Plans for Medicare payment overhaul receive mixed reviews

HHS announced ambitious goals for the healthcare industry Monday, stating it wants 50 percent of Medicare payments based on how well patients are cared for by 2018, which was the first time in the history of the Medicare program such explicit goals have been set for alternative payment models.

By 2016, the benchmark is to have 30 percent of all Medicare provider payments fall under an alternative model, which includes accountable care organization, patient-centered medical homes or bundled payments.

The department's second goal is for "virtually all" Medicare fee-for-service payments to be tied to quality and value. This amount to 85 percent in 2016 and then 90 percent in 2018.

The announcement has received both positive and unfavorable reviews and left some in the healthcare industry wanting more information on how the targets laid out in HHS' plan will be achieved.

Scott Becker, JD, CPA, publisher of Becker's Hospital Review and chairman of the healthcare department at McGuireWoods, recognizes the serious outcomes the overhaul may have. "I think if this happens it will have a draconian effect on all small and mid-size hospitals, health systems and providers." he says. "The largest providers, who can absorb the changes and take on population health, will fare fine. The small and mid-size providers will face further harm from such substantial changes in payment methods. They are already struggling to survive. Actions like this heavily favor the larger systems and are grist for more consolidation."

Concerning HHS' plan, Mr. Becker also says, "This may in part be a political salve aimed at getting more providers interested in a single-payer system — i.e. Medicare for all. Most mid-size and small providers would anticipate serious negative consequences from the approach set forth by CMS and might view a single-payer system as a good alternative to this. It reminds me of the old adage about hitting someone over the head. If you hit them for long enough, they say thank you for stopping here. This plan is another shot across the bow at smaller and mid-size providers of all types. They may just be thankful to stop being hit."

Regarding the payment overhaul, CMS said the change is being made to push the healthcare industry "toward greater value-based purchasing — rather than continuing to reward volume regardless of quality of care delivered," and Igor Belokrinitsky, partner with Strategy&, believes HHS' plan is going to give providers the push they need.

"A lot of the systems we work with struggle with not knowing when to transform and make changes for the future," he says. "A lot of them have said, 'Once 50 percent of payments are value-based, that will be enough to push us over the edge and get us to change the way we provide care.' And this will get them past the tipping point."

Although Mr. Belokrinitsky is excited about the announcement, he believes HHS' overhaul plan is lacking in some areas. "[The plan] sets a very noble and a very necessary goal, but it doesn't necessarily tell health systems how to get there," he says.

In the plan announcement, HHS said investments in alternative payment models created under the Patient Protection and Affordable Care Act, including accountable care organizations and bundled payments, will help the overhaul goals be achieved. However, the Medicare ACO programs have been met with mixed success so far.

HHS also seeks to have 85 percent of all traditional Medicare payments tied to quality or value by 2016 through initiatives such as the Hospital Value Based Purchasing Program and the Hospital Readmissions Reduction Program, with the number increasing to 90 percent in 2018. However, less than 800 of the 1,714 hospitals that qualified for bonuses under the VBP program in 2015 will receive their bonuses due to being penalized through other Medicare quality programs focused on reducing readmissions and lowering the rate of hospital-acquired conditions. 

Now that HHS has set the targets for the shift away from fee-for-service care, Mr. Belokrinitsky asks, "What are the programs that are going to get us there?" Along with Medicare quality programs cancelling out bonuses for providers, Mr. Belokrinitsky says some of the programs "only go skin deep" and "don't get into the fundamental transformation into how care is delivered."

Josh Seidman, vice president of payment and delivery reform at research firm Avalere Health, sees HHS' goals as "ambitious but realistic" given the groundwork the agency has already laid for value-based payments. To him, the announcement demonstrates the move away from turnstile medicine. "Over time, all providers will need to perform will on quality metrics to see favorable compensation. Increasingly, providers will also have to transition from a reactive approach — treating sick people when they seek help — to a proactive approach — trying to help manage their health to prevent acute needs."

American Medical Association President Robert Wah showed support for the overhaul plan by saying the plan is aligned with the AMA's commitment to providing "innovative care delivery reform that will promote high-quality and efficient care for our nation's seniors who count on Medicare, while reducing administrative and regulatory burdens physicians face today." Like Mr. Belokrinitsky, Mr. Wah is also looking forward to hearing more details about the plan. 

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