next a senate finance committee discussion and then a senate appropriation committee hearing and then testimony before a senate subcommittee on defense spending. >> coming up on friday, the federal reserve has published a report showing falling household incomes in the u.s.

a look at america's changing urban population. wa washington jurourn al begins li on c-span. >> health insurance executives appeared before committee to speak about how insurance companies deal with rates for services which expires before the end of the year.

>> the cause is uncertain and causes seniors to fear losing access to doctors and threatens physicians with increasing payment cuts year after year. we need to take a look at underlying fee for service. fee for service does not encourage physicians to coordinate patient care to save money and improve results. we need an efficient system to provide high quality care.

today we have systems that develop organizations that are changing how they pay physicians that improve patient care. they are we regarding physicians to keep patients healthy and cut down on hospital room readmissions. these results save money and mean better care for patients. we want to learn how these ideas can be applied to the medicare program. it needs a range of settings and primary care providers. what works in california may not work in montana. our panelists look forward to their candid direct suggestions from them. thank you.

>> thank you. mr. chairman, i want to thank you for convening this today's round table as we continue discussing options to improve the way we pay physicians and the quality of medicare. the chairman and i agree that we must find a better way to pay physicians than medicare we must repeal the flawed system. in my opinion an albatross around the congress's neck and this is not an easy task but our physicians and patients deserve better. we must establish a more stable system. our fee for service system provides little incentive.

the current incentive is to increase the volume of service. today, we have the opportunity to hear from the top performers in the pro vaivate sector. these industry leaders are showing that you can improve quality and improve costs in a way that does not ail nate the community. i want to thank you again for rescheduling this round table but i hope provides us with another opopportunity to learn about the best practices that are occurring in the pro vate sector. thank you. mr. chairman. >> thank you, senator. i'm pleased to offer our panelists and next the president

of humanan and dr. reisman senior vice president of aetna and the ceo of carefirst blue cross and blue shield of maryland and mr. gerald cardozza. doctor why don't you begin? >> you know our custom here. your statements are included in the record. tell it like it s. >> i don't know if your mike is on. these are tricky. is it on now? >> okay. should i start again?

>> thank you chairman. ranking member hatch and members of the committee. i'm senior vice president for performance measurement and improvement for blue cross and blue shield of massachusetts. as this committee considers the sgr, i appreciate the opportunity to discuss the payment reform model. the model known as the alternative quality contract employs a population based global budget together with substantial incentives on qu quality outcome measures. >> significantly slowing spending growth.

these organizations vary in size, scope, composition and geography. even in year one, akc providers slowed spending growth by 2% while improving quality. these settings through significant changes in utilization. in 2010, providers saved more

than $10 million by reducing admissions, emergency room use and high teng imaging. each organization has made significant improvements across a proceed set of health outcome measures. organizations are innovating in ways that are sowing the seeds of sustainability. they are investing in ny sew systems and new approaching to patienten gamement. these findings offer evidence that a payment model that creates accountability for outcomes is a vehicle for realizing the goal for the system with the sustainable rate of growth.

>> thank you. >> i'm peter saedwards. by year's end 1.8 million of our care members will get care and

we expect 80% of our primary care physicians will be in rewards programs. we believe the system is pr predicated on creating models that recognize the ability of physician practices and engage physicians on resources. inni beginning in florida we introduced payment models and then we moved to combined arraignments shared risk for part a and full risk for part b and d. and then fee for service programs in 2010 and areas where the primary model was fee for service. our rewards program was four variations for different

structures. there are opportunities to increase structures. payment begins with fee for service with & wall notice and care coordination fees plus a bonus and shared savings and we provide retail data and quality information to physicians and in some cases such as rural areas, we have added nurse practitioners to assist practices. we weengauged with the leading primary care providers and during the first nine months of 2011 our rewards program resulted in improved outcomes in the number of participating physician practices meeting or

exceeding patient care measures. costs run five to 20% higher. any proposal to modify policy should be flexible to allow for practice variations. single uniform is critical for us all public and private programs and realtime data is a component policy. our focus will be on models that improve communication and reduce un-necessary cost and ensure that patients receive the right care at the right time in the right setting thank you again. >> thank you, doctor. >> mr. edwards? >> good morning. thank you for inviting me to testify.

>> providing collaboration is the key to transforming patient care. since 2005 we have invested $2 million to provide models. we recognize there are single models and we believe there is no single health system across the country. our partnerships are designed to support all -- and are not limited to medicare or aetna members. we believe in quality improvement and we use low cost technology solutions. our provided collaborations provide a model that ties

reimbursements and reductions in the total cost of care. it provides nurse case managers within participating provider groups. novahealth averaged 56% fewer admissions in 2011 compared to state wide unmanaged populations. new research is published frequently. active health management has registered nurses that applies research from the most eligible resources. in a randomized clinical trial, it was found to lower charges by

6%. regarding fragmentation of care delivery, people with diabetes or high blood pressure, physicians were able to coordinate care and coordination. aetna is able to skurlecurely exchange medical information. within 120 days, mhg rolled out the imax referral application to 100 practices and is mails them to practices which are able to replace the multiple phone calls and fax exchanges with the

referrals. we share the committee's goal to transform the system. aetna has achieved the results for collaborations and we are making it easier to improve patient care. we believe that models can be applied more broadly to create a sustainable care sustem. >> thank you very much. >> they are tricky. >> thank you mr. chairman and other members of the committee. i am the ceo of carefirst blue cross glblue shield we cover th area of maryland and cover

620,000 fep members here in the capitol area. several years ago we started our own patient centered program. and the way we approached it was we asked primary care physicians in this area who were in active practice to form teams typically of eight to ten primaries. as a team, this includes solo practitioners who were in rural areas. these are self chosen teams. there are a million carefirst members being served by these panels. this model i think is incidedif

in the sense that we establish global expected cost for each panel's population of patients. each panel serves about 3,000 members which can be expected to run on 12,000 a year. we project what that cost could be and ask them to better that. if they can, we share the savings. we pay them during the course of the year and we can get the data better than way. and if the end of the year, they have better the expected care we share the savings with them. this can provide major incentives to these physicians we have extensive quality

measures during the course of the year to see to it that we have populations in the panel. through which, nearly $3 billion worth of claims flowed and here is what we found. 60% of the 300 panels beat it by 4% and that is a big number. of the panels of the 40% that didn't, they exceeded. it was an 8% p spread and what has happened as a consequence of that, as the ones that one have become interested in what they can do better and the ones that didn't want to find out what they can do. over 80% of the primes in this area are in the program. so that is the way we have

approached it. we are looking to get medicare into the program through a waiver. to bring medicare fee for service into the program. thank you, mr. chairman. >> thank you very much. >> mr. cardozza. >> chairman, ranking member and members of the committee i appreciate the invitation to join you today. and thank you for holding this round table on what is a very important topic. the medicare advantage prescription drug program we serve 300,000 people through our network most of whom are independent and self employs we are paid through captation

through our own compensation plan. i have submitted to the committee my comments. i will offer these brief opening thoughts. we have helped to organize the tools and systems to build a value oriented delivery system. there is consensus in today's round table. as a tracktic practical matter. it would move away from fee for service to those that are population based. physicians has suck saided by

pro specialtively providing outcomes and measures and achieving those outcomes and supporting those outcomes. affordability crisis has been anticipated we thought for a long time. while true, we could not anticipate the larger cost. marcus welby could not make it today. today he would not be able of using his tools all on his own. yet the model today was built while he was in his prime. we have worked for over 25 years to build systems and programs

designed to support physicians for our patients. how we pay our physicians is important. yet physicians have been successful due to the support for our network for over 25 years. the framework has been essential and i would encourage you to consider system development for the feature. >> thank you very much. >> this is going to be different how we are going to conduct this hearing today. everybody can participate in formally. it is like around the kitchen table. if someone wants to say something say it. if it makes sense speak up.

that is plies to both sides of the table. senators as well as everyone. feel free to jump in. and that is for my colleagues too as well. i will ask the question. >> i'm intrigued as to what you are doing. and the system targets i should start off with free for service and savings are rebated back to the participants and you said target. in the outset as i understand. >> yes. >> so the question i have, is how do you set that target and then, what lesson does that have, the target, sdr, because, in each case, there is a target,

one and you said you asked for the waiver. to apply your approach to the medicare payment system. so, i just, to me, if you could tell us the degree to which sjr could be modified that could help us to decide what to do about it. >> let me describe how we do it which is similar to the way that premiums are established. you have a panel. the question is, how many patients do those primaries have? who are the patients that are attributed to them? and the first question we ask is once we know that. what are the experiences of

those patients. the age, the sex, the illness, the health, it reflects everything about the health care. when i said it would be the case that 3,000 members would be in the panel on ours, they would be expected to have $12 million a year today in health care expenditures. we take that base, and that is the target? >> no, that is the base. in this case we use 2010 an unmanaged base. before the program started. we look at the illness burden that is in that panel and we take that into account and apply an overall medical trend factor which reflects what we believe are the trends in this region. we apply it to the base.

and we come out with the expected cost of care. what we are expected is when we attempt to beat that number. 60% of the panel s in this regin you are at 3.#%. we track that trend over time. we go forward and then as the next year comes, it is 50/50 and by the next year it is two thirds. so as the cost per bends, the action of the panels, but by the time that occurs, they are more and more experiences to deet them. so much the cost is dry ven by

disease. the essential thing that is focused on is how to focus. follow them through the community and watch for the breakdowns and not expect the community to do it all. >> same approach could apply to medicare. you could say, take medicare membe members in this region who are in those same practices and establish medicare cost of care in a similar manner fees and we establish a credit system expected cost of care as a credit to the panel and