HHS sets percentage targets for a Medicare value-based payment system — emphasis on ACOs/bundled payments/integrated care –

HHS calls for coordinated design across all payment sectors.

Secretary of Health and Human Services Sylvia Mathews Burwell announced last week that HHS will expand upon current efforts in transforming Medicare’s fee-for-service (FFS) payment system from one that long has been volume-based to one that is value-based. Payment reform initiatives will build in three ways: 1) increasingly tying payment to medical care received by beneficiaries through alternative payment models; 2) supporting integrated, coordinated care delivery models and provider efforts in advancing population health; and 3) harnessing vast data to improve patient care.  “Today’s announcement would continue the shift toward paying for what works,” HHS said in its January 26, 2015 press release.

The Secretary identified two distinct payment percentage goals —

  • By the end of 2016, 30% of all Medicare FFS payments will be tied to quality through alternative payment models such as accountable care organizations (ACOs), advanced primary care medical homes, and bundled payment mechanisms. By the end of 2018, 50% of all Medicare FFS payments will be made through these mechanisms. HHS says that approximately 20% of FFS dollars in 2014 were paid out through programs such as ACOs in the Medicare Shared Savings and Pioneer ACO programs, bundled payments, and the Comprehensive Primary Care Initiative.
  • By 2016, 85% of all Medicare FFS payments, including those made to ACOs and through bundled payments and similar mechanisms, will be tied to quality or value. Other payment programs added to this percentage mix are the Hospital Value-based Purchasing Program, the Physician Value-based Modifier, the Hospital Readmissions Reduction Program, and other initiatives. By 2018, HHS plans that 90% of all Medicare FFS payments will be tied in some way to programs of quality or value. HHS says that now a majority of Medicare FFS payments have a link to quality or value.

To meet its announced percentage goals, HHS will build upon program initiatives now in place and showing promise but also will develop new payment models, for instance, for specialty care (starting with oncology) and for care coordination for patients with chronic conditions. HHS also will invest $800 million through the Transforming Clinical Practice Initiative to provide hands-on support to 150,000 physicians and other practitioners in developing skills and tools needed to improve care delivery and transition to alternative payment models.

HHS will convene a Health Care Payment Learning and Action Network in March to not only develop sustainable payment models fostering coordinated, high quality medical care but also to align Medicare’s efforts with initiatives in other payment sectors. “Making operational changes will be attractive only if the new alternative payment models and payment reforms are broadly adopted by a critical mass of payers,” HHS notes. Representatives to this new Network have yet to be named but likely will include private payers, large employers, providers, consumers, and state and federal government programs. HHS expects the Network to facilitate joint implementation of agreed-upon models of payment and care delivery and to identify and implement common approaches on core issues like beneficiary attribution, financial models, benchmarking, and risk adjustment.

HHS anticipates an ongoing working alliance with the nation’s health insurance industry.  America’s Health Insurance Plans (AHIP), through its president, Karen Ignani, said that health plans have been on the forefront of implementing payment reforms in Medicare Advantage, Medicaid Managed Care, and the commercial marketplace. “We are excited to bring these experiences and innovations to this new collaboration.”

The American Medical Association (AMA) issued a statement saying that HHS’ efforts to align Medicare payment with innovative, high quality, and efficient health care delivery are consistent with AMA objectives. “We look forward to hearing more details behind the percentages HHS put forward as well as their plans to reach these percentage targets.” The AMA also emphasized the need for SGR payment relief, requiring congressional action before April 1 to avoid a 21% SGR reduction in Medicare payments to the nation’s physicians and loss of the 1.0 Work GPCI floor important to Iowa and other physicians in payment localities that otherwise would suffer Medicare Work GPCI payment adjustments below the national average.

It is not clear the extent to which HHS’ 2016 value-based payment percentage goals of 30%/85% will be reflected in its proposed 2016 Medicare physician payment rule (expected release in July of 2015). HHS emphasizes that these 2016 percentage goals are to be realized by the end of that calendar year, indicating implementation starting in 2016. Time is short to reach specified percentage objectives.

Medicare processes over 1 billion Medicare Part A and Part B FFS claims per year. In 2014, Medicare FFS payment outlays amounted to $362 billion.

This link accesses the HHS Fact Sheet supporting Secretary Burwell’s announcement.