In a meeting with nearly two dozen leaders representing consumers, insurers, providers, and business leaders, Health and Human Services Secretary Sylvia M. Burwell today 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 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018. HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent 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.
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.
The Affordable Care Act created a number of new payment models that move the needle even further toward rewarding quality. These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care. HHS believes that in these alternative payment models, health care providers are more "accountable" for the quality and cost of the care they deliver to patients. Providers have a financial incentive to coordinate care for their patients. An ACO, for example, is a group of doctors, hospitals and health care providers that work together to provide 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 increasingly available.
In 2011, Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20 percent of Medicare payments. The goals announced today represent a 50 percent increase by 2016. To put this in perspective, in 2014, Medicare fee-for-service payments were $362 billion.
HHS is already claiming results it considers promising on cost savings with alternative payment models, reporting 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 (which many attribute primarily to the Great Recession). Moreover, HHS claims that initiatives like the Partnership for Patients, ACOs, Quality Improvement Organizations, and others have helped reduce hospital readmissions in Medicare by nearly eight percent– translating into 150,000 fewer readmissions between January 2012 and December 2013 (again, the impact of the economic slowdown is difficult to tease out) – and quality improvements have resulted in saving 50,000 lives and $12 billion in health spending from 2010 to 2013.