Medicare Unveils Alternative Payment Models

HHS officials highlight a three-year payment reform timeline, which calls for boosting fee-for-service Medicare reimbursements and increasing reimbursements linked to quality and value.

Federal officials have announced an accelerated effort to use payment reform as a mechanism to shift Medicare and the broader healthcare industry away from the fee-for-service model.

During a gathering in the nation's capital Monday, nearly two dozen healthcare industry stakeholders, including providers, commercial payers, and Department of Health and Human Services Secretary Sylvia Burwell, announced plans to ramp up Medicare payment reforms featuring alternative payment models and value-based payments.

"Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a healthcare system that delivers better care, spends healthcare dollars more wisely and results in healthier people," Burwell said. "We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement."

SGR: Medicare Reforms Proposed as Funding Offset

In a statement released Monday morning, HHS officials said the payment reform initiative includes creation of a "learning and action network" to promote the development and promulgation of value-based payment models. "HHS will intensify its work with states and private payers to support adoption of alternative payments models through their own aligned work, sometimes even exceeding the goals set for Medicare. The Network will hold its first meeting in March."

3-Year Timeline
In a conference call Monday afternoon with members of the media, senior HHS officials highlighted a three-year payment reform timeline, which calls for boosting the percentage of fee-for-service Medicare reimbursements based on alternative payment models (APM) and increasing the percentage of all reimbursements linked to quality and value.

In the early phase of the payment reform initiative's implementation, APMs will be limited to three pathways: Medicare's existing accountable care organization efforts, the Pioneer ACO program and the Medicare Shared Savings Program; bundled payments; and payment models tied to patient-centered medical homes.

HHS officials said efforts are already under way to develop and implement more ambitious value-based payment models, including episode-of-care payment for chronic illnesses and oncology care that will require providers to shoulder a significant level of cost risk.

The reform initiative calls for Medicare fee-for-service payments through APMs to rise from the current 20% level to 30% by the end of 2016. The percentage is slated to rise to 50% by the end of 2018.

It additionally calls for the percentage of Medicare payments that are linked to quality and value to reach 85% by 2016 and 90% by 2018. Existing Medicare quality and value linked payment programs include the Hospital Value-Based Purchasing (VBP) program and the Hospital Readmission Reduction Program (HRRP).

One HHS official noted that the agency is showing an unprecedented level of commitment to move Medicare away from fee-for-service payments to value-based payments. "This is the first time in history that we have a date-certain. … This sets very clear goals."

Marrying Value-Based Care Delivery With Value-Based Payment
HHS officials started foreshadowing the Medicare payment reform initiative in the fall.

In November, the Centers for Medicare & Medicaid Services released details about developing and optimizing APMs, linking fee-for-service payments to quality and value, Medicare ACO and bundled payment projects, and PCMH models. The slideshow highlights several value-oriented Medicare payment reform strategies and potential benefits:

• Establishing greater focus on better care, better health, and lower costs for patients
• Engaging in accountable care and other alternative contracts based on achieving better outcomes at lower cost
• Testing models to better coordinate care for people with multiple chronic conditions
• "Relentless pursuit of improving health outcomes"

A primary goal of the Medicare payment reform initiative is to develop and enhance the alignment between value-based healthcare delivery and value-based healthcare payment models.

One HHS official said the Medicare payment reforms will "support care delivery reforms," noting that hospitals and other providers are "on the frontline" of the battle to create a value-based healthcare industry.

Payment reform "can only be accomplished with partnerships," one of the HHS officials noted. To successfully shift the entire healthcare industry from volume to value, providers, commercial payers, regulators and every other major stakeholder will have to be "all working at the table on this."

Healthcare Payment Reformer Cautiously Optimistic
Suzanne Delbanco, PhD, executive director of Catalyst for Payment Reform, a Berkeley, CA-based nonprofit, says the Medicare initiative is a big step in the right direction, but it is only a single step.

"CPR obviously welcomes great company in advocating for rapid payment reform. Medicare and Medicaid can change the face of healthcare," Delbanco said Monday after Burwell's announcement.

Federal officials, however, have a lot of work ahead to implement reforms and move beyond "tinkering with fee-for-service" payments. "It's not as simple as saying, 'Hurrah, we've arrived at a new delivery model and we're going to save a lot of money!'" Delbanco says. "Most of the reforms that CMS is talking about are working off a fee-for-service architecture… It takes a huge amount of infrastructure change to handle more than that. Changing will be hard for Medicare and for providers."

Noting the looming March 31 deadline to fix or patch Medicare's loathed fee-for-service physician payment system, the Sustainable Growth Rate, she says the time may be right for CMS to accelerate alternative payment models, as long as HHS proceeds carefully.

"We need to move forward boldly with experimentation, but we will have to be willing to make changes," Delbanco said. "We have to be sober about it. We have to look objectively at the results and make mid-course corrections as needed."