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Kennedy Introduces Health Care Modernization, Cost Reduction & Quality Improvement Act May 13, 2004

May 13, 2004 -- The Health Care Quality Modernization, Cost Reduction, and Quality Improvement Act addresses three serious and related problems in our health care system that affect every American family:

• Healthcare costs are too high and are rising too rapidly.
• The quality of care received by too many patients is well below the standard that we are capable of achieving. In fact, the gap between the care we actually provide and the care we should be providing is so great that the prestigious Institute of Medicine has referred to it as a "quality chasm."
• Our system lavishes funds on sickness care and neglects the health promotion and disease prevention activities that are the most effective ways of reducing health costs and assuring good health for as many of our people as possible.

The legislation we are introducing is an effective way to modernize and improve the health care system, by using modern information technology, by paying for value and results and not simply for procedures performed or patients admitted to hospitals, and by focusing on improving quality and preventing disease.

Controlling the soaring cost of health care is essential. In the year 2000, health insurance premiums grew 8%--two and a half times the cost of living. In 2001, premiums went up 11%--six times the Consumer Price Index. They went up 13% in 2002, and 14% in 2003—almost eight times the cost of living increase. By any standard, increases like that are unsustainable.

We have to bring these costs under control—but there is a right way and a wrong way to do it. Arbitrary cutbacks for hard-pressed hospitals and physicians are the wrong remedy.

With emergency rooms bursting at the seams, nursing shortages threatening the quality of care, and physicians forced to spend less time with more patients, we have an obligation to all our health providers as well. They're the backbone of our health care system, and we have an obligation to help them provide the quality care that every patient deserves.

Fortunately, the right way to control costs is also the right way to achieve higher quality care. It's based on an emerging consensus of health experts and practitioners. It involves four fundamental principles—using information technology, paying for results, improving quality, and investing in prevention.

The gap is vast and growing between information technology and the current practice of medicine. Health care in America is the best in the world, but it is also one of the least efficient industries in America. We spend a staggering $480 billion a year on administration alone—more than 30 cents of every dollar spent on care. Over a quarter of all personnel in the health care system today are performing administrative tasks, not providing care.

The potential savings through modern technology are immense. Transactions in health care cost $12 to $25 apiece. Brokers and bankers used to have similar costs, but now, a transaction in these industries costs less than one cent

Information technology can also improve the quality of care, at the same time it reduces costs. Automated patient record-keeping can help bring real coordination to what is often a frighteningly fragmented health care system.

Today, for one in five patients with significant health problems, various health professionals order duplicate tests and procedures. One in four patients arrive for a doctor's appointment and find that needed test results or records are not available. Information technology can end this waste of time and resources and also prevent the errors that reduce quality. Automated prescribing, for example, has reduced errors by 95 percent, and reduced hospital costs by an amazing 13 percent. It's time to end the disconnect between modern health care and modern information technology, and the savings will be immense.

The gap between the best standard of care and the care that too many patients receive is staggering. A quarter of all breast cancer patients receive substandard care. A third of all patients diagnosed with high blood pressure receive substandard care. Half of asthma patients receive substandard care. Sixty percent of patients with pneumonia receive substandard care. Almost 80% of patients with a hip fracture receive substandard care.

The Midwest Business Group on Health estimates that poor quality care costs employers $2,000 a worker every year. Improving quality can cut costs dramatically. But more important, it can reduce unnecessary suffering. For patients and their families, good quality care can truly mean the difference between life and death, and between disability and health.

One of the highest barriers to improving the quality of care is the backward incentive system embedded in the way we pay for care. We need to start rewarding quality care by paying for results, and not just for the number of procedures performed or the number of hospital admissions. Too often, the incentives today are geared to doing more—not doing better. It makes no sense that doing better today can actually result in even greater financial hardship for health care institutions. If hospitals organize patient-tracking, home visits, and patient education to improve care for chronic diseases, they can reduce hospitalization dramatically. But the hospitals won't get paid much, if anything, for these improvements—and they will no longer receive the large reimbursements they would otherwise receive for in-patient care. Use of doctors specially trained to manage hospital intensive care units has been shown to reduce costs and improve outcomes. But fewer days in the ICU means lower revenues for hospitals. That's wrong, and we need to correct it.

Hospitals in Boston have already negotiated terms with insurers under which they are paid for results, rather than days of care. Some business associations, such as the Leapfrog Group, have begun to make quality standards a condition for participation in their insurance plans. The Department of Health and Human Services is testing the use of incentive payments to hospitals that meet specific quality standards. These steps are hopeful, but we need to make payment for results the rule, rather than the exception, in all aspects of our health care system.

Another key step is to assure that the typical standard of care comes much closer to the best standard of care. We need to do far more to see that what we know how to do for patients is actually what is done.

Opportunities are immense for improvements by targeting specific diseases that have high incidence, high costs, and high impact on individuals and families. Diabetes, for example, afflicts 17 million Americans. Patients with the disease account for one in ten dollars of overall health expenditures and one in four dollars of expenditures by Medicare. By using proven methods of prevention and treatment, we can save 10 million Americans from diabetes-related amputations, disability, or blindness during their lives—and save more than 50 billion dollars a year as well.

Stroke is another example of the huge gap between what we could do and what we actually do. Stroke is the third leading cause of death and one of the major causes of disability. It strikes nearly 750,000 Americans each year. The economic cost is also staggering. The United States spends almost $50 billion a year in caring for persons who have suffered a stroke. Appropriate, timely intervention with clot-dissolving drugs has been shown to reduce disability and death by 55%, but only three percent of patients receive the needed treatment.

Chronic illnesses are major costs in the current system. Medicare beneficiaries with three or more chronic conditions account for almost 90% of Medicare spending. Well-organized care for patients with chronic conditions such as congestive heart failure, diabetes, asthma, and depression produce significant reductions in costs and significant improvements in outcomes. But only a fraction of patients with chronic conditions have the opportunity to benefit from such treatment.

Finally, to cut costs and promote quality, we can do much more to stop illness before it starts. Health promotion and disease prevention must be as central to our health system as hospital and physician care. Four hundred thousand Americans require medical treatment every year for diseases that are fully preventable by vaccination. Lack of exercise and poor diet cost almost $80 billion a year because of increased heart disease, cancer, and diabetes.

The legislation being introduced today is a recipe for a peaceful revolution in the way health care in the United States is delivered. Building on a growing expert consensus, it provides a blueprint for a better health care system that will be lower in cost, higher in quality, and more closely oriented toward prevention.

To assure that modern information technology will be fully utilized in health care, the legislation sets a goal of full implementation of a broad-based system of electronic medical records and automated bill-paying. It authorizes grants, loans and loan guarantees for health providers to install and implement clinical information systems that meet national technical standards for parameters such as security and interoperability.

The bill also offers larger reimbursements for providers who implement these types of information systems. Over a period of time, it reduces payments for large health care facilities that fail to do so. The legislation also encourages the use of information technology to reduce the administrative costs, by requiring insurance companies to adopt the same types of computerized transaction-processing systems that are the norm in other industries.

In these ways, the legislation begins the needed effort to enable the health care system to become a system that pays for value, rather than solely for procedures performed or illnesses treated. The Secretary of HHS is required to set quality standards for providers of services. Public and private payers will be required, through their reimbursement procedures, to reward the attainment of these quality standards, and are permitted to reduce reimbursements to providers who fail to meet the standards.

When a provider of services believes it can provide higher quality care at lower cost, but feels that existing reimbursement procedures will not fairly recognize these innovations, payers are required to enter into good faith negotiations with providers to reach agreement on an alternative payment system. The legislation also has special provisions for payment for chronic care services in recognition of the special role of coordination of care, patient education, tracking, and follow-up in achieving quality care for individuals with chronic diseases.

Finally, the legislation contains a number of important initiatives to improve the quality of care and strengthen health promotion and disease prevention. These include the establishment of a National Quality Council, and specific initiatives on diabetes, stroke, arthritis, nutrition, exercise, adult oral health, adult immunizations, and the provision of culturally and linguistically appropriate care for patients whose primary language is not English.

America's health care system cannot continue to lurch from crisis to crisis. Our people deserve affordable care, and when illness strikes, they deserve the best care our system can provide. This legislation lays out a number of important steps to achieve this objective, and I look forward to working with my colleagues in Congress and the braoder health community to achieve the important goals we share.