A clear timeline has been set for moving from volume to value in Medicare payments.
HHS announced earlier this year that 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. Ideally, CMS wants 50 percent of Medicare payments based on how well patients are cared for by 2018.
The department's second goal is for "virtually all" Medicare fee-for-service payments to be tied to quality and value. This amounts to 85 percent in 2016 and then 90 percent in 2018.
The announcement has received mixed reviews. Many in the healthcare industry want more information on best practices for reaching these ambitious goals and wonder how their organizations may achieve success under a value-based model.
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."
How do ACOs fit in?
This is the first time a clear timeline has been set, but value-based payments certainly aren't new to the healthcare industry.
ACOs, for instance, are characterized by a payment and care delivery model that aims to tie provider reimbursements to quality metrics, as well as total cost of care reductions for an assigned patient population. ACOs may use a range of payment models, one of which is the Pioneer ACO Model.
The Pioneer ACO Model was designed specifically for organizations that have experience offering coordinated, patient-centered care, and operating in ACO-like arrangements, according to CMS. It allows the provider groups to move more rapidly from a shared savings payment model to a population-based payment model, and is aimed at working in coordination with private payers by aligning provider incentives, which will improve quality and health outcomes for patients across the ACO, and achieve cost savings for Medicare, employers and patients. The ACO must agree to accept risk for at least 15,000 fee-for-service Medicare beneficiaries for three years or less.
Why are payment models not successful?
The original 32 Pioneer ACOs were announced in 2011, and their first performance year began in January 2012.
But in July 2013, nine ACOs announced they would be leaving the Pioneer program. Eight of the nine organizations posted losses for the first performance year, and none of them earned shared savings.
More ACOs exited the program after posting losses in performance year two. In August 2014, San Diego-based Sharp Healthcare announced it was leaving the Pioneer program after determining its ACO was at risk for "significant shared loss" for performance year three.
The next month, three more ACOs left the Pioneer program after failing to meet the benchmarks to receive shared savings, leaving only 19 ACOs in the program.
The individual financial results show Sharp Healthcare's ACO, which included seven hospital locations and two medical groups — Sharp Community Medical Group and Sharp Rees-Stealy Medical Group — posted a loss of 0.3 percent in performance year one, and a loss of 1.3 percent in performance year two.
Many of the ACOs were doing well as far as meeting quality measures outlined in the Pioneer ACO model. However, certain factors, such as regional variations, aren't considered with the model, which can cause these organizations to suffer financially.
When Sharp looked at 33 quality indicators, it scored 84 percent.
However, the area wage index in San Diego for 2011, 2012 and 2013 went up 8.3 percent, so Sharp was paying providers 8.3 percent more per patient discharge than what the national benchmark reflects, says Alison Fleury, senior vice president of business development for Sharp.
The area wage index, one of the significant in the Medicare hospital inpatient prospective payment system, is intended to measure differences in hospital wage rates among labor markets; it compares the average hourly wage for hospital workers in each metropolitan statistical area or statewide rural area to the nationwide average, according to the American Hospital Association.
The Pioneer ACO model calculated that Sharp would break even in 2013 — essentially where it was in 2012 — so criteria like the area wage index wiped out utilization improvements.
"We just didn't feel we could be at risk," Ms. Fleury says.
She says Sharp didn't enter into the Pioneer ACO model to test the waters by way of risk. "We walked in full-risk and taking downside risk we were interested in."
The positive side of the Pioneer ACO model
Sharp was able to benefit from the Pioneer ACO model because two affiliate medical groups came together to manage the care of a shared population. And it didn't walk into the Pioneer ACO model expecting to have some huge return.
"We weren't doing it for a financial reward, but for the benefit of having medical groups working together (to manage) population health, " Ms. Fleury says.
Additionally, Sharp operated programs for Medicare Advantage patients and added more nursing patients. Overall, Sharp felt it could make a difference and didn't believe it would have financial risk.
Ms. Fleury says overall Sharp enjoyed working with other pioneers and continues to collect its results from being part of the program.
She advised ACOs that are still in the Pioneer program to have a strong ability to take all claims information and turn it into information incorporated into the daily work flow. That means "being able to take that information and incorporate it in a way that fits into those processes."
ACOs in the Pioneer program also need to know the financial model. "A lot of organizations felt that do a good job here, but if they have a financial model that doesn't reflect utilization, you're not appropriately rewarding organizations that are doing well," says to Ms. Fleury.
Geoff Walton and Paul Jawin, with Stryker, a medical device company focused on orthopedic and spine procedures, also weighed in.
Stryker has focused on helping health systems and physicians transition to value-based reimbursement. It's also done a lot of work with bundled payments and ACOs, as well as helping hospital service lines meet the aim of better outcomes and better cost.
"We're excited," Mr. Walton says of the recent HHS announcement in regard to a timeline for value-based reimbursement. "Not all physician groups are going to share what we believe. We can show them how this is really very beneficial to them and how it would turn to their favor. "
For instance, ACOs can help hospitals and health systems meet their goals, and there are tools and data available.
Mr. Jawin says it's critical for hospitals and health systems to align with physicians to put them in a better competition position to present themselves to payers, and the providers needs data to back up their quality and efficiency claims.
Stryker also is telling perspective clients that the shift to value-based reimbursement will move many orthopedic procedures to outpatient setting.
Hospitals tend to start by focusing on big chronic diseases, such as lung disease and diabetes, and Stryker's message is "Don't forget orthopedics" when developing population health strategies because it is the second biggest area for Medicare spending in healthcare.
Mr. Jawin also believes the shift from fee-for-service to value-based reimbursement will increase the number of providers creating their own health plans or becoming part of a health plan. "Recent changes in the existing CMS Shared Savings (ACO) program… make it less risky and more attractive. It remains to be seen whether these changes will be enough to encourage a significant increase in participation."
Still, many in the healthcare industry contend that hospitals and health systems will have to receive more guidance and mechanisms to reach the HHS' goals in order to be successful.