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Employers to CMS: Want to Do Bundles Right? Emulate Us

Analysis  |  By Philip Betbeze  
   October 26, 2017

Two business groups seek targeted deregulation and market-based purchasing strategies based on employer tactics they say have improved healthcare efficiency and effectiveness.

If the federal government wants better value for the healthcare dollars it spends, it should take a few lessons from the experience of large employers, say the representatives of two large employer associations that have banded together to advocate policy recommendations to improve value-based care.

The DRIVE Health Initiative, launched by the Pacific Business Group on Health (PBGH) and the ERISA Industry Committee (ERIC), is pushing President Trump and CMS to adopt value-based strategies large employers have undertaken in recent years to improve the quality and efficiency of their employees' healthcare.

Large employers' solutions have centered on value-based care principles, and while direct contracting and bundled payments for procedures have been effective for large employers in reducing costs and improving quality, their effectiveness on the health system has been limited because government schemes to improve value do not have consistent measures with those of the private sector, they say.

"DRIVE's primary purpose is to advocate for public policies that will improve quality and reduce costs based on innovations developed by private employers," says Annette Guarisco Fildes, ERIC's president and CEO.

DRIVE advocates six requirements for effective implementation of value-based care and a multitude of specific policy recommendations.

Bundled Payments

Before he resigned in the wake of the private plane travel scandal, former HHS Secretary Tom Price managed to torpedo several value-based programs initiated under the Obama administration.

Mandatory bundle programs were scaled back, and some were scrapped entirely because the Trump administration ostensibly wanted more freedom in their design, and principally, because it wanted participation to be voluntary.

Employers have had success with bundling, says Bill Kramer, executive director for national health policy with PBGH, even if providers have perhaps been less enthralled with the practice.

"The federal government has experimented with these, and most people would say they have had mixed results, but in the private sector, those programs have been very successful in bringing lower costs, improved patient experience, and satisfaction," Kramer says.

Data from the PwC survey 2015/2016 Strategy& Annual Bundles Survey support the claim that bundles have helped hospitals and their patients alike, with the following findings:

  • 63% of hospitals realized savings from bundles
  • 69% of hospitals improved quality through bundles
  • 55% of patients were more satisfied with bundled service than previous service

PBGH manages the Centers of Excellence Network on behalf of several large employers.

"If Medicare wants to do them right, they should look at the experience of large employers," Kramer says.

To reduce federal spending on healthcare, Kramer says more bundle programs, not fewer, is the antidote to paying for these services through fee-for-service.

"It's important for Medicare and Medicaid to be partners with private sector purchasers to develop consistent ways to measure quality, consistent payment models, and ways to make consumers informed so they can make smart decisions," he says.

The government cannot continue to spend the amount it's been spending on healthcare, which is nearly 18% of GDP right now.

That's easily twice the amount spent by other developed nations, says Fildes.

"At this rate, the government will [soon] spend more on healthcare than the entire discretionary budget," she says. "Government can learn from strategies the private sector has used that have worked."

Better ACOs

A second example where government can learn from and coordinate with the private sector is in ACOs. Medicare ACOs have been developed under several categories, but results have been mixed.

Many ACOs in the private sector, by contrast, have been successful, say Fildes and Kramer.

One crucial way private sector ACOs are different is that under Medicare ACOs, beneficiaries don't choose the ACO, but are attributed to the ACO based on where they've been going for care. There's no active choice based on features, benefits, value propositions, or quality scores.

In the private sector, beneficiaries choose whether to join the ACO or not.

"There's active consumer engagement in the private sector models and patients are known to the ACO in advance, so the ACOs work with them closely to manage their care more effectively," says Kramer.

Whether the president or Congress will act upon these recommendations anytime soon is certainly doubtful at this point, as Republicans have seemingly moved on from meaningful legislative action and CMS remains leaderless following Price's resignation.

But regardless, Fildes and Kramer say these issues will only get bigger as healthcare continues to consume a larger share of GDP and the federal budget.

"We're moving in the direction of improved quality and reduced costs," says Kramer. "[Health system and physician leaders] want to move in that direction too but they want clinical and business models aligned so this will work."

Philip Betbeze is the senior leadership editor at HealthLeaders.

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