The future according to HHS

At a Jan. 26 Department of Health and Human Services meeting with consumers, health plans, healthcare providers and business leaders, HHS Secretary Sylvia M. Burwell announced concrete goals and a timeline for shifting Medicare payments from fee for service to fee for value.

HHS has, for the first time in the history of the Medicare program, set a goal of pushing a significantly larger share of Medicare payments through alternative payment models such as accountable care organizations (ACOs) and bundled payments. The shift will be from 20 percent ($72.4 billion) in 2014 to 30 percent ($113 billion) in 2016 and 50 percent ($213 billion) in 2018—a compound annual growth rate of 31 percent for 2014-2018.

In addition, HHS wants to tie 85 percent of all fee-for-service Medicare payments to quality or value by 2016, and 90 percent by 2018, through programs such as the Hospital Value-Based Purchasing and Hospital Readmissions Reduction Programs.

In support of these two goals, as well as broader expansion of alternative payment models, HHS is creating a Health Care Payment Learning and Action Network. Through this new organization, which will start meeting in March, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to add alternative payment models into their programs.

Implications

HHS’s bold, significant announcement certainly begs the question as to how the Centers for Medicare & Medicaid Services (CMS) will be able to engineer such significant shifts in the way the federal government will pay for healthcare services for much of the Medicare population. There are a number of important implications of this announcement.

Greater accommodation in the final rule to modify the Medicare Shared Savings Program

On Dec. 1, 2014, CMS released a long-awaited proposal to modify the Medicare Shared Savings Program (MSSP), which now has 405 ACOs serving 7.2 million people, roughly one in every seven Medicare beneficiaries. The proposed rule introduces a broad range of changes, the most salient of which pertain to the MSSP’s original two tracks and a proposed new third track.

At a high level, provider organizations—most notably the National Association of ACOs and the American Hospital Association—were critical of the proposed rule, generally contending that it is neither sufficiently generous nor flexible. In view of the recent HHS announcement, it is clear that CMS will need more provider participation in the MSSP in the future. In order to reach its goal of 50 percent of Medicare payments flowing through alternative payment models by 2018—assuming in the future similarly sized ACO patient populations as at present—there will need to be a total of 800-900 Medicare ACOs four years from now, roughly double the current count. To encourage such robust growth, CMS will probably agree to the most substantive changes to the proposed rule that were requested by provider organizations.

Continued promotion and growth of commercial ACOs

The highly visible presence of the health insurance industry at the meeting—including representatives from America’s Health Insurance Plans, Aetna, Anthem, the Blue Cross Blue Shield Association, Humana, and UnitedHealthcare—as well as the establishment of the Health Care Payment Learning and Action Network clearly portend public-private collaboration in support of commercial ACOs, which currently total 300-350.

Increased use of bundled payments

Since bundled payments are included in the category of alternative payment models, CMS will encourage their use, expanding the Bundled Payments for Care Improvement initiative. In July 2014, CMS set the table for such growth by nearly tripling the number of hospitals and medical groups that are candidates to test bundled payments, adding some 4,100 providers to about 2,400 that were already exploring the possible use of bundled payments for some or all of 48 medical conditions and procedures.

With its recent announcement, HHS cast an ambitious vision and disclosed major portions of its playbook to transform the way healthcare will be paid for, not just for senior citizens, but for all Americans. It is a vision that will require the involvement of healthcare providers and private payers, and its ramifications will be wide-ranging, deep and profound.

Ken Perez is vice president of healthcare policy at Omnicell, Inc.