Payment reform shifts to high gear

April 2, 2015

After several years of uneven progress, the pace of healthcare payment reform shifted into high gear in January when the U.S Department of Health and Human Services (HHS) announced plans to tie 30% of traditional, or fee-for-service, Medicare payments to quality or value alternative payment models by the end of 2016, and 50% by the end of 2018.

After several years of uneven progress, the pace of healthcare payment reform shifted into high gear in January when the U.S Department of Health and Human Services (HHS) announced plans to tie 30% of traditional, or fee-for-service, Medicare payments to quality or value alternative payment models by the end of 2016, and 50% by the end of 2018. 

With the idea of volume to value reimbursement now an expectation, HHS quickly followed up with plans to help the healthcare community achieve the goal, starting with the formation of the Health Care Payment Learning and Action Network.

On the 5th anniversary of the Affordable Care Act (ACA), Network members met for the first time in Washington D.C. to begin their work. Payers, providers, employers, consumers and non-profit leaders listened as a steady stream of government figures framed the challenge.

“For years, we’ve felt the effects of a healthcare system that…incentivizes the quantity of tests over quality of care, that prioritizes volume over value, that addresses conditions…instead of patients,” said HHS Secretary Sylvia M. Burwell.

“After countless internal and external conversations looking at the data of what works [and] where the evidence will drive us, we determined that to get to a better care model…we would need to change the way that we pay providers,” said Karen B. DeSalvo, M.D., M.P.H., MSc., acting assistant secretary for HHS.

Related:HHS announces historic changes to Medicare

“The alignment on alternative payment models such as ACOs (accountable care organizations) or bundled payments or advance primary care is critical to moving our nation forward,“ said Patrick Conway, M.D., MSc., chief medical officer of the U.S. Centers for Medicare and Medicaid Services (CMS).

Finally, President Obama himself took the stage, recalling a main goal of the law that‘s taken a back seat to the uninsurance rate. “A lot of the attention has been rightly focused on people’s access to care, and that obviously was a huge motivator to us passing the Affordable Care Act…but what was also a central notion of the Affordable Care Act was that we had an inefficient system with a lot of waste...” said President Obama. “We don’t want the incentives to be skewed so that providers feel obliged to do more tests, we want them to do the right tests.”

While there’s long been discussion about payment reform, this latest effort represents a level of consensus and collaboration not before seen. The Network’s 2,800 members include seven of 10 of the county’s largest private payers. “If you put up CMS and the amount of people we insure plus these private payers, we already represent the majority of the American population,” said Conway. “We are going to lead and catalyze from the public sector, but the public/private partnership here is critical and essential.”

 

NEXT: Raising the bar

 

Raising the bar

The HHS announcement marks the first time in the history of Medicare that the agency has set explicit goals for alternative payment models. Prior to 2012, virtually all Medicare payments were tied to fee-for-service models. In 2014, the agency says 20% of payments were linked to value initiatives.

PiperMedicare and Medicaid are the largest health insurance programs in the world, and one in three Americans receives benefits from them. The announcement is a signal that HHS is serious about transitioning the system away from fee-for-service, says Kip Piper, MA, FACHE, advisor with Sellers Dorsey, a Medicaid consultancy in Washington, D.C.

“To the marketplace, both providers and other large purchasers such as state Medicaid agencies, employers, and health plans, [HHS] is signaling Medicare is throwing its imposing weight behind ending traditional fee-for-service payment and doing so on a fast track,” Piper says. “This is very much in sync with the goals of most other buyers, particularly state Medicaid agencies, Fortune 500 employers, and innovative health plans in the Medicare, Medicaid, and commercial markets. They are all eager to end transitional fee-for-service and align provider payments with value.”

Related: Top stakeholders form task force to accelerate shift to value-based care

For providers, the announcement “sends a clear message to adapt and help minimize uncertainty,” says Piper, a former state and CMS official who advises states, health systems, and health plans. “Those providers who have been sitting back or taking a more cautious approach to innovation now have a clearer vision of the future of payment.”

In recent years, Medicare has rolled out a “dizzying array” of performance measures and payment methods, says Piper. “In most cases, these have been tests or demonstrations. [This] initiative offers an actionable structure to take public and private innovations large-scale, nationwide.”

Payment must be aligned with value to improve patient outcomes and the clinical and economic performance of care delivery, according to Piper. “While Medicare is a major player, to really drive change, all the largest purchasers-state Medicaid programs, self-insured employers, and health plans-must work together to leverage their buying power and align it with outcomes-based expectations.

“CMS can greatly benefit from the expertise and experience of the other purchasers and plans. Other buyers, notably innovative state Medicaid agencies, large employers, and health plans, are more experienced in payment reform than Medicare,” Piper adds.

 

NEXT: Defining value

 

Defining value

Close on the heels of the HHS announcement, a group of major providers and insurers launched the Health Care Transformation Task Force, with a goal to shift 75% of their operations to contracts designed to improve quality and lower costs by 2020. The coalition includes the nation’s largest non-profit, Ascension Health, as well as Trinity Health, Partners HealthCare, Advocate Health Care, Aetna, the Health Care Services Corp. (HCSC), Caesars Entertainment and the Pacific Business Group.

The Task Force defines value-based payment arrangements as those that successfully incentivize and hold providers accountable for the total cost, patient experience and quality of care for a population of patients, either across an entire population over the course of a year or during a defined episode that spans multiple sites of care.

LanskyThe group’s first order of business, says David Lansky, chief executive officer of the Pacific Business Group, “is finding agreement and a shared understanding of how we are going to measure value.” Different specialties, he notes, may have different ideals of what constitutes value.

Initial priorities also include improving the ACO model, developing a common bundled payment framework and improving care for high-cost patients. The Task Force will also develop policy and program design recommendations for the private sector, CMS and Congress; new delivery and payment models; and best-practice tools, benchmarks and approaches to implement them.

Related:Value-based formularies take hold

“The biggest challenge,” says Lansky, “is we don’t really know what works. In a very large, pluralistic environment, it’s easy to state something, but to apply it in this environment is difficult.”

Lansky said that, from a purchasing perspective, “we think the bar could be higher for quality outcomes. We’re interested in higher standards.” On the cost side, “we don’t have very good measures on the total cost of care across the continuum. Just because a patient is enrolled in a value-based program doesn’t ensure quality outcomes.”

The second challenge, he says, “is changing the cultural legacy of healthcare, changing the way doctors practice medicine, changing patient expectations. It’s going to take some time.”

The Task Force already released its first consensus recommendations on how best to design the next generation ACO model for commercial, Medicare and Medicaid programs. “There is a great readiness and a motivation to help with work flow change,” says Lansky. The group, he adds, wants payment transformation to move as quickly as possible so that providers don’t have to straddle two payment systems.

OndraTask Force member Stephen Ondra, M.D., senior vice president and chief medical officer at HCSC, which runs five state Blue Cross plans, says the status quo is not an option. “The current reimbursement system is not sustainable. Fee-for-service reimbursements have led to the situation we find ourselves in today, when we as a country get only average outcomes for the high costs we pay for healthcare. We must shift from a system that rewards volume to one that rewards quality.

“In an era during which everyone from the federal government down to each individual person must operate within the confines of limited resources, we all must focus on getting the most value from the dollars spent on care,” says Ondra.

 

Next: The tipping point

 

The tipping point

While the Task Force set a goal of transitioning 75% of operations to value-based models, many organizations are already well on their way to hitting that benchmark.

UnitedHealthcare, the nation’s largest insurer, recently announced that it had shifted 11 million individual, employer-sponsored, Medicare and Medicaid plan participants into value-based programs, and plans to increase payments tied to value-based arrangements to $65 billion by the end of 2018. It currently contracts with about 520 ACOs and plans to contract with 250 new ACOs in 2015.

Cigna says it will double revenues in the next seven to eight years due in part to the shift to value-based care contracts. More than 24 million Blue Cross/Blue Shield members in 2014 received care through value-based programs, according to the Blue Cross/Blue Shield Association, while Aetna reports that 3.2 million of its members are under value-based models. Currently 28% of all Aetna claims payments are for value-based care, and the company wants to increase that number to 50% by 2018 and 75% by 2020.

Humana already has about 50% of its members under value-based reimbursement models, and plans to have 75% of Medicare Advantage members under ACOs by 2017, according to Bruce Broussard, Humana’s president and chief executive officer. Brousssard and other panelists at the Health Care Payment Learning and Action Network kick-off meeting shared what’s working for their organizations.

Related:Industry expects to recoup investments in value-based models like ACOs

Humana has seen the biggest impact from value models on chronic care, said Broussard. “Chronic care is not one and done, it is a lifestyle change. When we have a conversation with a member about their health and prevention and ensuring that they’re adhering to their prescriptions and ensuring that they’re walking, it makes a big impact,” he noted. Payment reform “has wrapped the conversation around the journey of someone’s health as opposed to treatment.”

Dignity Health, one of the nation’s largest delivery networks with care sites in 21 states, started an ACO even before the passage of the ACA, noted Lloyd Deen, chief executive officer. “We recognized…that cost escalations that historically were happening in our country were not sustainable.” Dignity’s partnership with the California Public Employees’ Retirement System “resulted in a model that improved care, saved money, but most importantly, saved lives.”

Caesar’s Entertainment Group’s Chief Executive Officer Gary Loveman shared the success the company has had with a bundled care pilot in Reno, Nevada. The program “encourages those facing joint replacement decisions to consider a bundled offering…that combines orthopedic surgeons, rehab services as well as the in-hospital portion of the experience under a capitated cost structure that [results] in substantially lower out-of-pocket costs,” for employees, said Loveman.

HHS has also seen promising results from alternative payment models, realizing a combined savings of $417 million to Medicare due to existing ACO programs. It said it expects those models to continue to contribute to the recent slowdown in healthcare spending.

 

NEXT: Providing support

 

Providing support

As value-based alternative payment models evolve, some physicians are wondering where resources will come from to help acclimate to different programs and metrics.

A recent joint study by the RAND Corporation and the American Medical Association found that physicians reported needing help in managing the increasing amounts of data and programs in use.

“We found that changing the payment system probably isn’t enough to ensure that patient care will improve,” said Mark W. Friedberg M.D., senior natural scientist at RAND, and the study’s lead author. “For alternative payment methods to work best, medical practices also need support and guidance. It’s the support that accompanies a new payment model, plus how well the model aligns with all of a practice’s other incentives, that could determine whether it succeeds.”

The disparity of data systems is something HCSC’s Ondra has seen in the field. “We see a great diversity of providers in the five states we serve, in terms of their integration, technological capabilities and ability or willingness to share risk. We try to meet providers where they are with the right models and support.

“HCSC is working to lead the way to streamline and refine quality measurement,” says Ondra. “Together with CMS, NQF (National Quality Forum), and our fellow payers at AHIP (America’s Health Insurance Plans), we have convened a collaborative working group with providers to reduce quality measure variability across payers and programs, refine measurement to be less resource-intensive, and relate the measures to patient outcomes.” The NQF is a non-profit, nonpartisan, membership-based organization that advises the federal government and private sector payers on optimal measures for specific payment and accountability programs.

Related:Plans, providers must collaborate for value-based payment models to succeed

Part of the work of the Health Care Payment Learning and Action Network will be to develop scalable, standardized value-base payment models, said HHS’ DeSalvo. “We want to add certainty to the marketplace so that everyone, including providers, knows what business model to build for optimal care delivery,” DeSalvo said at the Network’s first meeting.

Some payers are also rolling out resources directly to help providers. The Texas Medical Association (TMA) and Blue Cross and Blue Shield of Texas (BCBSTX) recently launched a resource initiative to assist independent physicians with providing accountable care. TMA’s membership includes more than 48,000 Texas physicians and medical students. BCBSTX serves more than 5 million members in all 254 Texas counties.

NEXT: Value in the patient's eyes

 

Value in the patient’s eyes

At the end of the road, improving patient outcomes is the ultimate goal of payment reform, says Miles J. Varn, M.D., chief medical officer of PinnacleCare. “Where the benefit of volume to value really lies is, we need more personalized, physician-based care. If [we] save patients from surgeries, that’s a huge benefit for the patient…it starts with treatment recommendations, and transparency focused on treatment options.”

NessFor patients, healthcare reform is “the promise of really being able to have a primary care provider with whom you have a trusted relationship, that knows you and takes [you] into account,” noted Debra L. Ness, president of the National Partnership for Women & Families, speaking at the Health Care Payment Learning and Action Network kick-off.

“We’ve talked a lot about access to care. But people…have to believe and trust that what they’re getting is better. If we want them to make decisions that are value-based, we have to let them see information about quality and costs,” said Ness.

Patients, said Ness, haven’t always been at the center of the reform conversation. “We can’t get to that triple aim unless we begin to see patients and families as co-creators of healthcare. We can’t get there if they’re not at the table helping to shape that care.”

In the past, said Ness, “we’ve had the mindset of, if we build it, they’ll come. This time I hope what we do is…build it with them so that they’re already there…engaging with us. Then we get to a care system that leads to giving people…the kind of care they need.”