March 23,2007

Grassley Advances Provisions on Medicare Physician Quality, Hospital Wage Index, Use of Data for Research

WASHINGTON – Sen. Chuck Grassley, ranking member of the Committee on Finance,
today advanced Medicare provisions to add quality measures to physician payments, reform the
hospital wage index, and reform the use of data for research to improve health care programs.
Grassley received approval of the measures as amendments to the Senate’s Fiscal Year 2008
budget resolution, which the Senate approved today.  The budget resolution provides a spending
framework for authorizing and appropriating committees to refer to as they legislate federal
spending.  The Finance Committee is the authorizing committee for Medicare.  Details of each
provision follow.

Physician quality measures.  This adds language to the reserve fund on Medicare physician
payments to include financial incentives for physicians to promote better quality care.  It endorses
rewards for physicians who use consensus-based quality measures when they provide care to
Medicare beneficiaries.

“Increasing physician payment, by itself, does not improve quality in the Medicare program,”
Grassley said.  “We need to make changes in how Medicare pays physicians to reward higher quality
and more efficient care.”

This provision builds on last year’s Tax Relief and Health Care Act, which provided incentives for physicians to provide better quality care by establishing a voluntary Physician Quality  Reporting Program.  That program is the first of its kind for physicians and other health care  professionals. It provides incentive payments for those who report consensus-based quality measures  to the Centers for Medicare and Medicaid Services from July through December of 2007.  Today’s  provision allows continued work toward the goal of improving the quality of care in the Medicare  program by providing financial incentives for physicians to furnish higher quality and more efficient  care.

Improved Medicare hospital payment accuracy.  This provision creates a reserve fund
to allow the reform of the Medicare hospital wage to better reflect labor costs.  Grassley said many
observers agree that the current method of calculating the wage index does not reflect a hospital’s
actual labor costs. Instead, the current method is seen as arbitrary, so that similarly situated hospitals
can receive significantly different wage index values and therefore receive significantly different
Medicare payments. Some also question the underlying data used to calculate the wage index.
“It’s unfair when a government calculation does not work,” Grassley said.  “This unfairness
not only adversely affects the hospital, but it also ultimately affects the community. Residents rely
on the hospital not only to receive much-needed health care services, but also for vital contributions
to the local economy as an employer and purchaser.  We need to make sure that residents, especially
in rural and underserved areas, have access to hospital services.”

Medicare data amendment. This provision creates a reserve fund to create a framework
and parameters for the use of Medicare data for the purpose of conducting research, public reporting,
and other activities to evaluate health care safety, effectiveness, efficiency and resource utilization
in federal programs – such as Medicare’s prescription drug program – and the private health care

“Medicare collects a lot of information on services used by beneficiaries under Part A and
Part B,” Grassley said.  “Millions of prescriptions are being filled each year under Part D.  Linking
data on hospital and physician services provided to Medicare beneficiaries to prescription drug data
will offer a tremendous resource for researchers in our federal agencies, as well as those based at
universities and other research centers.”
Grassley said the data can support research such as studies and analyses related to post-
marketing surveillance of prescription drugs and research on drug safety.  For example, analyzing
the Medicare claims data could help agencies, such as the Food and Drug Administration (FDA),
identify situations like the one involving Vioxx more quickly and provide a new valuable tool to
enable the FDA to take swifter action to protect the public’s health and well-being, Grassley said.