HHS goal: 30% of Medicare payments to be tied to quality of care provided by 2016

WASHINGTON — In a meeting with nearly two dozen leaders representing consumers, insurers, providers and business leaders, Health and Human Services Secretary Sylvia Burwell on Monday announced measurable goals and a timeline to move the Medicare program, and the healthcare system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.

 

HHS has set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations or bundled payment arrangements by the end of 2016, and tying 50% of payments to these models by the end of 2018. HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016 and 90% by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs. This is the first time in the history of the Medicare program that HHS has set explicit goals for 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 health care system that delivers better care, spends health care dollars more wisely and results in healthier people," Burwell said. "Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” she said. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.” 

 

The pharma industry praised the move. “New medicines make important contributions to value in health care for patients, payers and policymakers, and we look forward to working with the secretary on this new initiative," stated John Castellani, president and CEO of the Pharmaceutical Research and Manufacturers of America. PhRMA suggested that the new initiative incorporate clear mechanisms for recognizing the value of new treatment advances, such as precision medicine and other new tests and treatments; are grounded in strong quality measures and incentives, with emphasis on outcomes that matter to patients; support shared decision making between providers and patients, which is informed by high quality evidence about the full range of available treatment options; and, are transparent and enable manufacturers and other stakeholders to work collaboratively in support of high-quality, high-value health care."

 

Many healthcare providers today receive a payment for each individual service, such as a physician visit, surgery, or blood test, and it does not matter whether these services help — or harm — the patient, HHS noted. In other words, providers are paid based on the volume of care, rather than the value of care provided to patients. Today’s announcement would continue the shift toward paying providers for what works – whether it is something as complex as preventing or treating disease, or something as straightforward as making sure a patient has time to ask questions.

 

The Affordable Care Act created a number of new payment models that move the needle even further toward rewarding quality, HHS stated. These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care. In these alternative payment models, health care providers are accountable for the quality and cost of the care they deliver to patients. Providers have a financial incentive to coordinate care for their patients – who are therefore less likely to have duplicative or unnecessary x-rays, screenings and tests. An ACO, for example, is a group of doctors, hospitals and health care providers that work together to provide higher-quality coordinated care to their patients, while helping to slow health care cost growth. In addition, through the widespread use of health information technology, the health care data needed to track these efforts is now available.

 

To make these goals scalable beyond Medicare, Secretary Burwell also announced the creation of a Health Care Payment Learning and Action Network. Through the Learning and Action Network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs. 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 2015, and more details will be announced in the near future, HHS noted.

 

In 2011, Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20% of Medicare payments. The goals announced today represent a 50% increase by 2016. To put this in perspective, in 2014, Medicare fee-for-service payments were $362 billion. 

 

HHS has already seen promising results on cost savings with alternative payment models, with combined total program savings of $417 million to Medicare due to existing ACO programs. HHS expects these models to continue the unprecedented slowdown in health care spending.  Moreover, initiatives like the Partnership for Patients, ACOs, Quality Improvement Organizations, and others have helped reduce hospital readmissions in Medicare by nearly 8% — translating into 150,000 fewer readmissions between January 2012 and December 2013 — and quality improvements have resulted in saving 50,000 lives and $12 billion in health spending from 2010 to 2013, according to preliminary estimates.