive care, information- and science-based care, and commitment to
quality improvement.\42\
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\41\ Karen Davis, et al., Room for Improvement: Patients Report on
the Quality of Their Health Care. The Commonwealth Fund, April 2002,
and Karen Davis, et al. Mirror, Mirror on the Wall: The Quality of
American Health Care. The Commonwealth Fund, forthcoming.
\42\ K. Davis, C. Schoen, and S. Schoenbaum, ``A 2020 Vision for
American Health Care.'' Archives of Internal Medicine, Vol. 160, No.
22: 3357-62.
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Fortunately, there are examples of high performance in health care
in both the private and public sectors. The Council on Accountable
Physician Practices in the United States, which includes more than
17,000 physicians in 14 large group practices, has demonstrated that it
can provide superior quality care, as measured by widely used HEDIS
quality indicators, more efficiently than in other settings.\43\ The
Veterans Administration has markedly improved its performance in the
last decade on both quality and efficiency.\44\ The United States
Bureau of Primary Health Care has improved effective management of
diabetic patients in community health centers that participate in
learning collaboratives to improve quality of care.\45\
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\43\ Council of Accountable Physician Practices, Why Accountable
Physician Practices Are Essential to the Future of American Medicine.
January 2003.
\44\ Kizer KW, Demakis JG, Feussner JR, ``Reinventing VA Health
Care: Systematizing Quality Improvement and Quality Innovation.''
Medical Care, June 2000: pI7-16.
\45\ D. Stevens, Changing Practice, Changing Lives: Large Scale
Improvement in Health Centers Across the Nation. Presentation at
Institute for Healthcare Improvement National Forum, December, 2002.
---------------------------------------------------------------------------
But these success stories are far too isolated. If we are to
achieve a truly high performance health system, bold action is
required. The following steps would start us on this course:
--Public reporting of cost and quality data on physicians, hospitals,
nursing homes, other health care providers, and health plans.--
CMS has been a leader in posting nursing home quality data on
its website, but this is just a modest beginning. If we are
serious about doing better, we need to know where we stand.
--Broad-scale demonstrations of: a new approach to health insurance
coverage, science-based benefits; use of modern information
technology, and high-quality care.--I served on the Institute
of Medicine committee which issued a report last fall calling
for statewide demonstrations of health insurance coverage for
all, model chronic care and primary care initiatives,
information technology, and medical malpractice.\46\ The $50
billion in the budget resolution for improving health insurance
coverage would go a long way toward putting these
recommendations into action in five or more states.
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\46\ Institute of Medicine, Fostering Rapid Advances in Health
Care. The National Academies Press, November 2002.
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--Investment in health information technology.--Other countries are
quickly surpassing the United States in the adoption of
electronic medical records and electronic prescribing. They are
doing so because the government has been willing to invest in
the infrastructure and establish the standards required to make
this potential a reality.
--Development and promulgation of clinical guidelines and quality
standards.--It is long past time to simply pay for services
rendered without establishing a scientific-basis for
effectiveness--not just for new drugs but for consultations,
procedures, and tests. This could be accomplished through an
expanded mandate for the CMS Medicare Coverage Advisory
Committee or establishment of a new National Institute on
Clinical Excellence and Effectiveness.
--Paying for performance.--Medicare and private insurers tend not to
vary payment rates with quality. They pay for defects, whether
those defects are surgeries that need to be repeated;
infections that arise from failing to use state-of-the-art
technology, such as catheters impregnated with antibiotics for
heart valve patients; or medication errors. CMS has embarked on
some modest initiatives to begin testing paying-for-performance
rewards. Medicare can and should be a leader in promoting
quality. These efforts need to be substantially expanded and
best practices documented and disseminated. Medicare's
leadership can be instrumental in moving private payers as
well; to date, very few private insurers have instituted
``value-based purchasing'' strategies.\47\
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\47\ Vittorio Maio, Neil Goldfarb, Chureen Carter, and David Nash,
Value-Based Purchasing: A Review of the Literature. The Commonwealth
Fund, May 2003 and Neil Goldfarb, Vittorio Mario, Chureen Carter, Laura
Pizzi and David Nash, How Does Quality Enter Into Health Care
Purchasing Decisions? The Commonwealth Fund, May 2003.
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--Investment in research.--We urgently need to gather evidence on
what works to improve care, eliminate waste and ineffective
care, and promote greater efficiency, including use of modern
information technology, team work, and improved care processes.
Any industry that fails to invest in research to improve
quality and efficiency is going to be a backward industry. The
federal government pays $455 billion for health care in the
United States but devotes only $300 million--.04 percent--to
the budget of the Agency for Healthcare Research and Quality
for learning effective ways to improve the performance of the
United States health system. The quality report on United
States health care due to be issued this fall is an important
starting point. But it needs to be followed with an investment
in research up to the task for ensuring that the United States
is a high-performing health system worthy of the 21st century.
Thank you very much for the opportunity to join this panel. I look
forward to learning from my fellow panelists and answering any
questions.
Senator Harkin. Well, Dr. Davis, thank you. That was really
a great opening, I think, for what we are talking about here
today. You have really set the stage for that.
STATEMENT OF JOHN MENTEL, M.D., CHAIR, DEPARTMENT OF
APPLIED INFORMATICS, MAYO CLINIC
Senator Harkin. Next, we turn to--well, let us see--I will
go to Dr. Mentel; this is not the way I have it lined up here--
Dr. John Mentel.
Dr. Mentel is the Chair of the Department of Applied
Informatics and assistant professor at the Mayo School of
Medicine at the Mayo Clinic, in Jacksonville, Florida. Dr.
Mentel received both his undergraduate and M.D. degrees from
the University of Missouri, in Kansas City. Dr. Mentel was
instrumental in facilitating the implementation of a paperless
system at the Jacksonville Mayo Clinic. I understand Dr. Mentel
wants to talk about information technology and how systems
improvement can reduce healthcare costs.
Dr. Mentel, welcome.
Dr. Mentel. Thank you.
Good morning, Senator Harking, members of the subcommittee.
It is an honor to be with you today.
I am John Mentel, Chair of the Department of Applied
Informatics at Mayo Clinic, and I am also a practicing
internist--doing it 50/50, each one--in our facilities in
Jacksonville, Florida. I have been invited to participate in
this discussion on access and affordability in healthcare to
address the subject of electronic medical records, and, to be
honest with you, in a little more general terms, automating
healthcare.
First, let me start with some demographic information about
our facilities, so you can get some understanding of where I
come from. Now, we have got 300 physicians. They are delivering
primarily through quaternary care, so it is all levels. They
are providing both inpatient and outpatient environment
services, and it is complemented by activities in education and
in research. We have been paperless in the outpatient
environment since 1998, so for the last 5 years. We are
chartless. We do not move paper. And we are achieving this in
the hospital probably in another year.
To begin with, I am going to break this discussion down
into three topic areas: one, cost and savings; the second,
improvements in quality and efficiency; and the third are the
challenges to medical automation.
First, cost and savings. We, evaluated--or internally,
rather, evaluated the cost benefit of our outpatient, chartless
environment. For a total investment of $16 million over the
first 5 years of operation, we realized savings--on average,
depending upon how you wanted to account for it--$3 to $7
million. I can give you $3 million, of exactly hard
reproducible; I can give you $7 million, if you try to look at
every nickel and dime that you probably save.
This is annual savings. And those savings go on beyond that
initial investment. This includes all software, all hardware,
all IT expenses. And interestingly enough, the model was later
reproduced at our facility in Scottsdale and was relative
reproduced, even though a different medical records vendor was
used at that facility.
In the radiology field, we are also filmless. We do not
produce X-ray film; it is all digital. And we spent $5.8
million to get there, between 1995 and 1999; and calculated
savings were about $8 million on that $6 million expense.
Senator Harkin. Per year? No.
Dr. Mentel. Over that 4-year--over that 5-year period of
time.
Improvements in quality and efficiency--I could go back to
our filmless environment there--it took us about 45 minutes--
this is pretty darn efficient--from the point that the patient
arrived for a chest X-ray to the point that the ordering
physician had the film and the report back. At our facility, it
was 45 minutes. We have moved that to 5 minutes because of
automating the process. CT and MR scans have gone from 2 hours
down to 10 minutes for this same thing. The images are back to
the ordering physician, and the report is there, in a 10-minute
period of time.
An even more dramatic example is an infectious-disease
application we have just recently entered a pilot on--
constantly monitors for significant infectious events within
the hospital environment, and then it automatically alerts the
physician and/or the infection-control team of the event. And
in some circumstances, it will even propose what the correct
solution will be.
We have extended the healthcare model to the home also,
trying to improve quality and reduce costs. The diabetes
program we are working with, for example, allows the patient,
over the Internet, to customize their education program. They
do not have to come in and sit with a group and learn about
their diabetes. They can do it online, and it is customized to
their own specific illness and needs. Then they can
communicate, through this application, securely with their
providers. They can conjointly set and manage their treatment.
We are moving on to the next phase of this, which is
automating, through the computer, the treatment
recommendations. So you could, say, put your sugars in; it will
tell you what next to do with your dosing, thereby reducing the
need for the diabetic management team's involvement, which will
reduce cost further, which increases quality, because we are
going to take practice variation out once we automate that
process. And it allows the same team, obviously, to care for
many more diabetic folks.
The challenges are legion, as well. The first is capital.
Institutions have to make sizeable investments. And the return
on investment does not start day one. So in these times of
crises and hospital closures, finding capital is very
difficult.
Dollars are needed not only for the software and hardware,
but also you have got to budget for the upgrades, for the
maintenance. And I will tell you, a bigger part that we learned
in going through this was it also requires a large investment
in data center infrastructure. Once you fully depend upon that
automation to be there 24 by 7, when Mary hits the ER, Tom is
in the operating suite, you need that record available. So the
redundancy, the fail-safe nature of that network, it also has
an attendant expense.
Then there is the subject of change management. How much
can your staff accept change? How quickly can they adapt to the
change? And do not be fooled; healthcare automation is still in
its infancy, so these products are far from maximally efficient
or user friendly.
In conclusion, after going through those challenges, one
might ask, ``Why change?'' We really thought that we had no
choice. The savings are measurable. The savings are
reproducible. And in these times of an aging population with
declining resources, we really felt we had to automate to
reduce our cost base.
Complement that fact with a dramatic increase in the
complexity of healthcare that medical sciences, such as
genomics, are bringing forward, and automation just seems
mandatory just to keep up. Add to that the desire for higher
quality measures, increasing requirements from licensing and
review organizations for these quality and outcome measures,
and we could see no alternative but to automate to try to
capture that data.
prepared statement
Finally, as Dr. William Mayo stated so many years ago, the
needs of the patient come first. Medical practice automation
needs to be pursued because it provides higher quality
healthcare, which, at the end of the day, is why we all do what
we do.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Dr. John Mentel
Good morning Mr. Chairman, Senator Harkin and members of the
subcommittee. It is an honor to be with you today. I am John Mentel,
M.D., Chair of the Department of Applied Informatics at Mayo Clinic and
a practicing internal medicine physician based at our facilities in
Jacksonville, Florida. I've been invited to participate in this
discussion on Access and Affordability in Healthcare to address the
subject of electronic medical records and in more general terms,
automating healthcare.
First let me start with some demographic information about our Mayo
Clinic facility to give you some background concerning our challenges
and accomplishments in this field. In Jacksonville we have around 300
Physicians delivering primary to quaternary care in both an inpatient
and outpatient environment complemented by activities in research and
education. We see approximately 400,000 patient visits annually, almost
50 percent of which are primary care visits and have approximately
12,000 hospital admissions per year. We have been paperless in our
outpatient clinics since 1998 and are well along the way of achieving
this in the hospital as well. In the outpatient clinic, we do not have
paper-based patient records. There are approximately 100 million
results with approximately 9 million documents online at this time.
Around 45,000 patient e-charts are viewed online daily.
To begin, let's break this discussion into three topics:
1. Costs and savings associated with automation,
2. Improvements in quality and efficiency through medical
automation, and
3. Challenges to medical automation.
As you may have noticed, I'm referring more to medical practice
automation than to electronic medical records. This is a fundamental
point to be made because to be successful we need to automate all
healthcare processes in an integrated fashion. For without this vision,
all we will succeed in doing is layering another complex system onto an
already extremely complex field.
1. costs and savings associated with automation
We have internally evaluated the cost-benefit of our outpatient
chartless environment and have broken it down into two categories. The
first category is measured savings which consists of employee savings
as well as paper printing and storage savings. The second category is
measured plus estimated savings which includes these same elements plus
income from improved coding, savings from less lost charges, and
improved productivity. Using a rate of inflation of around 4 percent,
we calculate the measured category's internal rate of return (IRR) to
be 20 percent and the measured plus estimated category's internal rate
of return (IRR) at 30 percent. To restate another way, for a total
initial investment of $16 million over the first 5 years of operation,
we realized additional savings of between $3 to $7 million annually
thereafter. This includes all software, hardware, and information
technology personnel costs. This model has been later reproduced at our
sister facility in Scottsdale using a different commercial electronic
medical records vendor and similar results have been found.
Let's move on to the radiology field where we are filmless as well,
fully utilizing digital imaging techniques. From 1995 to 1999 the
calculated expenses were $5.8 million to achieve this goal while the
attendant calculated savings were $8 million.
We can even move down at the application level, where we have
recently operationalized an infectious disease program. It cost
$500,000 to install and is projected to save $2 to $4 million annually
through many benefits including increasing the use of appropriate
antibiotics while decreasing complications.
In these days of constrained reimbursement and rapidly escalating
costs we require a positive return on investment from our products and
we consistently meet this goal.
2. improvements in quality and efficiency with medical automation
Cost savings needs be coupled with quality benefits to better evoke
change. Healthcare automation brings about the obvious benefits of
shared common data, drug-drug interaction checking, and automated
monitoring of health maintenance items such as screening mammography
dates and immunization schedules. It also makes possible the ability to
operationalize the use of evidence based guidelines into daily practice
in concert with the ability to measure the results in real time. Beyond
this though, it makes possible advances in quality simply not
achievable in the past such as rapid turnaround times, the inclusion of
knowledge into the care delivery process, and the expansion of the care
delivery model into the home and under the control of the patient-where
it belongs.
Examples here include our filmless radiology environment; there we
have taken turnaround times from x-ray acquisition to report delivery
for chest x-ray from 45 minutes to around 5 minutes and CT or MR exams
from around 120 minutes to 10 minutes.
An even more dramatic example is an infectious disease application
just piloted. It constantly monitors for significant infectious events
and then alerts either the admitting physician or the infection control
team of the event, and in some circumstances, the best action to take
to resolve the event.
Finally, automation of the healthcare model allows the full
extension of delivery to the home, thereby further reducing costs and
increasing quality. A diabetes program we're working with allows a
patient over the internet to customize a diabetes education program to
their specific needs, communicate securely with their providers, and
conjointly set and manage treatment goals online. The next phase of
this project is automating the computer's treatment recommendations
thereby reducing the need for the diabetic management team's
involvement which reduces costs further, increases quality while
removing practice variation, and allows this same team to care for a
much greater number of diabetic patients increasing efficiency.
Efficiency improvements abound in an automated environment. The
instant availability of the medical record is a priceless asset to the
care providers. Complimenting this with a unitary inpatient and
outpatient record increases the value exponentially. This becomes not
only an efficient tool for care delivery but an equally facile tool for
research activities.
3. challenges to automation
The first challenge is capital. Institutions have to make sizable
investments to hope to realize any of the automation benefits. Return
on investment when starting is far from immediate and in these times of
hospital closures and malpractice crises, finding capital can be almost
impossible. Dollars are needed not only for software and hardware, but
also budgets are needed for upgrades and maintenance. The automation
the clinical practice requires large investments in datacenter
infrastructure also. When you automate, not only your business, but
immeasurably of greater importance, the lives of your patients depend
upon that automation being available 24 by 7. This pervasive
requirement has its own significant cost attached.
Another challenge is the dramatic complexity of healthcare. No two
patients are alike and automating the care process around individual
variation adds even more layers of difficulty to an already complex
system. Add to this fact the sheer number of electronic medical record
vendors and the relative paucity of data standards and complexity
becomes an even more capable opponent.
Then there are the challenges of legacy system integration. Almost
all healthcare enterprises currently have multiple isolated electronic
systems used for such processes as billing or for the lab that must be
integrated into the new automated environment. This means building and
maintaining complex interfaces between systems or completely starting
over with a new integrated solution. Since the enterprise cannot risk
the loss of current and historical data, converting systems typically
involves complex historical data migration to the new environment. At
our facility this alone was originally predicted to takeover one year
running 24 by 7.
Then there is the subject of change management. How much can your
staff accept change and how quickly can they adapt to the change? These
are extremely busy people responsible daily for individual's lives.
Healthcare itself undergoes dramatic change daily that providers must
assimilate and automation introduces further exponential change to this
environment. And finally, don't be fooled, healthcare automation
instill in its infancy and these products are far from maximally
efficient or user friendly.
conclusion
Then why change--because we have no choice.
The savings are measurable, reproducible, and in these times of an
aging population with declining resources medicine must automate.
Complement this fact with the dramatic increase in complexity of
healthcare that medical sciences such as genomics are introducing,
automation will be mandatory just to keep up. Add to this yet the
desire for higher quality measures and the increasing requirements from
licensing and review organizations for these quality measures and we
can see no alternative but to automate. Finally, as Dr. William Mayo
stated so many years ago, the needs of the patient come first. Medical
practice automation needs to be pursued because it provides
significantly higher quality healthcare which, at the end of the day,
is why we are here.
Senator Harkin. Dr. Mentel, thank you. When we get back to
you, I want to find out how you convinced them to put the
capital in on this.
Dr. Mentel. Stiff-arm techniques.
Senator Harkin. Hmm?
Dr. Mentel. Strong-arm techniques.
Senator Harkin. That is pretty awesome.
STATEMENT OF DAVE HICKMAN, DIRECTOR, CLINICAL
INTEGRATION, MERCY MEDICAL CENTER
Senator Harkin. Next, we go to David Hickman. Mr. Hickman
is the director of Clinical Integration for Mercy Health
Network in my State of Iowa. Mr. Hickman holds his B.S. degree
for Iowa State University and a master's of public health from
the University of Iowa. Mr. Hickman will discuss the Mercy
Disease Management Program and how this program saved money and
improved health outcomes for patients and how this might be
used for Medicare and Medicaid for cost savings.
Mr. Hickman, welcome.
Mr. Hickman. Great, thank you.
Senator Harkin and members of the subcommittee, my name is
Dave Hickman, and I am serving as director of Clinical
Integration for Mercy Health Network, based in Des Moines,
Iowa. Mercy Health Network is a joint operating agreement
between Catholic Health Initiatives, in Denver, Colorado, and
Trinity Health, Novi, Michigan. I am a registered nurse and a
fellow of the American College of Healthcare Executives.
I want to thank you for the opportunity to tell you about a
telemanagement program Mercy Health Network is using that is
lowering the cost of care and increasing the quality of life
for people with congestive heart failure. Nearly 5 million
Americans have congestive heart failure today. CHF
hospitalizations cost Medicare $5 billion annually. Within a
month of discharge from the hospital, 20 percent of CHF
patients will be readmitted to the hospital for CHF. And within
6 months of discharge, 50 percent will be readmitted to the
hospital.
Half of all these re-admissions to the hospital are caused
by patients not following the diet and medication treatment
plan prescribed by their physician. Another 20 percent of re-
admissions are caused by patients not seeking care when
symptoms are beginning to get worse. Clearly, costs can be
avoided if patients can learn to be compliant with treatments
prescribed by their physicians, and learn to recognize early
warning signs of a worsening condition.
Our CHF telemanagement program, which uses the Tel-
Assurance system, from Pharos Innovations, is relatively
straightforward. Patients are enrolled in the program by their
physician, who predetermines an acceptable body weight for the
patient, and the case manager enters that into the computer.
Every morning, patients use their touchtone phone to call a
toll-free number to our telemanagement computer, and, in this
phone call, to an automated attendant, the patient answers the
same survey of seven questions every day. The first six
questions ask patients about their symptoms. For example,
``Have you felt more short of breath in the last day?'' And the
seventh question asks the patient to enter their morning weight
on the telephone keypad. The computer software then compares
the patient's morning report to the preset parameters set by
the physician. If the patient answers yes to any symptom
question, or if the morning weight exceeds the acceptable
weight, a variance report is sent to the nurse case manager for
follow-up. Now, patients in our program only need to have a
touchtone phone and a bathroom scale. That is all they need in
their own home.
Now, in our first year, case managers at Mercy Medical
Center, in Des Moines, decreased re-admissions to the hospital
by 84 percent.
Senator Harkin. Amazing.
Mr. Hickman. We replicated the program to our other four
medical centers, and re-admissions to the hospital for CHF were
decreased by 86 percent.
Now, the estimated total net savings for the 182 patients
in our five-hospital study was between $900,000 and $1 million.
Costs, including today's newer versions of software and case
manager salaries, are estimated at $187,000. So while the
return on investment for hospitals is only about breakeven, the
total return on investment for health insurance and patients
and hospitals, collectively, is about five to one.
But we believe that the program has been successful because
early warning signs of an exacerbation of the CHF were
identified and acted upon early by case managers. Over time,
patients change their behavior and they follow the treatment
plan, and they learn to recognize these early warning signs of
an exacerbation of their illness.
Mercy Health Network medical centers utilize CHF
telemanagement for two reasons. First, because Iowa's average
Medicare reimbursement is so inadequate--lowest in the United
States--that costs usually exceed reimbursement for CHF
admissions. So out of necessity, we reduce our CHF admissions
to avoid further financial losses. Second, and more
importantly, our CHF telemanagement program keeps patients
healthier and at home, and that is where they want to be. We
also believe that our telemanagement program shows promise for
other chronic illness, such as diabetes, COPD, and asthma.
Now, if our data continues to show the same return on
investment as our previous studies, we would recommend that
Congress consider adding case management as a reimbursable
service to the Medicare program.
prepared statement
Senator Harkin, thank you, again, for the opportunity to
present the information. We appreciate the assistance your
Subcommittee provides. And I would be happy to answer any
questions at this time.
[The statement follows:]
Prepared Statement of David Hickman
Mr. Chairman, Senator Harkin, and members of the Subcommittee, my
name is Dave Hickman, and I am serving as Director of Clinical
Integration for Mercy Health Network based in Des Moines, Iowa. I am a
Registered Nurse and a Fellow of the American College of Healthcare
Executives.
I want to thank you for this opportunity to bring information to
you about a telemanagement program Mercy Health Network has used that
is lowering the cost of care and increasing the quality of life for
people with congestive heart failure.
Mercy Health Network is comprised of 1,792 staffed inpatient beds
in five medical centers and 28 rural hospital affiliates; 104 clinics,
numerous home care, hospice, long-term care facilities and senior
housing facilities across Iowa. Our 1,637 affiliated physicians provide
1.9 million emergency and outpatient visits per year to a primary and
secondary service population of 1.2 million people. Mercy Health
Network is a joint operating agreement between Catholic Health
Initiatives, Denver, Colorado, and Trinity Health, Novi, Michigan.
the problem: patient non-compliance, frequent readmissions
Approximately 4.8 million Americans have congestive heart failure
(CHF) today. After age 65, the incidence approaches 10 of every 1000
Americans. From 1979 to 1999, hospital admissions for CHF increased 155
percent. It is one of the most frequent diagnoses in American hospitals
today. It is estimated that CHF hospitalizations account for
approximately $5 billion in annual cost to the Medicare budget.
Of all hospital admissions for CHF from the Emergency Department
(ED), approximately 80 percent are repeat visits to the ED. And,
approximately 80 percent of ED visits for CHF result in an inpatient
admission. Data indicates that within a month of discharge from the
hospital, about 20 percent of CHF patients will be re-admitted to the
hospital for CHF. Within six months of discharge, about 50 percent will
be re-admitted.
Half of all readmissions to the hospital are caused by patients not
following the diet and medication treatment plan prescribed by their
physician. Another 20 percent of readmissions are caused by patients
not seeking care when symptoms are beginning to get worse. Clearly, the
problem can be reduced if patients can learn to be compliant with
treatments prescribed by their physicians, and learn to recognize early
warning signs of a worsening condition.
Clearly, congestive heart failure is a large, growing and costly
problem for the American healthcare system. And, clearly, the problem
can be reduced if solutions can be found to improve patient's
compliance with treatments prescribed by their physicians, and if
patients can learn to recognize early warning signs of a worsening
condition.
the solution: frequent monitoring by case managers using telemanagement
tools
Since 1993, Mercy Health Network medical centers have recognized
the need to case manage high-cost, high-risk patients who have
experienced frequent ED re-visits and hospital re-admissions for
various chronic illnesses, many of whom have CHF. MHN medical centers
have implemented community-based and/or inpatient-based case management
designed to intervene at key points in a patient's disease progression
to improve clinical and financial outcomes. Each of our medical centers
has invested in CHF case managers. They closely monitor the clinical
conditions of CHF patients after they have left the inpatient setting
to prevent an exacerbation of their illness and a readmission to the
hospital.
At Mercy Medical Center-Des Moines, clinical and administrative
leaders recognized in 1999 that their ability to case manage their
large CHF population was limited by the number of patients that a case
manager could realistically contact at the frequency necessary to be
effective. William Wickemeyer, M.D., medical director for the CHF
program for the Iowa Heart Hospital at Mercy, and Deborah Willyard,
R.N., CHF case manager, purchased, through a grant from the National
Retirement Foundation, the Tel-Assurance<SUP>TM</SUP> telemanagement
system as a tool to assist case managers become more effective and
increase their caseload of CHF patients. Tel-Assurance<SUP>TM</SUP> was
designed by cardiologist Randall Williams, M.D. from Northwestern
University and founder and CEO of Pharos Innovations.
The CHF telemanagement program used by Mercy Health Network medical
centers is relatively straightforward in the following steps:
1. Patients with high readmission rates are enrolled in the CHF
telemanagement program by their physician. Because body weight is an
important indicator of fluid balance and how efficiently the heart is
pumping, the physician predetermines an acceptable body weight, and the
case manager enters it into the computer.
2. Patients enrolled in the telemanagement program use their
touchtone phone to call a toll-free number to our telemanagement
computer everyday between 4 a.m. and 12 noon. In this phone call to an
automated attendant, the patient answers the same survey of seven
questions everyday. The first six questions ask patients about their
symptoms, e.g. ``Have you felt more short of breath in the last day?'',
and the seventh question asks the patient to enter their morning
weight.
3. Between 12 noon and 1 p.m., the computer calls any patient back
that did not call in before noon.
4. At 1 p.m., the computer software compares the patient's morning
report to the pre-set parameters. If the patient answered ``yes'' to
any symptom question or if the morning weight exceeds the acceptable
weight, a variance report is sent to the case manager for follow-up.
With our current telemanagement system, Tel-Assurance<SUP>TM</SUP>,
patients enrolled in the program need only a touchtone phone and
bathroom scale.
the results: cost savings, healthier and satisfied patients
In their first year in 2000, case managers at Mercy Medical Center-
Des Moines decreased re-admissions to the hospital by 84.4 percent and
tripled their caseload (from 30 to 90) without adding additional case
managers using telemanagement.
One of the purposes of Mercy Health Network is to identify best
practices, and then replicate them throughout the network. In 2001, the
CHF telemanagement program was replicated to our other four medical
centers. In the first year of the program, case managers decreased re-
admissions to the hospital for CHF by 86.2 percent collectively using
the telemanagement system. Mercy Medical Center-Sioux City decreased
readmissions by 100 percent using an innovative combination of
telemanagement and palliative care. Daily patient call-in compliance
rate was 93 percent. On a five-point scale, average patient
satisfaction was 4.8 (very satisfied). Patients made comments such as
``It gives me peace of mind'' and ``Someone is caring for me
everyday.''
Estimated cost savings of the telemanagement project are worth
noting. Avoided admissions were estimated at 202. Based upon typical
reimbursement and payment models, von Ebers & Associates estimated that
health insurance (Medicare, Medicaid, Blue Cross, commercial insurance)
gross savings was between $627,000 and $668,000. The savings to
patients was estimated at $167,000 to $209,000. The estimated hospital
savings was $152,485. The estimated total net savings for 182 patients
was between $921,485 and $1,004,485. And there may have been additional
savings by avoiding posthospitalization office visits. By contrast, the
estimated cost of Mercy Health Network's CHF telemanagement program was
about $25,000, excluding the cost of case managers. Costs including
newer software versions and case manager salaries are estimated at
$187,000. While the return on investment for hospitals is about
breakeven, the ROI for health insurance, patients and hospitals
collectively is about 5 to 1.
the keys: early intervention and teaching by case managers
In the first year that all five medical centers used the congestive
heart failure telemanagement program, hospital readmissions were
reduced by 86.2 percent. We believe that the program was successful
because early warning signs of an exacerbation of the CHF were
identified and acted upon by case managers. Often, patients are found
to be not following their physician's treatment plan for diet
restrictions and medications. Case managers respond by re-teaching
patients the importance of following the treatment plan. Over time,
patients with CHF change their behavior and follow the treatment plan
more often, and they learn to recognize these signs and to notify their
case manager or physician when necessary.
Case managers intervene to break the cycle of frequently repeating
hospital readmissions. Telemanagement is a tool that helps case
managers be more effective. Our case management approaches and
successes are further outlined in a chapter of a book to be published
this summer by Health Administration Press titled Thinking Forward: Six
Strategies for Highly Successful Organizations by John Griffith and
Kenneth White with Patricia Cahill, featuring the work of selected
Catholic Health Initiatives' facilities.
Mercy Health Network medical centers utilize CHF telemanagement for
two reasons. First, because Iowa's average Medicare reimbursement is so
inadequate (lowest in the United States), costs exceed reimbursement
for every CHF admission for most of our medical centers. Out of
necessity, we reduce our CHF admissions to avoid further financial
losses. Hospitals receive no reimbursement to provide case management.
We invest in case managers and telemanagement systems at our own
expense.
Second, and more importantly, the CHF telemanagement program keeps
people healthier and at home where they want to be.
collaboration to replicate success
Earlier this year, Mercy Health Network co-founded the Iowa Chronic
Care Consortium along with the Iowa Health System, Des Moines
University, the Iowa Farm Bureau Federation, and the Iowa United Auto
Workers. The purpose of the Iowa Chronic Care Consortium is to improve
the health and productivity of Iowans through the routine practice of
innovative, proactive chronic care strategies.
Mercy Health Network is committed to participation in the Iowa
Chronic Care Consortium because we believe that our telemanagement
program is a breakthrough in decreasing the cost of care and increasing
the quality of life for people with CHF, and we are willing to
collaborate with other providers in the state to achieve the same
results as we have.
Through the Consortium, Mercy Health Network will be expanding our
telemanagement program to heart failure patients in more remote rural
locations and to diabetes patients in our urban medical centers.
recommendations
We acknowledge that the causes of rising health care costs are
complex, and the solutions are difficult to identify. We believe,
however, the data indicates that our CHF telemanagement program could
be a model for improving the care of persons with CHF.
We offer the following recommendations: 1. Review Mercy Health
Network's telemanagement results this Fall after we complete another
year of using the telemanagement system 2. Review the comparative
results of the telemanagement demonstration projects conducted by the
Iowa Chronic Care Consortium in 2004; and, 3. If the data from these
projects shows the same cost savings as our previous studies, we would
recommend that Congress consider adding case management as a
reimburseable service to the Medicare and Medicaid programs to incent
hospitals to provide case management.
Mr. Chairman, I am grateful for the opportunity to present this
information to your Subcommittee. We appreciate the assistance that
your Subcommittee provides for the healthcare community, and
particularly acknowledge the consistent support provided by our good
friend Senator Harkin.
I would be happy to answer any questions from you and your
Subcommittee members at this time.
Senator Harkin. Thank you very much, Mr. Hickman. These are
great stories. These are remarkable. I am going to find out why
we cannot do this, what you and Dr. Mentel have done, all over
the place, all over the country.
STATEMENT OF DR. JAMES F. FRIES, DIRECTOR, ARTHRITIS,
RHEUMATISM, AND AGING MEDICAL INFORMATION
SYSTEM, STANFORD UNIVERSITY
Senator Harkin. Next, we turn to Dr. James Fries. I hope I
pronounced that right. Dr. Fries is a professor of medicine at
Stanford University School of Medicine, received his
undergraduate degree at Stanford and his M.D. at Johns Hopkins,
nearby. Dr. Fries is an expert in health promotion--prevention,
and will discuss how health promotion and disease prevention
can reduce healthcare costs through the reduction on the demand
side, rather than the traditional effort to control the supply
side. So now we will take a look at the demand side.
Dr. Fries.
Dr. Fries. Thank you, Senator Harkin and subcommittee
members.
Healthier persons have lower healthcare costs. And we know
how to reduce health risks and to improve health and to,
thereby, decrease the costs of healthcare. These amounts can be
extremely substantial. I will not go over again the data that
Karen presented or that you presented about the crisis in
rising healthcare costs, but just suggest that it is, in large
part, a result of the demand that we place, and that the demand
that we place on healthcare is, itself, related to the
disability and the state of health of the population that is
receiving that. There are, as I will argue in several discrete
ways, emerging evidence, very well-controlled scientific data
that we have, that the time for initiatives to be examined and
implemented has come.
I will make four points. The underlying theory between
health-enhancement initiatives is the compression of morbidity,
a term which I coined a number of years ago and I will explain
to you.
Second, disability rates in the United States can decline
by at least 2 percent a year. They are currently doing that,
and they will continue to do that in the future if we are
effective at implementing things. It is important that that
happens, because the Medicare program becomes solvent,
arithmetically, for 70 years or more if the rate of decline in
disability is 1.5 percent a year. It is currently declining at
2 percent, and this is some of the best news, in terms of
health in the United States, that we have had for some time.
Then the onset age of chronic infirmity may be postponed.
We have data that it may be postponed by as much as 12 years,
so that people end the period of adult vigor some 12 years
later than people with less healthy lifestyles and a less-
healthy approach to managing their medical care.
Finally, multiple large randomized controlled scientific
trials have proved the effectiveness, cost effectiveness, of
these. I will go through the points quickly, and then I will
tell you six things that I think we ought to be doing now in
order to get there.
The compression-of-morbidity paradigm says that most
illness in this era occurs between the time in which you first
get sick for good--that is, the onset of chronic infirmity--and
the time in which you die. And during that time, you become
increasingly infirm. So that the area under the curve of that
infirmity, between when you first get sick--this is 55 or 56
for the average American, lowest levels of disability--until
the time in which you die, some 20 years later, is where most
of life's morbidity is. So compressing morbidity says,
predominantly, let us postpone the onset of the period of
disability and, thereby, compress the period of disability
against the age of death, which, to be sure, is rising, as
well, but perhaps not as rapidly. And that is where some of the
data come in.
So this is the life of a vigorous life until reasonably
shortly before it is closed, at which time there is a terminal
drop, with obvious implications for the health quality of life
of the individual, and obvious implications for the financial
health of the system that pays for this care.
Disability, I indicated, was going down 2 percent a year
since 1982. This is documented in the two major surveys, the
National Long Term Care Survey and the National Health
Interview Survey, which have been administered serially over
that time, and it is consistent with everything else. It is
interesting that the improvement in disability, which is very
encouraging, is related, in lifestyle matters, only with the
decrease in cigarette smoking, because we have actually, as
everyone knows, become a more sedentary and a plumper Nation
over this same period of time. So part of the impetus and the
opportunity for postponing infirmity more comes to attacking
those things which we have not successfully--well, we have not
even really tried, on a national basis, to improve the health
habits and the subsequent illnesses that occur.
Now, recent data from longitudinal studies, in which we
follow individuals for life, have really associated factors
such as exercise or obesity or cigarette smoking or other
health risk factors on the time at which we develop morbidity.
Morbidity and disability are relatively interchangeable terms.
And the effect is a profound one.
In a University of Pennsylvania alumni study, we found an
8.4-year postponement of disability in those who had moderately
good health habits, compared with those who did not. In a
longitudinal study we began in 1984, we recently reported a
prolongation of 12.4 years in people, mainly, who were lifetime
participants in vigorous physical activity. And we are in the
process of reporting that those people who begin vigorous
physical activity after age 60 can reach very similar goals, so
that these benefits can accrue late in life, as well.
So we have an emerging base of longitudinal studies which
associate the health habits and health risks and personal self
efficacy and other variables of the individual with their long-
term health outcomes. This contradicts, directly, an original
fear that, in fact, if we had healthy people, we could not
afford them, because they would live too long, and they would
wear out our social support system. In fact, they live a little
longer, but they live a lot less disabled. And the lifetime
medical costs of the chronic cigarette smoker or the sedentary
or obese person are higher, substantially higher, than those of
the person who is fit, even though the life is shorter. So the
cumulative metric, where we are looking at cumulative
disability over a life span, is favorable with regard to these
areas. There are many other studies that do this.
Then, finally, randomized control trials are the finest
final scientific proof for things. And questions such as, ``Is
it too little too late to institute programs to change people's
behaviors and, thereby, improve their health,'' have arisen.
There now are a number of randomized control trials. I include
five in the supporting materials, which total some 70,000 or
80,000 people randomized to different groups, receiving
different interventions, and the ability to improve health,
both in working populations and in seniors. In working
populations, one of the big metrics is productivity, which is
improved; in senior populations, it is health and avoidance of
disability. And we were able to prove both of those. They have
been proven in multiple ways. They have been reviewed by many,
many groups, and the conclusions are always the same.
So it is time for us to take advantage of these data and to
move forward with programs to build a healthier United States.
And at the same time, within that healthier United States, to
have an ability to moderate, not eliminate, for all of the
reasons we have discussed here, but to moderate the rise,
perhaps stabilize the rise in healthcare costs.
Last year, RAND prepared a contracted report for the
Centers for Medicaid and Medicare Services recommending a
demonstration project of tailored print interventions, which
turns out to be the most effective intervention--I can go into
that later--with the goal of recommending that proven
interventions be made available as a Medicare benefit. We are
getting specific here. It is hoped that this demonstration,
currently being designed, might be underway by the end of this
year.
The Health Promotion FIRST Act will shortly be introduced,
by Senators Richard Lugar and Jeff Bingaman, and will provide
support for new and existing programs at the CDC and NIH, which
will accelerate progress in health promotion, knowledge, and
applications. Forty-nine Senators have signed on as co-sponsors
for a ``Building Health Promotion into the National Agenda''
Resolution. Clearly, there is increasing interest and
activity--you mentioned this in your introduction--a mandate,
an emerging mandate, for approaches to cost containment by
improvement of health.
There are six immediate policy imperatives that I would
like to enumerate.
First, support the Medicare Senior Risk Reduction
Demonstration Project. It is critically important that this
demonstration is designed, carried out, and implemented. It, by
itself, can have a major factor on the solvency of Medicare.
Second, support proven senior risk-reduction programs as a
Medicare benefit. Changes will be required here to sections
1861 and 1862 of the enabling legislation.
Third, support the Health Promotion FIRST Act with
increases in training and in application of health risk-
reduction principles. Details can be found at the Web site I
have provided.
Fourth, encourage reimbursement by federal, State, and
private medical insurance for qualified health education and
qualified health promotion programs provided as population
health initiatives. These will be parallel to much of what we
consider the medical-care system of today.
Fifth, encourage work-site health-promotion activities to
encourage health and productivity and to reduce costs. Details
can be found in another Web site, which I have provided.
Finally, monitor and evaluate these initiatives rigorously.
We must only encourage and fund programs that are known to be
effective, and that is inherent in the other recommendations
which I have done.
prepared statement
Closing, we can improve health and reduce medical care
costs substantially with currently proven health-enhancement
approaches. These approaches, in turn, can be redefined and
improved. Demand-side health-improvement initiatives benefit
the individual, the payer, and the society. They do not
encourage rationing or adversarial stances. They are entirely
bipartisan. They are not inconsistent with other cost-
containment initiatives, and, indeed, will make such
initiatives more effective. The need for a healthier society
has never been more obvious or more important.
[The statement follows:]
Prepared Statement of Dr. James F. Fries
Health care costs have resumed double-digit annual increases and
are in crisis. Existing ``control'' mechanisms based principally on
forms of rationing on the supply side have failed to be effective.
Current costs approximate 16 percent of GDP. These costs threaten
budgets in other areas, and put the Medicare program at risk.
Yet, an effective cost-containment mechanism on the demand side is
readily available, based on the established fact that healthier persons
have much lower health care costs than do persons with preventable
chronic illness. This mechanism holds great promise for reduction in
the national burden of illness and for improvement in the quality of
life.
----------------------------------------------------------------
Figure 1.--Outline
--Healthier Persons Require Fewer Medical Services
--Need and Demand Reduction Approaches are a Proven Approach to
Medical Care Cost Containment
--The Compression of Morbidity Paradigm Provides a Theoretical Base
--Disability among Seniors in the United States can Decline by at
least 2 percent per year; mortality rates by 1 percent per year
--The Onset of Chronic Infirmity may be postponed by up to 12 Years
--Multiple Randomized Controlled Trials Prove the Effectiveness of
these Approaches
--There are Major Policy Implications
----------------------------------------------------------------
I will make four points and explore their policy implications.
First, the underlying theory behind health enhancement initiatives is
the Compression of Morbidity. Second, disability rates in the United
States can decline by at least 2 percent per year, while mortality
rates will decline more slowly, at about 1 percent per year. Third, the
onset age of chronic infirmity may be postponed by up to 12 years.
Fourth, multiple large, randomized, controlled scientific trials have
proved the effectiveness and cost-effectiveness of these approaches.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
The Compression of Morbidity paradigm envisions reduction of
lifetime infirmity, shown on Figure 2 as the shaded area, and of
medical care costs, by squeezing the period of morbidity between an
increasing age at onset of disability and the age of death. The healthy
life is seen as a life vigorous and vital until shortly before its
natural close. This is achievable by postponing the onset of disability
and high medical costs through reduction of chronic illness and the
pursuit of vigorous and healthy lifestyles.
In the Figure, present average disability is represented by the top
line and is concentrated between an average onset at age 56 and the
average age at death, now 76 years. In future scenarios, extension of
morbidity, on the second line, occurs if longevity is increased but
disability is not postponed; this is the worst-case scenario.
Compression of morbidity, on the third line, occurs when disability is
postponed more than longevity is extended, as with reduction in health
risks. This scenario reduces costs and improves life quality.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
Disability, as documented by the National Health Interview Surveys
and the National Long Term Care Surveys, has been declining at about 2
percent per year since 1982 and even more rapidly in the most recent
five year period, while mortality rates are declining at about 1
percent per year. These data directly document compression of
morbidity. These trends have many contributing causes, from declines in
cigarette smoking to advances in medical science. It is important to
note that these improvements in the national health to date have
occurred despite the absence of a systematic approach to reduction of
health risks; our increasingly obese and sedentary population offers
major opportunities for continued reduction in chronic illness.
<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
Recent data from major longitudinal studies document the
association between reduced health risks and postponement of the onset
of disability. For eighteen years our research group at Stanford has
studied the effects of long-distance running and other vigorous
exercise, after age 58, on health outcomes. Results were remarkable.
Those exercising regularly postponed disability more than 12 years
compared with controls, and health care costs were reduced by nearly
one-third. Those who took up vigorous exercise later in life nearly
achieved the health benefits of lifetime exercisers. For those who
died, the exercisers had far less disability in the year prior to
death, as well as in all prior years. In the University of Pennsylvania
alumni study we have reported similar results in those exercising, of
moderate weight, and not smoking. Daviglus and colleagues showed
substantial decreases in Medicare costs for those with few health risk
factors in mid-life. Reed and colleagues prospectively determined the
effects of health risks, with results similar to ours. These results
from major studies are consistent with the broader literature.
FIGURE 5.--RANDOMIZED CONTROLLED TRIALS
----------------------------------------------------------------------------------------------------------------
Health
Time risk Cost per Savings
Number (months) score person per ROI
(percent) person
----------------------------------------------------------------------------------------------------------------
Bank of America............................... 4,712 12 -12 $29 $179 6.1
CALPers....................................... 57,268 12 -10 59 300 5.1
Arthritis..................................... 809 6 -7 50 260 5.2
Parkinson's................................... 290 6 -10 100 570 5.7
Take Care of Yourself......................... 2,833 12 -17 6 20 3.5
----------------------------------------------------------------------------------------------------------------
Randomized controlled trials represent the highest standard of
scientific proof. Such trials prove our ability to achieve healthier
and less costly lives, both in mid-life and in seniors, through
relatively inexpensive health improvement programs costing less than
$100 per year per person annually. The most effective approach has been
``tailored print interventions'', where each set of feedback materials
to the participant is exquisitely configured for the precise
characteristics and previous behaviors of that individual.
The Bank of America Retiree Study, the very large California Public
Employee Retirement System trial, disease-specific trials in arthritis
and other chronic illnesses, and trials of selfmanagement materials all
have documented our ability to both reduce health risks and to achieve
a substantial return on investment, ranging from 3.5:1 to 6.1:1. In
terms of Maintaining Medicare solvency, these results indicate that
investing about $100 per year per person annually, less than 2 percent
of the $5500 paid out to the average beneficiary, would reduce Medicare
claims by about $500 per beneficiary per year, even in the first year.
Last year RAND prepared a contracted report for CMS recommending a
demonstration project of tailored print interventions in Medicare, with
the goal of recommending that proven interventions be made available as
a Medicare benefit. It is hoped that this demonstration project,
currently being designed, might be underway by the end of this year.
The Health Promotion First (Funding Integrated Research Synthesis and
Training) Act will shortly be introduced by Senators Richard Lugan and
Jeff Bingaman and will provide support for existing and new programs at
the CDC and NIH which will accelerate progress in health promotion
knowledge and applications. Forty-nine Senators have signed on as co-
sponsors for a ``Building Health Promotion into the National Agenda''
resolution. Clearly there is increasing interest and activity, as well
as an increasing mandate, for approaches to cost-containment by
improvement in health.
----------------------------------------------------------------
Figure 6.--Policy Imperatives
--Support the Medicare Senior Risk Reduction (SRRP) Demonstration
Project
--Support Proven Senior Risk Reduction Programs as a Medicare Benefit
(changes will be needed in sections 1861 and 1862 of the
enabling legislation)
--Support the Health Promotion FIRST (Funding Integrated Research
Synthesis and Training) Act
--(to be introduced shortly by Richard Lugar and Jeff Bingman)
Healthpromotionadvocates.org
--Encourage Reimbursement by Federal, State, and Private Medical
Insurance for Qualified Health Education and Health Promotion
Programs Provided as Population Health Measures
--Encourage Worksite Health Promotion Activities of High Quality to
Increase Productivity and Reduce Costs--healthproject.
stanford.edu
--Monitor and Evaluate these Initiatives Rigorously
----------------------------------------------------------------
There are six immediate policy imperatives. First, support the
Medicare Senior Risk Reduction (SRRP) Demonstration Project. It is
critically important that this demonstration is designed, carried out,
and implemented. Second, support proven senior risk reduction programs
as a Medicare benefit; changes will be required in Sections 1861 and
1862 of the enabling legislation; these will improve the health of
Medicare beneficiaries through population health measures. Third,
support the Health Promotion FIRST Act, with increases in training and
in application of health risk reduction principles. Details may be
found at healthpromotionadvocates.org. Fourth, encourage reimbursement
by Federal, State, and private medical insurance for qualified health
education and health promotion programs provided as population health
initiatives. We must develop a culture of health rather than of
disease. Fifth, encourage work-site health promotion activities to
encourage health and productivity and to reduce costs. Details may be
found at healthproject.stanford.edu. Finally, monitor and evaluate
these initiatives rigorously. We must only encourage and fund programs
that are known to be effective.
We can improve health and reduce medical care costs substantially
with currently proven health enhancement approaches. These approaches,
in turn, can be refined and improved. Demand side health improvement
initiatives benefit the individual, the payer, and the society. They do
not encourage rationing or adversarial stances. They are entirely
bipartisan. They are not inconsistent with other cost-containment
initiatives and, indeed, will make such initiatives more effective. The
need for a healthier society has never been more obvious or more
important.
Senator Harkin. Thank you very much, Dr. Fries. Thank you.
I have some questions about some of those.
STATEMENT OF DR. DONALD R. HOOVER, PROFESSOR,
DEPARTMENT OF STATISTICS, RUTGERS
UNIVERSITY
Senator Harkin. Next, we turn to Dr. Donald Hoover, who is
a professor of statistics and a faculty member of the Institute
of Health, Healthcare Policy, and Aging Research at Rutgers
University. Dr. Hoover received his undergraduate degree at the
University of California at San Diego, his Ph.D. at Stanford. I
understand Dr. Hoover will discuss the expensive end-of-life
care, which burdens States and the Medicare program.
Dr. Hoover, welcome.
Dr. Hoover. Well, Mr. Chairman, the committee, thank you
for inviting me. I guess you have heard about me, so--a little
bit.
I have been--probably the past 2 years, I have been doing
work on end-of-life care, which--in the literature, end of life
is, a lot of times, defined as really the very end of life, the
very last year of life. So I am going to talk about more--not
so much implementation and things like that, but more of the
descriptions of the costs in the very last year of life, which
is a huge chunk of the medical care expenditures for Americans
65 years and older.
Now, I make three points. First, our Nation spends a
substantial amount of money for medical care for people just in
the last year of life alone. And even if we do nothing, no
changes to the healthcare system, just because of a changing
population demographics as the population ages, this amount is
going to go up.
Second, much of these end-of-life--and I am talking, again,
last year of life--medical care expenditures are for less
intensive care, such as nursing home and long-term care
facility care, as well as for technologically intensive
hospital care.
The third point I am going to make is that while Medicare,
right now, is paying most of the end-of-life, last-year-of-
life, medical costs, as the numbers of Americans age and the
numbers dying at older ages increases--in other words, our
population demographics shift and we have got more 75-year-
olds, 85-year-olds and people dying at older ages--just that
alone is going to cause the States and the elderlies themselves
to be required to assume more of these costs.
So let me get to my first point. America spends substantial
amounts of money for medical care during the last year of life,
and this will grow. And so a few numbers here. A study that we
published found that from 1992 to 1996, it was very expensive
to die in America. And in fact, an average person over 65 who
died created about $40,000 of medical expenditures in his or
her last year of life. If you look at what has happened to
medical costs since 1996, you know, it is maybe $50,000 to
$60,000 maybe now in the last year of life might be what the
expenditures are. And if you think about what an average person
makes in a year, an average wage-earner, that is quite a bit of
money to be spending for care in the last year of life.
Some other ways to look at this, about one fourth of
Medicare expenditures and one fifth of all healthcare
expenditures for the elderly simply went to that very short
time period during the last year of life. Now, there have been
several initiatives, such as hospices and advanced directives
that have tried to reduce these end-of-life, last-year-of-life
medical costs. Despite this, if you look at what has happened
with Medicare over the past 25 years, end-of-life costs have
continually been about a quarter of Medicare costs. They have
not gone down in spite of these initiatives.
So one take-home message from this might be that while
directed efforts to limit the last-year-of-life costs may be
needed, in fact these costs may be best controlled through the
same approaches used to control other general healthcare costs.
Now, my second point is that substantial end-of-life
healthcare expenditures go to less technologically intensive
and other institutional care, as well as to technologically
intensive inpatient healthcare. And the reason I make this
point is, you know, expensive hospital-based medical technology
is often blamed for higher end-of-life medical costs, which, in
fact, is true to a certain degree. But our research suggests
that non-intensive care of terminally-ill patients is, in fact,
almost as costly, and it is growing. From 1992 to 1996, on
average, about $15,000 for a person's last year of life was
being spent for care in the hospital, on average. This compares
to about almost as much, $12,000, being spent on non-
technological nursing-home and institutional care. However,
again, even if we do nothing to the medical care system,
because of the changing population demographics, end-of-life
nursing home and institutional expenditures are going to grow.
And the reason for that is, people who die at older ages--say,
75, 85--are more likely to be institutionalized around the time
of death during the year prior to death, and have higher
institutional nursing home costs, if you will. And again, our
population is shifting in age. We are getting more 75-and 85-
year-olds. So these costs are going to go up in the future.
Now, the third point. While Medicare now pays most end-of-
life medical costs, as the population ages and dies at older
ages, the States and the elderly themselves will have to assume
larger roles and pay for more of this. From 1992 to 1996, the
last year of life, Medicare paid about two thirds of all
healthcare costs during this time period. But this varied with
age of death and for people who were older who died at 75, 85,
most of their costs, or more of their costs, were institutional
care, and Medicare paid for less of those, because Medicare
does not cover this. So as the elderly American population
grows and shifts towards older ages, the States--that is,
Medicaid--and, in fact, the elderly, themselves, will have to
pay more for end-of-life medical care.
Now, if you think of the current financial difficulties the
States are in, they may be hard-pressed to come up with
additional resources for Medicaid. If you look at the elderly
and what they have to pay--from 1992 to 1996, on average, an
elderly person, or their family, had to pay about $5,000 for
their medical expenses during their last year of life, which
would obviously create a great economic burden in this group.
Now, in terms of supplemental and private insurance, right
now that is only paying for about 5 percent of the medical
costs in the last year of life, and it is really unclear that
this can assume a larger role.
So if end-of-life medical care expenditures, just the last
year alone, are not reduced, there may be a need for the
Federal Government to expand Medicare or find other ways to
support institutional care and relieve elderly from their out-
of-pocket expenses just for their last year of life.
prepared statement
Now, summary. End-of-life healthcare costs will rise and
may be more and more shouldered by the elderly and the States.
While efforts to reduce end-of-life medical costs should
continue, the impact of these efforts maybe limited, just due
to the changing demographics of a growing and aging elderly
population. The Federal Government may need to increase support
for Medicaid programs and/or to find other means to fund end-
of-life healthcare.
I thank the Chairman and the Committee, once again, for
inviting me to testify and will be happy to answer any
questions you have.
[The statement follows:]
Prepared Statement of Dr. Donald R. Hoover
Mr. Chairman and Honorable Members of the Subcommittee: Thank you
for inviting me. I'm a Professor of Statistics at Rutgers University,
and a member of the Rutgers Institute for Health, Health Care Policy
and Aging Research. I've been funded by the Agency for Healthcare
Quality and Research and National Institute on Aging to study health
care costs. Based on this research that I've conducted with colleagues
(Drs. Crystal, Sambamoorthi and Cantor) using the Medicare Current
Beneficiary Survey, and on a review of other studies done in the past
25 years, my presentation is on medical expenditures during the last
year of life for elderly Americans 65 years and older.
I make three points. First, our nation spends substantial amounts
on medical care for persons in their last year of life; this will
increase as our population ages. Second, much of these end of life
medical care expenditures are for less intensive long term care and
other institutional care, as well as for technologically intensive
hospital care. Third, while Medicare now pays most end of life medical
costs, as the numbers of American elderly dying at older ages
increases, the States and the elderly themselves may find themselves
required to assume more of these costs.
first point--america spends substantial amounts of money for medical
care during the last year of life, and this will grow
A study we published found dying in America was very expensive.
From 1992 to 1996 an average person over 65 who died created $40,000 of
medical expenditures in his or her last year of life, more than many
people earned in a year. About one-fourth of Medicare expenditures and
one-fifth of all health care expenditures for the elderly went to those
in their last year of life. Several initiatives such as hospices and
advanced directives have tried to reduce end of life medical costs.
Despite this, end of life expenditures have not notably decreased as a
fraction of Medicare expenditures over the past 25 years. While
directed efforts to limit end of life costs may be needed, end of life
medical care expenditures may best be controlled through the same
approaches used to control other general health care costs.
second point--substantial end of life health care expenditures go to
less technologically intensive long-term and other institutional care,
as well as to inpatient hospital care
Expensive hospital based medical technology is often blamed for
higher end of life medical costs. But our research suggests that non-
intensive care of terminally ill patients 1 is almost as costly and
growing. From 1992-96 on average $15,000 was spent for inpatient
hospital care for those in their last year of life compared to $12,000
spent on non-technological nursing home /institutional care. However,
end of life nursing home /institutional expenditures are higher for
those who die at older ages. So as Americans continue to age and die at
older ages, end of life nursing home /institutional costs will rise.
third point--while medicare now pays most end of life medical costs, as
the population ages and dies at older ages, the states and the elderly
themselves will assume larger roles
From 1992-1996 Medicare paid about two-thirds of end of life costs
for American elderly. But this varied with age at death and Medicare
paid less for those who died at older ages. As the elderly American
population grows and shifts towards older ages, the States (Medicaid)
and elderly themselves will pay more for end of life medical care.
Given current financial difficulties, States may be hard pressed to
provide additional resources for Medicaid. From 1992-1996 an average
elderly person directly paid $5,200 for health care during his or her
last year of life, a great burden for this economically pressed group
and their survivors. It is unclear whether supplemental /private
insurance which currently pays only 5 percent of end of life medical
costs can assume a larger role. If end of life medical expenditures are
not reduced, there may be a need for the federal government to address
gaps in Medicare causing high end-of-life out-of-pocket costs or to
find other ways to support institutional care and relieve elderly from
out of pocket expenses incurred for end of life healthcare.
summary
Funding medical care in the United Sates is a growing problem. End
of life healthcare costs will rise and may be more and more shouldered
by the elderly and the States. While efforts to reduce end of life
medical costs should continue, the impact of these efforts may be
limited due to a growing and aging elderly population. The Federal
government may need to increase support of Medicaid programs and/or to
find other means to fund end of life healthcare.
I thank you once again Mr. Chairman and Members for the opportunity
to testify and will be happy to answer any questions you may have.
Senator Harkin. Well, Dr. Hoover, thank you very much. You
can anticipate one question from me, and that is, have you
looked at hospice care and how that figures into all this?
Dr. Hoover. Yup, okay.
Senator Harkin. So we will get back to you on that.
STATEMENT OF DAVID L. BERND, CHIEF EXECUTIVE OFFICER,
SENTARA HEALTHCARE
Senator Harkin. Last, we go with David Bernd. Mr. Bernd is
the CEO of Sentara Healthcare, in Norfolk, Virginia, as well as
the chair-elect of the American Hospital Association's Board of
Trustees. Mr. Bernd holds a master's degree in hospital and
health administration from the Medical College of Virginia. He
got his B.S. degree from the College of William and Mary, and
representing the American Hospital Association, and will
discuss how health costs are impacted by excessive and complex
regulation and administration in healthcare and will talk about
the burden of paperwork on health providers.
Welcome, Mr. Bernd.
Mr. Bernd. Thank you.
I am here today on behalf of the AHA's nearly 5,000
hospitals, health systems, and healthcare provider members.
Thank you for this opportunity to discuss regulatory relief for
healthcare providers.
Sentara owns and operates six acute care hospitals in
Virginia, ranging in size from 100 to 600 beds. We are
committed to serving the unique needs of our communities, but
often these commitments are challenged by the host of
regulations and statutes which govern each caregiver's
interactions with their patients. More than 30 agencies oversee
some aspect of healthcare delivery, and not just at the federal
level. State and local Governments add yet another layer or
two. For hospitals like Sentara, this means a constant juggling
act of complying with regulations while providing quality
healthcare to our communities.
In order to determine what impact regulations have on the
time caregivers spend with patients, the AHA, in 2001,
commissioned PricewaterhouseCoopers to ask a group of 21
hospitals about their paperwork experience. The results?
Physicians, nurses, and other hospital staff spend at least 30
minutes on paperwork for every hour of care provided to a
Medicare patient. In the emergency department, it is worse.
Every hour of patient care generates an hour of paperwork.
These numbers are mirrored even when dealing with private
sector insurance groups, payers, and regulators. Now, we
brought a copy of this study for the Committee Members, and it
will be available for you afterwards.
Another part of this study is very interesting--is this
flow chart, which is three pages in length and shows the major
regulatory changes in Medicare regulations over the last 5
years. Now, this does not include the literally hundreds per
month of smaller regulatory changes that we get briefed on, but
these are the major policy changes on Medicare, alone.
We are pleased, Senator Harkin, that you and your
colleagues recognize this dilemma and are examining the
regulatory maze that providers face every day. And thanks to
the efforts of concerned legislators and HHS Secretary Tommy
Thompson, we are making progress in relieving some of these
burdens.
The Secretary's Advisory Committee on Regulatory Reform,
fully supported by the AHA, provided opportunities for a
firsthand look at the impact that regulatory burden has on
patient care. The committee's report included 255
recommendations, some of which are currently being implemented.
A number of these were heartily endorsed by the AHA's
Regulatory Reform and Relief Advisory Committee, which I
chaired.
These provisions include adopting recommendations on
EMTALA, such as creating an advisory committee ensuring that
local medical review policies for outpatient services are not
applied to emergency department services. As I am sure you are
aware, hospitals, under EMTALA, must provide emergency services
to patients that are presented in the emergency departments,
which is obviously supportive of our community, no matter what
their insurance status. But on the back side, some of the local
review commissions come in later and deny payment, Medicare
payment, because they say these services are not necessary or
medically needed. So it is a real problem.
The other thing is to reduce the size and complexity of the
antiquated pre-PPS Medicare Cost Report and modify or eliminate
its Medicare cost-specific accounting principles. And I brought
the Committee a summary of one of our hospital's cost reports.
This 350-report, which I am sure that the Senator would love to
read in his spare time, in fact, is a summary of our cost
report. And in fact, I could only bring one box of additional
papers that support this one report. On US Air, because of the
increase of the average weight of our passengers on our
airlines, they would not allow me to bring all eight boxes. So,
Senator, it is hard to believe, but the summary report is 250
pages. We have, behind each one of these summary reports, eight
boxes filled with paper that we have to put in for Medicare
Cost Reports on an annual basis. So that is 60 boxes of paper,
with 350 pages summary of each cost report, for each hospital
we have in Home Healthcare Agency.
Senator Harkin. That is bizarre.
Mr. Bernd. It is rather mind-boggling.
These revised policies are helping to alleviate the burden
on caregivers, and we appreciate the work that you all are
doing. But hospitals, working together with you and the
Secretary, can do more. In fact, I would urge you to work with
CMS and HHS to fully implement the Secretary's recommendations.
Too much work has gone into this report to simply allow it to
lay dormant.
We would also urge you to consider additional areas for
reform. Amend the HIPAA medical privacy rule and allow
hospitals to give patients, upon admission, a list of the types
of disclosures that may be made using their information. Such
actions makes more sense and strike an appropriate balance
between patient confidentiality and caregiver burden. They also
require less resources from caregivers, such as attempting to
build an expensive new disclosure tracking database.
Again, in a study AHA financed, one hospital in Boston,
150-bed hospital, relatively small size, on average has 300,000
disclosures required by law per year for its patients. And
under current HIPAA regulations, we would have to get, for each
one of those disclosures, an independent approval from patients
to disclose this information. It is mind-boggling.
We need to recognize that EMTALA should not apply to
inpatients. Once a person is admitted as an inpatient, the
hospital actually has taken responsibility for more than is
required under EMTALA.
Allow providers direct access to court to challenge
decisions made by CMS. Currently, the only way to appeal
decisions made by CMS is to fail to follow the rules, get
kicked out of the Medicare program, and then appeal to the
courts for relief. No other Federal agency operates in this
way.
Simplify the data-collection process that uses OASIS and
MDS forms. Establish common sense guidelines for regulations.
Regulations should be clear, unambiguous and well documented.
They should also enable better communication between all
parties involved--regulators, healthcare providers, and
patients--as well as be cost effective. And they should
encourage the pursuit of excellence through best practices.
prepared statement
Our first priority is our patients, to provide high-quality
medical care in the appropriate setting. While some regulations
contribute to this goal, I think you can see that others drain
away much-needed resources, placing a strain on our hospitals
and the men and women who work there and take care of our
patients. AHA believes healthcare should be regulated, but in a
common sense manner that allows healthcare providers to do what
they have been trained to do best, take care of the ill and
injured in our communities.
Thank you for your time today. We look forward to working
with you and your colleagues further to provide needed relief
from over-burdensome regulations.
[The statement follows:]
Prepared Statement of David L. Bernd
Good morning, Mr. Chairman. I am David Bernd, chief executive
officer of Sentara Healthcare in Norfolk, Va., and incoming chairman of
the American Hospital Association (AHA). I am here today on behalf of
the AHA's nearly 5,000 hospital, health system, network and other
health care provider members. We're pleased to be able to testify on
regulatory relief and reform efforts for the health care field.
Sentara Healthcare owns and operates six acute-care hospitals in
Virginia, ranging in size from 100 beds to nearly 500. At Sentara, we
are committed to developing hospitals and health care systems that
serve the unique needs of our communities.
Patients are our priority--no matter the time, no matter the
condition and no matter the hospital. Our facilities are open 24 hours
a day to provide health care services to our friends and neighbors in
the communities where we work and live.
But every time the nurses, physicians and other health care workers
care for a patient, a host of regulations and statutes govern their
very actions, especially if the patient is a Medicare or Medicaid
recipient. More than 30 agencies oversee some aspect of that health
care delivery process--and that's just at the federal level. State
agencies add yet another layer--or two. More than 130,000 pages govern
the Medicare system--a sheaf of paper three times larger than the IRS
Code and its federal tax regulations.
paperwork versus patient care
In order to estimate the amount of time caregivers spend on
paperwork, the AHA commissioned PricewaterhouseCoopers (PwC) in 2001 to
conduct a study of a group of America's hospitals about their paperwork
experience. Amazingly, PwC found that physicians, nurses and other
hospital staff spend on average at least 30 minutes on paperwork for
every hour of patient care provided to a typical Medicare patient. In
the emergency department, every hour of patient care generates an hour
of paperwork including paperwork to comply with the vast array of
federal, state and local health regulations. The study examined a
typical episode of care for a Medicare patient suffering from a broken
hip. We have provided a copy of the study for the record.
While the PwC report did not evaluate the paperwork requirements
placed on hospitals by the private sector, such as private health
insurance plans, outside regulators, etc., we do know that these
requirements mirror the paperwork burdens imposed by the Centers for
Medicare & Medicaid Services (CMS). These numerous private sector
payors and regulators add to the paperwork morass, since each typically
has unique requirements with which hospitals must comply.
Complete records and documentation, and compliance with important
safety standards, are essential to making sure our patients receive
safe, high quality care. But complying with the numerous regulations
issued by CMS and other federal, state and local regulatory agencies
should not dominate a caregiver's day. These regulations and statutes
do not always enhance the patient care experience--in fact, quite the
opposite. They absorb valuable time and resources--time that could be
spent caring for the next patient to come through the emergency
department doors, and valuable resources that could be used to purchase
new, life-saving technologies.
We are pleased, Mr. Chairman and Ranking Member Harkin, that you
and your colleagues recognize this dilemma and are examining the
regulatory maze that health care providers face. During the 107th
Congress, the House unanimously passed H.R. 3391, the Medicare
Regulatory and Contracting Improvement Act, which included a number of
regulatory relief initiatives proposed by the AHA's own Regulatory
Reform and Relief Advisory Committee, which I chaired. The bi-partisan
legislation was reintroduced this year in the House (H.R. 810) and
awaits action on the House floor. Though key members of the Senate
advanced a regulatory relief package in the 107th Congress, similar
legislation has not been introduced in the Senate to date.
HHS Advisory Committee on Regulatory Reform
We're still a long way ahead of where we started, though, thanks in
part to the interest legislators have taken in an issue that directly
impacts our patients, and thanks in part to Health and Human Services
(HHS) Secretary Tommy Thompson and his Advisory Committee on Regulatory
Reform.
Secretary Thompson's committee consisted of health care
professionals, academics, beneficiaries and others committed to
ensuring quality patient care with less burdensome regulations. The AHA
fully supported the work of this committee, and, with our member
hospitals, provided opportunities for the Advisory Committee and HHS to
see first-hand the consequences that the regulatory burden has on
patient care. The Advisory Committee's report to Secretary Thompson
included 255 recommendations--some of which have been implemented, some
of which are currently being implemented, and a number of which were
heartily endorsed by the AHA, such as:
--Adopting recommendations on the Emergency Medical Treatment and
Labor Act (EMTALA), including establishing an advisory
committee and ensuring that local medical review policies for
outpatient services are not applied to emergency department
services.
--The Medicare Cost Report.--This relic of a previous cost-based
payment system, used prior to the current prospective payment
system, should be evaluated and overhauled to reduce its size
and complexity, and its arcane Medicare-specific cost
accounting principles should be modified or eliminated.
--Streamlining the Minimum Data Set (MDS) for most nursing homes by
convincing the CMS to reduce the size of the MDS, and thereby
reducing by half the staff time spent on completing it.
--Convincing CMS to streamline the OASIS form by eliminating 27
percent of the information items currently reported by home
health agencies and two of the 10 assessments currently
required, reducing by 25 percent the time spent by nurses on
OASIS data reporting.
--Urging CMS to revise its policy for collecting Medicare Secondary
Payer information from every 30 days to every 90 days for
recurring outpatient services in hospitals, and from every 60
days to every 90 days for hospitals serving as reference labs.
--Changing the Health Information Portability and Accessibility Act
(HIPAA) privacy rule so that patients no longer have to wait
until a consent form is signed to receive care, and so that
providers will have ready access to needed patient information
in order to continue to provide timely, quality care.
--Addressing key concerns of rural providers. The committee
recommended consolidating the definition of rural to one
definition. In the past, the definition of ``rural'' was
different for hospitals versus health clinics. The committee
also recommended focusing on investing in best practices, as
well as providing more information to rural providers about the
more than 200 HHS programs that affect rural communities and
their health care entities.
What Needs to Be Done
We've made great strides in addressing the regulatory burdens
hospitals and caregivers deal with every day. But by continuing the
collaborative working partnership between hospitals, HHS and Congress,
we can make even bigger strides to reduce the red-tape burden on
caregivers and strengthen our ability to continue providing the world
class medical care that is the hallmark of our health care system. I
would encourage you and your colleagues to keep the pressure on HHS and
CMS to fully implement the Secretary's recommendations. Too much work
has gone into this report to simply allow it to lay dormant.
In addition, we would urge you and your colleagues to examine
additional areas for reform.
--HIPAA Medical Privacy Rule.--Hospitals have a long history of
protecting the privacy of patient information and this rule
goes a long way toward furthering this protection. However,
hospitals are facing an enormous administrative burden in
trying to comply with the rule's accounting for disclosures
requirement under the rule--a provision which states that
hospitals must track all disclosures made outside of providing
treatment, payment, and health care operations in case patients
request an accounting of those disclosures. Everyday, hospitals
are required by law to disclose patient information for
purposes of public health reporting, oversight activities,
disease registries, etc. While all of these are important
reporting laws, building information technology systems capable
of tracking these disclosures is, at best, enormously
expensive, and, in some cases, unobtainable depending on the
availability of vendors to provide the services. For example, a
150-bed hospital in Boston estimates that they make 300,000
legally required disclosures a year. Because each disclosure
takes 30-60 seconds to document and enter into a database, the
hospital would need to hire two full-time employees just for
data entry. Imagine the cost to a 500-bed--or larger--hospital.
These are resources that could and should be used to provide
patient care, not spent on paperwork. A common sense solution
exists, however: at admission, patients could be given a list
of the types of disclosures that may be made using their
information. The important goal of informing patients about
disclosures would be met without adding to the hospital's
paperwork requirement.
--EMTALA.--We believe that EMTALA provisions should not apply to
inpatients. Congress enacted EMTALA to ensure that people have
access to emergency services regardless of their ability to
pay. Once a person is admitted as an inpatient, the hospital
has taken responsibility for more than is required under
EMTALA. At that point, the usual hospital-patient and
physician-patient relationships exist, creating duties of care
for the hospital and physicians, and giving patients legal
recourse if those duties are not met. In addition, keeping all
hospital staff current on EMTALA regulations--not just the
statute and formal requirements, but the continually evolving
informal guidance--takes additional time away from providing
direct patient care.
--Allow providers direct access to courts to challenge decisions.--
Unlike other federal agencies, Medicare program policy
decisions made by the Secretary are insulated from judicial
review. Health care providers are required to exhaust all
administrative processes and remedies before they can file suit
against HHS. However, there is effectively no such process to
exhaust on questions about whether the Secretary has exceeded
his authority or failed in his duty.
Under Shalala v. Illinois Council on Long-Term Care, 120 S. Ct.
1084 (2000), the Supreme Court held that all matters arising
under the Medicare Act must be channeled through the Secretary
and that court review was available only following the
administrative process. The only time an administrative process
is available to hospitals to challenge a policy of general
applicability is if they are terminated from the program.
Consequently, as currently interpreted, the only means for
hospitals to challenge an unlawful action by the Secretary is
to fail to follow or ``violate'' the rules in order to be
terminated from the program. This means that the Secretary can
act outside the scope of his authority, without following
required procedures and be insulated from judicial review--
unlike other federal agencies.
--Simplify data collection process.--Currently OASIS and MDS use very
similar data collection tools, but they are unable to
communicate with one another and share data. Interoperability
between the two systems would greatly reduce the burden to
providers.
Establish Guiding Principles for Regulation
Regulation is essential to protecting patients and building public
trust and confidence in the system. But unnecessary, poorly targeted or
poorly implemented regulations may be of little benefit to the public,
frustrate health care providers and the patients they serve, and
interfere with appropriate care delivery. We would suggest that the
following be used as guiding principles for the promulgation of health
care regulations:
--The need to regulate behavior and the underlying objective of a
regulation must be clear, unambiguous and well-documented. For
hospitals, regulations should be used to protect patients from
harm, ensure that quality and other care and safety standards
are met, inform the public about their care, prevent fraud and
abuse, control expenditures under government programs, and
ensure fair functioning of the market for competing providers.
--Regulations should facilitate channels of communication between
regulators and providers, and accountability of providers to
their patients and communities.
--Regulations should be cost effective; linked to specific objectives
and regularly assessed as to whether it achieves its
objectives; based on sound scientific, technical, economic and
other relevant information; minimize the cost of compliance
assessment for both the regulated and regulators; and embody
the greatest degree of simplicity and understandability
possible.
--Regulations should establish a safe haven for innovation and
encourage the pursuit of excellence through best practices.
--Regulations should be applied prospectively and their
implementation appropriately staged to avoid disrupting patient
care activities, unnecessary costs, and overwhelming
administrative functions and information systems.
--Interpretive guidance and CMS manuals should be kept up to date and
harmonized with underlying regulations. All too often, the
guidance and manuals are out of date and thus present
conflicting rules for providers and patients.
conclusion
Our first priority is to provide high quality care to our patients.
While some regulations contribute to this goal, others drain much
needed resources, placing a strain on our hospitals and the men and
women who work there. We believe the health care field should be
regulated--but in a common sense fashion that allows health care
providers to do what they've been trained to do--care for the ill and
injured in our communities.
Thank you for your time today. On behalf of the American Hospital
Association and its members, we look forward to working with you and
your colleagues further to provide needed relief from overly burdensome
regulations.
Senator Harkin. Thank you very much, Mr. Bernd.
Boy, where do you begin on this? Well, where we ended up.
What about what Dr. Mentel has done down in Jacksonville, in
terms of getting rid of some of this paperwork and doing a
paperless system? Does that answer some of this, or does it
not? I am a little confused here, because his regulations there
are the same that you have got. He has a hospital there, and
he--I am trying to figure out whether his approach is one that
really works for your hospital. Could this apply to all
hospitals?
Mr. Bernd. It certainly could. I think a paperless system
is something that is a goal of probably every healthcare
organization in the United States. And as the Doctor mentioned,
though, it is extremely expensive. And with----
Senator Harkin. Yeah.
Mr. Bernd [continuing]. 30 to 40 percent of our hospitals
running in the red, they do not have the capital available to
invest in these systems. So it is one thing, we hope, that
Medicare and Medicaid may be able to help us do in the future.
But the information system he is talking about would not
take care of the problem with having to produce these Medicare
Cost Reports. That is done at the end of the fiscal year, and
it is an accounting matter. It does not have anything to do
with patient records, and he has automated patient records. But
I think it is really excellent work they have done at Mayo.
Senator Harkin. But I do not understand these reports.
There are 350 pages.
Mr. Bernd. Right.
Senator Harkin. And that goes to CMS?
Mr. Bernd. Yes. This is mandated, that each hospital
produce this type of report on each institution, on an annual
basis. It is the basis that Medicare can come in and audit your
Medicare financing for hospitals. And so, literally, we
probably have 3,000 pages per year per hospital, with these
eight boxes of attachments and the summary of the Medicare
report.
A lot of the information is outdated. It has not been
modernized. It still predates back when we had cost-based
reimbursement, where the Government had to track all the costs
in the hospital because we got paid on a cost basis.
Now, of course, we are paid on DRG basis, which we have a
flat set of money, and lot of this information is not needed
anymore. We just have not had the effort or the reform to do
away with a lot of these needless regulations. We really do
need your help in that area.
Senator Harkin. And does AHA have recommendations for us of
what needs to be done?
Mr. Bernd. Absolutely. Yes, sir, Senator. And we have
provided those to you and your staff.
Senator Harkin. And we have those, right? Okay. All right.
I just wonder if, in some of the debate that is coming up
on Medicare and stuff, I know it is all focused mostly on
prescription drugs, but I am wondering if we should not--when
the horse is leaving the barn to try to get on some of this,
too, to see if we can streamline some of this.
Mr. Bernd. Absolutely. If you think about it, with 1 hour
of paperwork for every patient hour of care in an emergency
department, you can see why the system is so expensive.
Senator Harkin. I thought you----
Mr. Bernd. It is part of the reason----
Senator Harkin. I thought you said it was 30 minutes per
hour.
Mr. Bernd. That is on a medical/surgical unit, 30 minutes
per hour. In the emergency department, it is worse.
Senator Harkin. Oh. It is one for one.
Mr. Bernd. One for one, yes, sir.
Senator Harkin. Oh. Hmm. But what Dr. Mentel did down in
Jacksonville--I will get to the capital issue of it here soon--
but would not that then replace all this paperwork? Because at
the end of the year, could you not just send in the CMS data
that would be paperless? Just electronic data?
Mr. Bernd. Well, in fact, what we are dealing with here are
the business systems, and he is talking about a clinical
system. And in fact, the business systems already are
automated, but we still have to produce this paper.
Senator Harkin. I see.
My staff just informed me that what you are dealing with is
patient care, and what you are dealing with is administration.
Mr. Bernd. Yes, sir.
Senator Harkin. Patient care--I mean, I do not know where
one ends and one begins.
Mr. Bernd. Well, they are all part of the same system, but
they are different----
Senator Harkin. Yeah.
Mr. Bernd [continuing]. Different regulations. This is the
business aspects of healthcare to meet the regulations of
Medicare.
Dr. Mentel. They blur. It does become confusing. I charge
whenever I perform a function. I order, and it ends up being a
billable event.
Senator Harkin. Right.
Dr. Mentel. But I think--I end up spending a ton of money
on programmers programming to get the data that he needs--even
if I automated the darn thing, I would still be spending
buckets of money on programmers to get the data out he needs to
report, which he believes does not really need to be reported
anyway in the current day and time.
Senator Harkin. Hmm. Yeah, I--well, I do not know. I have
to think about this some more, in terms of the necessity of
having some way of having just sufficient data on which we can
make public policy decisions.
Mr. Bernd. Absolutely.
Senator Harkin. You have got to have that. And then--but
going overboard on some of this stuff--I mean, I have got to
believe that that 350 pages really--no one really looks at
that.
Mr. Bernd. No. And again, it is 350 pages of summary. It is
actually thousands of pages, because there are eight boxes
behind this.
Senator Harkin. You told me, yeah. Yeah.
Mr. Bernd. It needs to be streamlined. It needs to be
brought up to date. It needs to be less burdensome, because it
is just eating up too many of our resources. This is just one
example. There are hundreds of other examples of over-
regulation and paperwork that--it is costing us a lot of money
and forcing--it is part of the--why we wanted to testify on
this is it is part of the reason healthcare costs continue to
accelerate.
Senator Harkin. Uh-huh.
Mr. Bernd. You know, it is not the whole reason, but----
Senator Harkin. Right.
Mr. Bernd [continuing]. It is a significant part. And we
have had good cooperation from the administration and this
committee to try to work on this. We just want to make sure
everybody realizes how important it is and that we can
hopefully reduce the increase of inflation in healthcare. This
is one of the ways to do it.
Senator Harkin. Just one last question for you Dr. Mentel.
How did you convince Mayo to come up with the capital for this?
Obviously, hospitals are strapped. I know that. Obviously, this
took some up-front investment to do this. I know you show the
payback is pretty good.
Dr. Mentel. Yeah, it was a bit of a gamble.
Senator Harkin. Yeah.
Dr. Mentel. But with healthcare the way it has been going,
we needed to take that gamble, basically, to try to reduce cost
in a method that would not impact quality. And so the goal was
basically to see if we could maintain the quality while
attempting to reduce the cost, so it was an investment. It was
just like any other investment you might make. ``We're going to
spend x. We hope to have x-plus come back by the time it's all
done.''
Senator Harkin. And your data shows that you are getting--
--
Dr. Mentel. Yeah.
Senator Harkin [continuing]. A great return on that.
Dr. Mentel. Yeah.
Senator Harkin. I am just wondering what we should do
nationally, maybe through Medicare or something else, to try to
encourage other hospitals to go that route.
Mr. Bernd. It might be good to fund some demonstration
projects. I know that we cannot fund everybody, but, you know,
to get some examples out there at different types of
institutions that could have some research money from Medicare
that would help set up precedents to show--I think we need to
build the case, as Mayo has, through all of our hospitals that
these kind of systems can pay for themselves in the long run.
Senator Harkin. I like that idea.
Mr. Bernd. And that is a possibility.
Senator Harkin. I like that idea a lot.
Mr. Hickman, if chronic care costs so much, and you have
shown that disease management is effective in reducing these
health costs, my question is, why is everyone not doing it? It
would seem to me to be in the best interests of every hospital
to be doing this. So why are we not?
Mr. Hickman. We invest in disease management at our own
expense. There is no reimbursement for paying for investing in
nurse case managers or in the computer systems. That is at our
own expense. And we get a payback, but it is about breakeven.
Our payback is just in avoiding further financial losses. In
heart failure, in some of our previous studies, we lose about
$1,000 for every heart failure admission. So if we can care for
our patients in other settings, at home, we avoid those
financial losses.
So, for us, for hospitals, there is not that much of an
incentive to get into it. The big incentive comes--or the big
payback is in from insurers. When we avoid a readmission to the
hospital, you know, we may avoid some financial losses, but
Medicare or Medicaid or the commercial insurer, that is who
really reaps the big benefits. There is about a three-to-one
payback there.
Patients, they get some benefit because they do not have
any out-of-pocket costs related to the hospitalization. The
hospitals get a little bit of a break there. So, overall, it is
about a five-to-one payback, but the big payback is to
insurers--Medicare, Medicaid. So there is just not that much of
an incentive for hospitals to do it. We do it because it is the
right thing to do and we are values based.
Senator Harkin. Are there any provisions in Medicare that
would allow for the up-front payment or establishing chronic-
care management programs?
Mr. Hickman. Well, there are some demonstrations going on
at our hospital, Mercy Medical Center, in North Iowa. They are
in a 5-year Medicare demonstration of--for case management to
try to improve the case management. That is more of a
community-based case management approach. The approach we are
using now is more of a telemanagement approach.
Senator Harkin. Uh-huh.
Mr. Hickman. But otherwise, there is no reimbursement for
the kind of disease management that we do.
Senator Harkin. Yes, Dr. Davis?
Dr. Davis. Commonwealth funded Don Burwick, at the
Institute for Healthcare Improvement, to do a business case
studies for quality, using the Harvard case-study method. And
they looked at seven--mostly hospitals around the country. And
what happened in Mr. Hickman's case happened in all of these
places. The hospital spent money to implement a cholesterol
control program, a diabetes management program. The patient
benefitted by living longer. There might be reduced
hospitalization, which normally loses the hospital money
because they have fewer patients coming in. But the insurance
company, or Medicare, saves. Medicare certainly saves when a
diabetic patient is controlled at age 50 and then does not go
into end-stage renal disease and cost Medicare money. But it is
the problem of the payoff going to a different party or at a
different time.
What Medicare would need to do to deal with this is either
to cover case management, as in the example Mr. Hickman's
given, or pharmaceutical management--at Henry Ford used a
pharmacy team--to really make sure that cholesterol was being
controlled. But they had to pay the cost of those pharmacists
to monitor that control, themselves.
So adding case management to Medicare as a reimbursable
service, pharmaceutical monitoring, as a reimbursable service
would help, but I also think Medicare needs to be concerned
about this pre-Medicare--older adults, who are--when the
diabetes is starting and, as Dr. Fries says, put off really
getting those--and that means finding a way to provide some
direct support for these--chronic disease management and what I
think of as the 50- to 64-year-old pre-Medicare age range.
Senator Harkin. Okay. I am just going to--anybody who has
got any thoughts on this, just--I am sort of just going down--
following from one statement to the other. Because, if what you
just said, Dr. Fries, if we can get control of this--I mean, it
is--if we had control, and if we can get this kind of case
management system going, then it would seem to me then that you
do buy that extra period of time in there that you are--that is
my phrase. You push the onset back a little ways, right?
Dr. Fries. That is correct, and I----
Senator Harkin. You save a lot of money. You told me--I
wrote this down; I thought it was interesting--if you decrease
the rate of disability by 1.5 percent per month----
Dr. Fries. Per year.
Senator Harkin [continuing]. 1.5 percent per year.
Dr. Fries. Yeah.
Senator Harkin. I am sorry. Per year--that's--Medicare is
solvent.
Dr. Fries. That is correct.
Senator Harkin. But you say it is already going down by 2
percent a year.
Dr. Fries. That is correct.
Senator Harkin. So Medicare is solvent.
Dr. Fries. If one plugs in those particular numbers, it is.
But of course that is dependent upon a projection which says it
will continue to go down by 1.5 percent or more per year for
the next 50, 70 years. So it is a continued effect. And the
question is whether you have achieved a one-time effect. And I
am sort of emphasizing a long-term strategy in which we work on
the biggest cost problems and drivers on the side of making
sick people who require services--as we are moving along, so
that we can keep that line going. I believe we could actually
accelerate it.
It is interesting, because Uwe Reinhardt, who is a well-
known economist, talked about what would happen when the care
of the gross national product for medical care got to be 100
percent. And he projected it was going to happen, I guess, late
this century. And he saw the world as one in which everybody
was a doctor, and they were in two-bed rooms, and they were
feeding each other intravenously.
That was the society which was envisioned. And I would like
to, you know, counter-mark that by saying if we had a society
in which nobody got sick or hurt, we would not need any system
at all. Costs would go to zero.
So let us just say that we can move a little bit toward
there. And if we do it in a responsible, careful way--the
arithmetic for Medicare goes something like this with regard to
existing retiree randomized control trial data. A program which
costs about $100 per person per year, and it is administered on
a population basis through the mail and telephone, with
tailored print interventions, will save about five times that
amount, or $500 per year, in the first year, and that amount
will grow slightly in succeeding years. So you can get an ROI
of about five to one. The return can be very quick, with regard
to providing some slack in the Medicare system.
That is what the plan is now. The plan was the RAND review
of whether this was a feasible approach, which said yes, it
was; the design of a demonstration project, which is a very
elegant randomized controlled trial which Medstat is currently
in the process of completing; the implementation, hopefully, at
the end of this year, and then going for the next couple or 3
years, of the demonstration project itself, with yearly
evaluation; and then the case made for a Medicare benefit which
incorporates the proven arms that come out of the demonstration
project.
So there is a plan. It could get to a Medicare benefit
stage where we are asking for large appropriations by 2008. It
will not happen tomorrow, even if we are very quick about it.
But it is very important that we get started. At the same time,
we can encourage the private sector, and there are a variety of
other folks, as to the same argument for work sites, for the
50- to 64-year olds that Karen's considered about there. There
are productivity issues. There are ways to return, by having
healthier populations. There are ways to return money to the
same people that are paying the money out, which is the
argument that we are sort of having here. There is a mismatch,
that you put in something visionary, and it works, and somebody
else saves money. And that is not very much of an incentive for
the hospital to put in the information systems or the chronic-
disease management systems to evaluate them, and so forth,
because they are saving money for another pocket. Somehow or
other we have to get that set so that the same pocket that
saves the money pays for the program, and then it becomes self-
sustaining and can actually build.
Senator Harkin. Well, if you have got some suggestions on
how we do that, I would like to know.
Mr. Bernd. Well, Senator, I think one thing we could do and
look at--and AHA is thinking about this, too, along with AMA--
and that is to start paying providers, particularly Medicare,
for clinical outcomes; paying for quality outcomes. Right now,
we just pay across the board. Everybody gets paid the same
amount of money. If we incent our institutions to do a better
job, to maybe have a little larger reimbursement for
institutions who do a better job and have better outcomes,
lower length of stay, less complications, it probably could
help greatly reform the Medicare program. It could really lead
a reform of healthcare delivery in the United States.
Senator Harkin. So you pay on the basis of outcomes.
Mr. Bernd. Right. And it is not easy to do. And I know CMS
is looking at it. But if you could start paying on quality
outcomes, then it would encourage providers to start doing
disease management, to----
Senator Harkin. Right.
Mr. Bernd [continuing]. Start taking care of the
chronically ill----
Senator Harkin. That is right.
Mr. Bernd [continuing]. Because they are being paid on
quality outcomes, rather than just providing a straight
service.
Senator Harkin. Do you think that that is possible to do
that, to set up a system like that?
Mr. Bernd. I think it is. Possibly one of the ways to do it
is, in the future, with updates, inflationary updates, of
Medicare, if we could get a decent inflationary update, to
start using part of that update to provide a better payment for
clinical outcomes. And I think what you would see is an
overnight change of the way providers work. It is very hard to
take the pie now and split it up. But out of future increases
of Medicare, it is possible.
Dr. Fries. I would just like to amplify that a little bit.
There are a lot of us that have been--a lot of us here--that
have been interested, a long time, in outcomes improvement, and
say that that is really the job of a service profession, is to
improve health outcomes. And everything we do should be focused
on this. And one problem, of course, in terms of measuring and
monitoring how much progress we are making toward improving
outcomes, is, some part of a rubric, probably in future
information systems or in future--hesitate to say--accounting
mechanisms, but you are going to need to know individual
disability, for example, and a couple of other quality-of-life
measures, on a yearly basis, because you are going to have to
measure this group of 50,000 people that are insured and being
provided--are in a particular hospital system, and you are
going to have to know that they actually have better outcomes.
So you are going to have to measure those outcomes, or there is
no way that you can do that.
But if you did have that system in place--and I think it
could be anything but onerous, compared with what we are
talking about, be very, very simple--and then you were to pay
people for keeping better outcomes than the competing
healthcare system, you would have a real horse race.
Senator Harkin. Do we have anything out there anywhere that
can show us the way on that?
Dr. Fries. We do----
Dr. Davis. Senator?
Dr. Fries [continuing]. We do it experimentally, so we know
it can be done. I mean, I have 17,000 people that are under
such monitoring. You would not do it as ambitiously as we do if
you were to do it on a larger scale, but it is a feasible thing
to do.
Dr. Davis. Senator, if I----
Senator Harkin. Yes.
Dr. Davis [continuing]. Could add to that?
Senator Harkin. Yes.
Dr. Davis. We have done a study of what is called ``value-
based purchasing'' in the private sector. I have got a
reference to it at the end of my testimony. But you take a
company like PacifiCare. They are starting to give bonuses to
group practices whose HEDIS quality scores for diabetes
management, for example, are up in the top range, so they are
giving bonuses. They are actually spending $15 million a year
on bonuses to group practices that----
Senator Harkin. But what is the bonus based on?
Dr. Davis. It is having good diabetes controls. So, in that
case, it is getting your hemoglobin A1C level down below, say,
a nine level. So having a high percent of your patients whose
diabetes is getting controlled.
Let me give you another example. Johns Hopkins Hospital has
recently started using--and I may need Dr. Mentel's help here--
catheter impregnated with antibiotics for heart-valve patients,
and they reduce their infection rate to zero over the first
nine months that they have tried this new technique. Now, under
Medicare's normal payment system, that patient with a hospital
infection would probably be an outlier, and they would pay
more. If we were willing to say, ``You'll get a bonus on your
DRG if you have a low infection rate,'' then more places would
adopt the technologies that would actually get the infection
rate down. It is most costly for the hospital to do it, but it
is better care. In the long run, it is better--it is more
efficient for Medicare. So that is one concrete example.
Mr. Hickman. Senator, I have another example. I believe it
is BlueCross of Michigan that pays a bonus now, as Karen was
talking about, for achieving certain outcomes. Now,
fortunately, right now, across the country, you are starting to
see some consistency in measures that are being agreed upon,
clinical quality outcome measures, from American Hospital
Association, CMS, Joint Commission. You are beginning to see a
set of clinical quality measures that everyone is agreeing on--
would-be good measures. BlueCross of Michigan, I believe, is
doing to this already. They are paying--and I believe it is a 5
percent bonus if you achieve certain higher levels of quality.
So you might want to ask your staff to look into that one
particular area.
Senator Harkin. Right.
Mr. Hickman. But the quality initiatives, especially
American Hospital Association, now, through their voluntary
reporting project, you are getting some agreement across the
country on what could be measured and what are good measures in
cardiovascular care--pneumonia, for example.
Senator Harkin. See, it seems to me this is--it has been a
kind of a--how do you--you can measure on an illness, if
someone gets ill, and what--the reimbursement rate and stuff--
but how do you get a measurement of wellness so that you build
in incentives? I supposed you could look at the data right now
and say, well, if you fall below--or if you do certain things
and your rate of increase is not so much, I suppose you can get
a bonus. Is that----
Mr. Bernd. I think you have to start--you probably have to
start with a certain disease process, such as we talked about
this morning--diabetes or congestive heart failure, a set
population of Medicare beneficiaries--and incent the right type
of care, the use of these case managers, and monitor that, and
then pay on the results. And what you will see is, the total
Medicare cost will go down. There is no doubt about it.
We run a health plan with 300,000 members, on the private
side, and we have seen significant decreases in our cost in
treating those types of patients. But we are doing it within
our own system. It is similar to these other demonstration
projects. We need to change the entire Medicare program on this
basis, and I think you will see we will get better care, better
outcomes, happier consumers, and I think we can decrease the
increased costs of Medicare over the long run. But somebody has
got to step forward and take the bold step to change the
system.
Senator Harkin. Yeah. It sounds like the kind of thing that
you cannot do in one fell swoop. But you can do some
incremental things. Like you say, at least focus on a couple of
disease groups, like diabetes, congestive heart failure. Is
there anything else that leaps to your mind, other than those
two, that might be really good examples? Are there a couple
others that you might think of?
Mr. Hickman. COPD and asthma, chronic obstructive pulmonary
disease and asthma, are also two areas that need focus.
Depression is another.
Senator Harkin. Let us see. Asthma--what was that? Chronic
obstructive----
Dr. Fries. Emphysema.
Senator Harkin. Yeah.
Dr. Davis. If I could just elaborate on the asthma, the
Children's Hospital in San Diego cut their length of stay for
pediatric asthma in half through better management. But the
California Medicaid program pays per day. So they actually get
penalized financially by cutting the length of stay in half. So
I think there are also some issues in the Medicaid program
about the need to restructure the incentives to reward, not
punish, better quality.
Dr. Fries. Senator, the research in the area has tried to
separate out process measures of care--that is, hemoglobin A1C
sorts of things--and the outcomes of care. And there are
elaborate guideline systems which have attempted to codify
clinical reasoning so that the process measures are better
linked to the outcome. So we now know, for example, in
diabetes, because that has been the subject we have been having
here, that improving the hemoglobin A1C does improve outcomes
in diabetic people. We know that having the diabetic see an
ophthalmologist yearly, after the first 5 years, to look for
early proliferative retinopathy is important. We know that
certain anti-hypertensives in diabetics are effective at
prolonging the period of good renal function and delaying any
onset of complications in those areas.
So those are, sort of, a perfect area where we can take a
process measure, which, by itself, does not mean anything to
the patient, but we can, with some confidence, say this should
be done because it will improve outcomes.
Now, my viewpoint is a little different than the disease-
specific one, although I do not disagree with the disease-
specific one at all. It is that we do have interactions between
diseases and between drugs for those diseases. And so unless we
start looking at outcome measures which are truly outcome
measures--like the level of disability in a population, or the
level of mortality rates in a population, number of hospital
days per year in that population, compared with something else,
really global things--then we miss the fact that the anti-
hypertensive drug does this, the anti-arthritis drug causes
heart attacks. And so you would have translations across. And
you can have areas--and, in fact, the medical literature is
pretty full of them--in which you have improvement in a
disease-specific thing, but no effect on, let us say, total
mortality.
Senator Harkin. Yeah.
Dr. Fries. So that you have some intervention which makes
sense at the local disease level, but, somehow or other, in the
system, they are compensatory losses, so that you really did
not get the gain out.
So we clearly need to work this on several fronts. And I
would say the process area, in hooking it to outcome, looking
at the major disease categories which people have been
gravitating to just because of their magnitude, the ones we
have been listing, and then look at overall health outcomes,
and see if we cannot beat some of these other countries.
Dr. Hoover. The one cautionary note is, this reminds me of
something similar I was involved with, where they were trying
to come up with an improvement measure, or improving an
outcome, but the concern was that the institutions--in this
case, Long Term Care Facilities--would select the patients, so
that they would be able to get the outcomes, and that there was
a fear that there might be some discrimination against patients
they thought were not going to comply or who medically were not
going to meet the outcome. And so----
Dr. Fries. There are adjustments for that, though. I mean,
it is----
Dr. Hoover. Yeah, but----
Dr. Fries [continuing]. From your field.
Dr. Hoover. Well, no, but I mean, in terms of the
implementation of the----
Dr. Fries. Oh.
Dr. Hoover [continuing]. Program, too. Once things are up
and running, the hospitals then, themselves, might try to--and
that was the concern.
Dr. Fries. It is clear there needs to be case-mix
adjustment, and people have tended to do that. For example, the
academic medical centers tend to see more complex, more
difficult kinds of patients. And you have to have some way of
adjusting for that.
Dr. Hoover. Yeah, but even beyond that. For example, you
think a certain ethnic group is not going to comply with the
procedures or things like that. I mean, there could be other
problems.
Mr. Bernd. We do a random sample, a blind sample, of the
cases that you put in place.
Another good example is of schizophrenia patients under our
health plan in Norfolk, Virginia. We put case managers in place
that communicate with these people on a daily basis to make
sure they are taking their medications and to make sure they
are eating right. And it is very simple, but it is expensive.
But it is simple, and we have been able to reduce admission
rates by 50 percent, both the emergency departments and in-
patient admissions, of these patients. It can be done.
So you can see, if we could incent--we are doing this
through a grant from our own internal foundation and from a
grant from a pharmaceutical company.
Senator Harkin. Thank you, Doctor.
We have been joined by our distinguished colleague, Senator
Craig, from Idaho, and I would yield to him for statements,
questions, observations, or whatever you like.
Senator Craig. Thank you very much.
Senator Harkin. We have had a great discussion here, by the
way.
Senator Craig. I know, and I missed it, and I apologize. I
am going to read your testimony, lady and gentlemen, because I
am--we are all very interested in this issue, and I think we
are all very concerned at this moment, as we reform Medicare
and add prescription drugs to it and try to project its cost,
that we just open the door to the U.S. Treasury and step back,
all in the name of humanity and all in the name of older
Americans who need. And I hope we have not done that. I am
obviously going to vote for the legislation. At the same time,
I know our ability to project. Also, I know our inability to
micromanage effectively at this level. So I hope we can create
some diversity in that new program that will allow the
marketplace opportunity to help us micromanage.
Now, having said that, Dr. Hoover, in another iteration I
am chairman of the Select Committee on Aging, and I have spent
the last good number of years looking at the demographics of
our aging population and, of course, the impact they have now
on the healthcare system and on all of our social systems, if
you will, or public policy systems where we are involved.
Marvelous things are happening out there to our aging
population. They are also darned expensive, and I tell my folks
that, who are aging. And I am about to become a--I am in that
boomer class, so I am going to be part of the problem here in
the near future.
I say that all in good humor, but, in reality, we have some
very real concerns that both aging Americans and mainstream
workforce Americans are going to have to face collectively
together. And I have read bits and pieces of your testimony.
But my frustration is, and your studies apparently have shown,
that it is darned expensive to die in this country. Nobody
wants to get sick, and nobody wants to die, but dying is more
expensive than getting sick in some instances.
So visit with me about that for a few moments. We have got
to figure out a cheaper way to die in this country.
Dr. Hoover. Well, it is also the getting sick before you
die----
Senator Craig. Yes, of course.
Dr. Hoover [continuing]. That costs, as well, too. You
cannot----
Senator Craig. No, I understand all of those problems----
Dr. Hoover [continuing]. Completely separate----
Senator Craig [continuing]. But, you know, the reality is,
we need to figure this out. We are all going to die, and it
should not have to be the most expensive episode in our lives
and in the taxpayer of America's lives.
Dr. Hoover. Yeah, well, I think, as a lot of the speakers
also said, there were maybe two or three components, in terms
of where the costs are coming from. Some people, they have
very, very expensive medical procedures at any time, but
usually it is more likely to be closer to death, in terms of in
hospital care, and a few of these were talked about. Others, it
is just the general disability and things like that, and, you
know, there needs to be supportive care, in terms of, you know,
nursing home and long-term care.
Now, in terms of where the population is and where it is
shifting, you know, you were talking about the baby-boomers,
and we are all getting older, and we are going to start aging
into older ages where there is actually going to start being a
lot more, in terms of long-term care and disability care, as
opposed to, necessarily, the intensive hospital care. This
other part will not go away.
So I guess, to try to close, is, it is the long-term care
of people who have disabilities, I see as becoming a bigger----
Senator Craig. Disabilities and chronic illnesses----
Dr. Hoover. Yes.
Senator Craig [continuing]. I would assume.
Dr. Hoover. Right. And where you need to have nursing-home
and that type of care, supportive care.
Dr. Fries. Senator Craig, if----
Senator Craig. Let me just do a follow-up, and all of you
can respond to this, if you wish. I am asking it specifically,
but I ask it also generally.
I am assuming--and we have looked at that, and I think one
of your, or one of your testimonies, or maybe all of you, spoke
about the cost of managing chronic illnesses and the value of
the savings that comes from that, instead of letting sick
people really get sick. But can we assume that if we get into
the business of better management of folks with chronic
illnesses, that we spread those costs backward instead of see
them kind of accumulate in that last year of life?
Dr. Hoover. I am going to let everybody else jump in----
Senator Craig. Okay.
Dr. Hoover [continuing]. Because I think they have been
talking about that. And my suspicion is, there is going to
always be some cost at the very end, at the end of life. As
people get ill and they pass on, they are going to go through a
stage where it is going to generate some costs. I think the
discussion has been that there is a way to do what you are
saying.
Dr. Fries. Let me just follow on----
Senator Craig. Sure.
Dr. Fries [continuing]. From that. I think that most people
who have studied the area have felt that it might be possible
to reduce these costs by as much as one half, but that--because
you never know, going into the last year of life, that it is
the last year of life. It is really very----
Senator Craig. That is true.
Dr. Fries [continuing]. Very difficult, when you have
defined these numbers looking backward. But just a couple of
things.
Bill Foege and Mike McGinnis----
Senator Craig. We could legislate it. But then again----
Dr. Fries. It is a hard thing to----
Senator Craig. I told the folks in Idaho, when we failed to
eliminate the death tax, and we spread it over a 10-year
period, I told the people in Idaho that they could not die for
10 years.
But that did not work, either.
Dr. Fries. That is right. Well, Foege and McGinnis
emphasized that chronic diseases are not causes of death or
disability. Chronic diseases have causes. And that until we get
set for the causes of the chronic diseases, which is lack of
exercise and cigarette smoking and everything, we are not
anywhere near the root system. We published, last year, in the
American Journal of Epidemiology, a paper looking at the last-
year-of-life costs by fitness level, essentially, by health
risks; and those people with good health risks, who had good
health habits, had less than one half of the last-year-of-life
of costs of those who did not. So, clearly, the compression of
morbidity that we were speaking of earlier operates on last-
year-of-life costs.
Then a final point, because you correctly made, Dr. Hoover,
the point that advanced directives, which have been many of our
hopes as a helpful interaction here--that is, living wills and
durable power of attorney--have not been proven, in the main,
as helpful as we would like.
But there is a real anomaly here with an initiative to be
seized. 85 percent of people say that they would like dignified
and humane care at the end of their life. And the absence of
this is a major driver. Only 15 percent of people have executed
such documents. Now, it is a tremendous area, where people say
they want to execute the documents, but they have not done it.
We, clearly, get these people to execute these documents. Then,
having executed the documents, you have to get the documents in
the right place. Your doctor has to have it, your caregiver--
remember, you are not going to walk in and say, ``Here's my
thing.'' You are going to be rolled in for this. So you need to
have the copies of your wishes as to what is done to you in the
chart, with your doctor, with the caregiver or an alternate
caregiver who might be involved in that. And those things which
have tried to take advanced directive seriously and not just
say--you know, have actually tried to implement them, are
showing some signs that this may be an important way to deal
with this issue.
Mr. Bernd. I think the other way is to continue the
encouragement of the use of hospice programs. Outpatient
hospice programs have been very effective to have a higher
quality in the end-of-life experience and also to keep the
costs within control. And utilization is increasing, but it
really needs to be encouraged.
Dr. Hoover. Yeah, if I could comment a little--and, Senator
Harkin, you had a question on the impact of hospices. They do
work. And I think Hogan, et al., says about 19 percent or 20
percent of the patients that are dying are using hospices. Now,
not every patient who dies needs to use a hospice. And a
hospice reduces, on average, the cost, of about $3,000 per
patient end-of-life-cost, through use of a hospice.
But the problem, though, is that end-of-life costs, in that
last year are so high that this $3,000--it is helpful, but it
is maybe, you know, 1 to 2 percent of the total end-of-life
cost. So it is not, in and of itself, an answer, but it is part
of something that is needed.
Senator Craig. Well, thank you all. I have no other
questions. But you mentioned a fitness and less--healthy people
dying at older ages costs less. My family, my wife's father
passed away summer before last, at 89. He had completed a golf
game, came in, sat down, was resting to go down--they lived in
a retirement community--for dinner, and fell asleep and never
woke up. His cost impact on that unit, that family, his wife,
and it was really that, except for burial. And I think
backwards to that, he was a physically fit man all of his life,
took care of himself, exercised, and really was very seldom
ill, and only minor. And I had not thought of in that context
until you mentioned it, that here was a very healthy man who
was fit, whose impact, from the standpoint of cost to die, was
just very minimal, in reality. Point well made, thank you.
Senator Harkin. Thank you, Senator Craig.
Let me ask you a question. Let me ask how this happens. How
would it happen that a 95-year-old woman in a hospital in a
State had a quadruple bypass performed on her, and she died two
weeks later? Why would that happen? I mean, how could something
like that--and this is a case that is actual. Now, this same
person--again, this is information--just performed a fourth
bypass on a severely obese woman in her 40s. Fourth bypass. But
no one has been working with her on her obesity and to get it
under control. She just comes in, and they do another bypass.
How do these things happen?
Mr. Bernd. It is the way the system is set up. If you have
a beneficiary or someone under insurance comes in and demands a
procedure--and, in a lot of cases, it has got to be done. The
other thing is the incentives are--as we talked earlier, the
incentives are that we are paid on piecework. We are not paid
to keep people well; we are paid to take care of and intervene
in diseases processes. And those are two examples, obviously,
that are of not good care. And I certainly would not condone
them.
Senator Harkin. I just do not know how that happened. You
know, you would think a 95-year-old woman, quadruple bypass, I
mean, it just does not make sense. I do not know how that
happens.
Yes?
Dr. Mentel. And you know, we always might assume the more
puerile inside of the story. But I have got to tell you, when
you suggested that we could limit or legislate end-of-life
care----
Senator Craig. I trust you recognize the context in which I
said that.
Senator Harkin. I am sure he was----
Senator Craig. I do not think we would get many votes on
the floor of the Senate, so I doubt that I would offer it.
Dr. Mentel. Well, I actually thought, it is done. It is
done around the world. We legislate on dialysis. We legislate--
I mean, not ``we''--but other countries and other people do
that. And if we legislated on transplant and dialysis--I mean,
there is a lot of high-cost care out there that is legislated
around the world, but you do not, because you really do think
it would not go over very well with the American populace.
Well, guys, change roles with us. Sit in the room with the 91-
year-old lady who has got a breast lump. And you say, ``Well,
you're 91, and maybe that mammogram's probably going to not
show anything, but it just might,'' and am I going to make the
decision on whether you can or cannot have your mammogram, am I
going to tell you no? Or if you are 95, and you are sitting
there with angina, severe chest pain, and you cannot even get
out of your darn wheelchair because of the angina; actually you
were out in the garden, and you were having a pretty good time.
Are you going to tell that lady, ``No, you're 95. I'm not going
to have you undergo bypass surgery''? This is not as easy as
the rule would be to write.
Senator Harkin. I understand that. These are difficult
questions, you are right.
Senator Craig. Senator, I have an 87-year-old father, who
is physically very active and fit, but he has prostate cancer.
He detected it--it was detected at 78 years of age. And he
called me to intervene with the doctor, because the doctor
refused to take him through surgery. And the reason he refused
to, he says, ``You're too old for that. There are other ways.''
In other words, what he was saying is, ``There are other ways
to treat you that will allow you to live out your life, because
you're not going to''--what he did not say was, ``because
you're not going to live that much longer. And so, therefore,
we won't do as radical a treatment.'' My father was very angry,
because somebody was all of a sudden putting a timeline out
there for him, and he had not planned yet to die.
Now, a substantial number of years later, the surgery was
not done, other treatments have been used, and he is very much
alive and healthy. But I had to walk him through it. And what I
had to do--because I walked my mother through it to understand
it, and then I actually called the doctor--we went back to the
doctor, and I had the doctor walk through with him, in a much
more detailed way, why these things were being done and what
was the likely outcome. When it was over with, my father was
satisfied. But he grew up in a time--when you had a cancer, you
cut it out. And then he had not factored in age. And the moment
age was factored in, he was a very angry person.
I would suggest, afterwards, that the doctor and I had
several conversations, at the doctor's initiative, saying, ``I
misjudged that one. I have learned something here.'' And I
said, ``Well, I did, too.'' Because I was suggesting to my
father, in some context, what the doctor was saying, and my
father was then angry with me. All of a sudden, ``Well, you're
going to out--this is going to outlive you, Dad, or you're
going to''--``No, it's not.'' You know, he had not planned
yet--and, right now, my guess is he is good for a good number
of years left.
Mr. Bernd. You know, Senator Harkin, earlier we talked
about how much less GNP is being spent in Great Britain and
Canada and some other areas, and one of the major reasons for
that is rationing of healthcare and not doing procedures on the
very elderly and having waiting lists for elective surgeries,
and that does drive the cost of healthcare down. Is that the
kind of system the American public wants? I do not know the
answer to that, but that is a large part of the cost equation.
Senator Harkin. I do not know, either. And I do not know
those systems real well, but, I mean, I--Canada is not that
much different than we are, people-wise, how people live and
what they do. I am a little bit familiar with some of the
systems in Germany, having had my wife's family members to
die--and live under that health system. And so we got a kind of
a firsthand look at that.
I mean, it is hard to detect rationing. I mean, it is hard
to--I could not detect it in the German system. I thought they
got very good care and everything, but somehow they do not
spend as much.
Mr. Bernd. Well, I will give you a concrete example. In
Great Britain, we had an exchange program with one of the
regional governmental systems that provide all the care for
part of a suburban area in London, and we went over there and
visited their system. And I went to the regional cancer center
there and talked to the physician in charge, and I asked him
what the cancer incident rate was per thousand in his
community, and he gave me the number. And then I asked about
his treatment slots per year, and they came out to be about 60
percent of the incidents of cancer. And I said, ``What do you
do?''--being an American businessman, I said, ``Do you go to
other regions in the healthcare system and bid these out to get
the best price to stay within your budgets?'' And he looked at
me like I was crazy. He said, ``No, we've got these kind of
treatment slots, and it's all we use.'' And I said, ``What do
you mean?'' He said, ``Well, somebody comes in with terminal
cancer, we give him pain medication, and we send him home.'' I
said, ``If you did that in the United States, you'd have, you
know, three Congressman, five lawyers, and the Washington Times
on you.''
So it is a different system. It really is.
Senator Harkin. That is true.
Mr. Bernd. The one other thing--I am going on, but--the
other thing is, when they visited our organization, one of the
doctors said, ``Do you know the difference between America and
the United Kingdom?'' I said, ``No.'' He said, ``Americans feel
that death is an option.''
Dr. Davis. You know, Senator, if I----
Senator Harkin. Yes.
Dr. Davis [continuing]. If I could speak to this point.
Senator Harkin. Let us wrap this up, please.
Dr. Davis. We support a U.K./U.S. quality improvement
conference annually, and we feature best practices. The U.K.
cancer learning collaborative, the regional network, to improve
cancer care, has developed new, kind of, management and
scheduling techniques, that even without an expansion of
capacity, they have reduced the waiting time for definitive
treatment for cancer from 260 days down to 60 days. Now, we
would think that is still unacceptable, but I think they are
recognizing that they have under-invested, particularly in
oncology care and in cardiac care, and are doing some very
interesting things to that kind of improvement.
But one of the things they have in the U.K. that I think is
interesting is something called the National Institute of
Clinical Excellence. And I think there is something for the
United States to look at in this. Certainly, there are examples
of people not getting needed care, but we also have examples of
excess care. You know, examples are surfacing of chemotherapy
being provided in the last days of life. And these are patients
with extensive spread for whom it is really not indicated. And
it is not as if even the patient or the family is demanding it.
It is that the financial incentives in our system reward it.
So the truth in the matter is, we do not know whether we do
too much or the U.K. does too little, because we do not have a
scientific way of really looking at the effectiveness and the
cost of providing these services. And until we are really
willing to talk about quality standards, clinical guidelines,
and building the evidence base for what is appropriate, and
then let patient and family preferences modify that--but being
fully informed that going through this chemotherapy regimen is
really not going to extend your life, and it is really going to
make the quality of your life much reduced. And so I think we
need to move to a science-based standards of care and get
beyond this rhetoric of ``They're rationing care in other
countries; we need all the care that we're providing.''
We really need to look at cost and quality, what is
effective, what is scientifically sound, and have a mechanism
for doing that.
Senator Harkin. Thank you. I am going to look at that.
National Institute of Clinical Excellence. I want to take a
look at that and see what--I have not heard of that before.
Well, thank you all very much. Did anybody have something
else you wanted to add? I have to wrap up here shortly.
Dr. Fries. Well, I was just going to make a short comment
that when we are talking about healthcare costs and the
technology drivers and so forth--I am kind of echoing Karen's
point--we are a country that loves technology----
Senator Harkin. Yeah.
Dr. Fries [continuing]. So that the demand-side view would
say that--why do we have the same ratio of televisions per
capita to healthcare costs per capita, versus U.K. and the
United States? Why do we have the same amount of automobiles,
the ratio of automobiles per person, ratio of computers per
person? They are much higher than they are in these other
countries. So there is--and Victor Fuchs and others have said
this technological imperative, which is driving part, a good-
sized part, of the costs that are going up. And in part, that
is a national pastime, and we are very easily sold on the
latest and the most expensive and the highest tech,
particularly if somebody else will pay for it.
So what I think Karen is saying, in terms of establishing
the quality guidelines, is that--and something that perhaps the
Senate can get involved with at some level--is it is a rational
use of these kinds of things, recognizing that there is clearly
such a thing as overuse, even if we cannot define it exactly
the way we would like to, and that it is fairly prevalent in
this country, by any international comparison.
Senator Harkin. Well, thank you all, again, very much. This
has been a very intellectually stimulating morning for me, I am
sure for our staff.
It seems--you know, again, in terms of what is driving
costs and cost containment, you have got two sides. You have
got demand side and supply side. And so you have got to--as I
have heard you this morning, there are ways of addressing it on
both sides. And the problem, on the demand side, seems to be
that how we build in incentives for wellness, how we build in
incentives for being healthy and----
I just remembered a trip I took to China. One of my trips
to China, we were out looking at a medical clinic in a fairly
rural area, and it was very rudimentary, obviously, but--it was
very rudimentary, but the doctor and the healthcare people
there had this system where this doctor and his healthcare
personnel in this clinic were responsible for so many people--
they had so many people in a certain area that they were
responsible for. And of course, they worked for the Government.
And they were reimbursed--and he had--they kept track of these
people--they had their names in little card files. It was not
very high-tech. And at the end of the year, someone came around
and checked on them, and based upon how few had to go to the
hospital, how few had to go on, they got more money, this
doctor and the healthcare--they got more money for that. And so
they were out trying to keep people healthy all the time,
because that gave them an incentive to do so. I thought--
obviously, that is not our system, but----
How do we build in incentives for keeping people healthy?
How do we start changing some of our habits in this country, in
terms of obesity, which is now a big problem, and exercise,
and--it is starting at an early age and getting the kids--we
have got to start with the younger generation to get people to
start getting a lifestyle that is different that will keep
people healthy later on in life. It is pretty hard, when you
are 55 and you have never exercised, and, you know, you have
led a sedentary life and you are sitting there watching TV all
the time, it is very hard to change. But if you have done that
all your life, well, then it becomes a part of your lifestyle.
So how do you provoke the demand side to have a healthier
lifestyle, to utilize services less?
Then, on the supply side, how do you we encourage and give,
again, incentives for the supply side to go to paperless
systems? How do we get incentives to cut down on this kind of
stuff? I mean, what do we have to do to stop this? Because this
is just nonsense. This is nonsense. How do we build those in,
on the supply side, to make a more efficient system?
Then there is this last issue of end of life. In your
situation--I forget----
Dr. Fries. Compressing morbidity.
Senator Harkin. Collapsing mobility?
Dr. Fries. Compressing morbidity.
Senator Harkin. Yeah, collapsing morbidity. And how, again,
in that--again, how do we do that? How do we, again, provide
the incentives and the encouragement to do that in this system?
And how do we figure the end of life? Because, you are right, I
mean, what did you say--how much money do we spend in the total
system? It was----
Dr. Hoover. One fourth of Medicare.
Senator Harkin [continuing]. One fourth.
Dr. Hoover. And one fifth of all healthcare----
Senator Harkin. Yeah.
Dr. Hoover [continuing]. Expenditures.
Senator Harkin. That is big.
Dr. Hoover. That is last year. Yeah. Only 5 percent of
people are--you know, die every year, so it is that much money
for a very small portion.
Senator Harkin. That may be the touchiest part of all with
how we handle that, just in terms of--I do not know. Some of
these others, I think we might be able to work on, but I do not
know how we would work on that one.
Dr. Hoover. Yeah, well, as someone was alluding to before--
I think it was Dr. Fries--to a certain degree, it is impossible
that you do not know who is going to die in advance, and so you
even if you wanted to say, you know, you are going to die, you
know, next month, or whatever, you do not know that. But the
fact is, even if you could do that, in our paper that we did,
even if you could predict in advance--1 month, 3 months in
advance--some person was going to die, you actually do not end
up saving all that money, at least for intensive technology-
based inpatient care. You know, if you say, ``We're not going
to do these expensive things on you, because, you know, we know
you are going to die,'' the costs there would not be all that
much, because so much of the costs are, you know----
Senator Harkin. Exactly.
Dr. Hoover [continuing]. Other things.
Senator Harkin. Yeah.
Well, these are all very stimulating, and I think there are
some suggestions I got this morning that I just asked my staff
to work on that we might look at in terms of this Medicare
bill. And if any of you have any other further suggestions that
we might want to try to do in this Medicare bill coming up, I
mean, we are open for suggestions, written suggestions, that
you might have on some little fixes we might do. Maybe it is on
the margins, but sometimes on the margins, it helps. Or
demonstrate some programs. We might demonstrate different
things. I have got some ideas for those here this morning, too.
So, again, I thank you all very much, some of you coming a
great distance. Thanks for all the great work you are doing out
in the field. And I can say, about each one of you, you are
sort of on the cutting edge of what we have got to be doing to
get this healthcare cost a little bit contained, to slow the
growth in terms of the GDP that we are spending on healthcare.
CONCLUSION OF HEARING
Thank you all very much for being here. That concludes our
hearing.
[Whereupon, at 11:29 a.m., Wednesday, June 11, the hearing
was concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
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