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May 17, 2016
Value-based Payments: What’s Next?

The Department of Health and Human Services (HHS) recently announced that it has reached its goal of tying 30% of Medicare payments to quality care ahead of schedule. And HHS and providers have not only come in ahead of deadline — they’ve done it by a full year.

According to HHS, that means “over 10 million Medicare patients are getting improved quality of care by having more time with their doctors and better coordinated care.” Before the Affordable Care Act (ACA), Medicare paid essentially $0 through alternative payment models. So how has delivery of healthcare come so far, so quickly — and what’s next?

Value-based payments are becoming the norm

The ACA established tools such as the Medicare Shared Savings Program and the Center for Medicare and Medicaid Innovation, which tests a number of alternative payment models for achieving better care, smarter spending and healthier people. Alternative payment models — such as accountable care organizations (ACOs), advanced primary care medical homes and bundled episodes-of-care payments — are ways Medicare can reimburse providers based on the health of the patient and quality of care, rather than the number of services provided.

In January 2015, the Administration announced that it wanted to shift 30% of Medicare reimbursements from quantity to quality by December 2016. Thanks to HHS efforts such as the creation of the Health Care Payment Learning and Action Network, uptake has been swift. This has resulted broadly in better care, smarter spending, and healthier people: Care for patients with chronic conditions is now coordinated by providers inside and outside the general physician’s office, helping patients with their medications, communicating about upcoming appointments and expectations, and talking with the other members of the patient’s care team.

Essentially, because the goals of healthcare haven’t changed, the move towards value-based payments has been embraced and incorporated into everyday service delivery.

What’s been achieved

Some facts about the way value-based payments are changing healthcare:

  • There are 121 new ACOs, as well as greater provider participation in other models.
  • There’s a total of 477 Medicare ACOs participating in the Shared Savings Program and the Pioneer ACO Model combined.
  • As of January 2016, CMS estimates that roughly $117 billion out of a projected $380 billion Medicare fee-for-service payments are tied to alternative payment models.
  • In 2014 alone, Medicare ACOs improved quality and patient experience markedly over previous years and saved over $411 million for the program.
  • In just one year, the Independence at Home Demonstration saved $3,000 per Medicare beneficiary on average.
  • There has been a 17 percent reduction from 2010 to 2014 in the number of hospital acquired conditions, such as ulcers, infections, and avoidable traumas, representing over 87,000 lives saved and $20 billion in cost savings.
  • Between April 2010 and May 2015, an estimated 565,000 readmissions were prevented across all conditions, compared to the readmission rate in the year before to the passage of the Affordable Care Act (April 2009 to March 2010).
  • Medicare spent $315.9 billion less on personal healthcare expenditures between 2009 and 2013 than what would have been spent if the 2000-2008 average growth rate had continued through 2013.

Where value-based payments are headed

Participation in bundled payment models is now on the upswing, and there is a national trend in healthcare improvements, according to CMS. Here are three key components of value-based care that are up next.

  1. This year is a transitional period for the Core Quality Measures Collaborative, as it begins adoption and harmonization of the measures. Ongoing monitoring by the Collaborative of the use of these measures will enable modifications of measure sets, as needed and based on lessons learned, including minimizing unintended consequences and selection of new measures as better measures become available.
  2. The reach of the Value Modifier is expanding. Currently, it provides for differential payment on a per-claim basis to a physician or group of physicians under the Medicare Physician Fee Schedule (PFS) based upon the quality of care furnished compared to the cost of care during a performance period. In 2016, the Value Modifier it will be applied to groups of physicians with 10 or more eligible professionals (EPs), based on 2014 performance. For 2017, the Value Modifier applies to participants in the Medicare Shared Savings Program, Pioneer ACO Model, and Comprehensive Primary Care Initiative. And, in 2018, the Value Modifier will also apply to Medicare PFS payments made to non-physician EPs, encouraging more multidisciplinary healthcare.
  3. A pilot program bundling payments for hip and knee replacements — Comprehensive Care for Joint Replacement (CJR) — has taken flight. Under this model, the hospital in which the hip or knee replacement and/or other major leg procedure takes place will be accountable for the costs and quality of related care for the episode of care, from the time of the surgery through 90 days after hospital discharge. Depending on the hospital’s quality and cost performance during the episode, the hospital will either earn a financial reward or, beginning with the second performance year, be required to repay Medicare for a portion of the spending above an established target. The idea is to incentivize coordination between hospitals, physicians, home health agencies, skilled nursing facilities, and other providers. The CJR model is being tested in 67 geographic areas throughout the country, and nearly all hospitals in those geographic areas are required to participate
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