By Rebecca Adams, CQ Roll Call
January 26, 2015—The Obama administration said last week that it expects to significantly raise the percentage of Medicare payments to doctors and other health providers that are tied to the quality of care delivered, continuing an effort to move away from a system that pays based on the volume of procedures and tests that performed on patients.
The share of Medicare payments shifted to alternative spending models that reward coordinated care will rise from 20 percent of payments in 2014 to 30 percent in 2016, according to new targets released by the Department of Health and Human Services (HHS).
The targets are the first the government has set for the new spending models and track with goals of the 2010 health law (PL 111-148, PL 111-152) that aim to promote value-based care instead of pay doctors and hospitals for every test and treatment given to patients.
The announcement will likely continue to stoke a national conversation about health care spending in the United States, which is higher than other industrialized nations, without any better outcomes. Some health policy experts, including Democrats, have criticized the law for not going far enough to curb medical inflation.
By 2018, half of Medicare fee-for-service spending could be shifted to the new models for paying medical providers, if a new administration does not make changes. That amounts to $213 billion, said HHS officials.
Health and Human Services Secretary Sylvia Mathews Burwell said at a briefing for reporters that the goals were achievable and that the target for 2018 would mark a tipping point for the health sector.
The targets could be met without any additional legislation, said another administration official by phone. However, the official said anticipated bipartisan legislation to replace the current formula for Medicare physician reimbursements "aligns very well" with the administration's priorities. And the administration would like Congress to expand some authority in the health law by, for instance, getting rid of limits in the law affecting how much HHS can tie hospitals' pay to value. The bill on doctors' pay could include such changes.
The health care law allowed the administration to experiment with new ways of paying providers through pilot programs. Mechanisms include so-called accountable care organizations, which allows doctors, hospitals and other medical providers to share in any savings that they may get by better coordinating care and avoiding unnecessary tests. The Medicare program has saved $417 million so far through the organizations, according to HHS officials.
Another cost-saving device is bundled payments, in which Medicare pays a group of providers a set amount for a particular case instead of being paid for each individual test, drug or medical service.
Burwell said further savings will come from measures such as penalties the health law levies on hospitals whose patients are discharged but readmitted to the hospital within 30 days. Currently, a majority of Medicare payments are tied in some way to quality measurements. Burwell said he agency wants 85 percent of Medicare fee-for-service payments to be linked to efforts to improve quality by 2016 and 90 percent of payments by 2018.
"We want to encourage everyone to be moving and to have some measures of quality," Burwell told reporters.
Federal officials intend to bring together health industry officials, employers and state officials such as those that run Medicaid programs beginning in March to explore other new ways to improve quality and lower costs, Burwell said.
The targets were largely applauded by a large coalition of health care industry leaders, including insurers and family physicians.
"Government works best when it works in little nudges rather than sledgehammers," said Andrew Racine, senior vice president and chief medical officer of Montefiore, a medical center in New York that has already saved money for the government and its own bottom line through a pilot program to encourage coordinated care, known as the Pioneer program. Burwell "is pushing on an open door. If you are trying to augment what's already a trend, your likelihood of success is much greater."
Smaller hospitals and physician practices may have difficulty adjusting to the new climate, but the goals that Burwell set forth are not so ambitious that it would affect them immediately. Insurers who have been trying to hold down costs support the push toward more value-based care.
"Health plans have been on the forefront of implementing payment reforms: for other patients, including those in employer-provided insurance and Medicare managed care plans, said Karen Ignagni, president and CEO of the trade group America's Health Insurance Plans, who called the targets a "major step forward" in transforming the way Americans pay for health care.
The administration has been urged by its allies to do more to promote value-based care. In 2012, the liberal Center for American Progress said that by 2022, Medicare and Medicaid should base at least 75 percent of payments on alternatives to fee-for-service payment, such as accountable care organizations, known as ACOs. Sen. Sheldon, D-R.I., suggested that the goals announced by the administration would put Medicare on a path to base 75 percent of its payments on alternative payment models by 2020, a goal he has espoused.
Paul Ginburg, the Topping chair in medicine and public policy at the University of Southern California, said the announcement is "encouraging, but mostly because it indicates a willingness to contract with many more ACOs. But setting a goal is different from achieving it. The ACO model needs to be made more compelling to providers if these goals are to be achieved."
