Experience. Integrity. Advocacy.
Experience. Integrity. Advocacy.

Navigating Value-Based Payments


In January, Health and Human Services (HHS) Secretary Sylvia M. Burwell announced a timeline to move the Medicare program, and the health care system as a whole, toward performance-based payment models.

Essentially, HHS has a goal of tying 30 percent of traditional, or fee-for-service, Medicare provider payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payments by the end of 2016. HHS is moving toward 50 percent of payments tied to these models by the end of 2018. As well, HHS also seeks to link 85 percent of all traditional Medicare hospital 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.

To extend these goals beyond Medicare, Secretary Burwell also announced the establishment of the Health Care Payment Learning and Action Network. Through this 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.

In 2011, Medicare made almost no payments to providers through alternative payment models. The Affordable Care Act created a number of these new payment models, and today such payments represent approximately 20 percent of Medicare payments. The goals announced by HHS in January represents a 50 percent increase by 2016.

Two major components of the pay-for-performance plan are ACOs and bundled payments.

Accountable Care Organizations

In 2015, there are 405 ACOs participating in the Medicare Shared Savings Program (MSSP), serving more than 7.2 million beneficiaries. When combined with the Innovation Center’s 19 Pioneer ACOs, there are a total of 424 ACOs serving over 7.8 million beneficiaries. Eight of those ACOs are in Indiana, including four in the South Bend/Goshen area, three in the Indianapolis area, and one in Evansville. Three other ACOs in Kentucky and one in the Chicago area also serve Indiana patients.

According to Sean Cavanaugh, Deputy Administrator and Director of the Center for Medicare, MSSP ACOs who started the program in 2012 improved on 30 of the 33 quality measures in the first two years and outperformed group practices reporting quality on 17 out of 22 measures. In December, the Centers for Medicare and Medicaid Services (CMS) announced proposals to help strengthen the MSSP program, including providing more flexibility for ACOs seeking to renew their participation in the Program, encouraging ACOs to take on greater performance-based risk and reward, and shifting the emphasis to primary care. As well, CMS hopes to streamline data sharing and reduce the administrative burden of the MSSP program.

Several industry leaders agree that changes need to be made, but they aren’t sure that the CMS proposals do enough. For instance, in an interview with HealthLeaders Media in January, Nancy Foster, vice president of quality and patient safety policy for the American Hospital Association, said that the quality measures for these innovative payment models need to be streamlined with other Medicare programs.

“[Providers who sign up for new payment models are] not relieved of their hospital reporting quality… or their physician quality reporting activities. And they have to take on the new ones that are associated with whatever new [payment] structure they’re taking on,” Foster said. “So you’ve got this cacophony of measures, and that really kind of overwhelms you. And you’re not sure how to focus attention in an effective way.”

Also, a letter sent to CMS Administrator Marilyn Tavenner signed by nearly three dozen industry groups asks CMS to create a sustainable shared program that allows more participants to see the savings and incentives the program boasts.

“While the MSSP program has generated strong interest, sustained and increased participation hinges on the potential financial opportunities being adequate to support the investments needed to improve care and, ultimately, create a program that is sustainable for the long term,” wrote the groups, including the American Medical Association, American Academy of Family Physicians, American Medical Group Association, Medical Group Management Association, National Association of ACOs, and Premier Healthcare Alliance.

“As currently designed, the MSSP program places too much risk and burden on providers with too little opportunity for reward,” the groups argued in their letter. “We urge CMS to: strengthen the assignment of Medicare beneficiaries, establish a more appropriate balance between risk and reward, adopt payment waivers to eliminate barriers to care coordination, modify the current benchmark methodology, and provide better and timelier data.”

Bundled Payments

In addition to ACOs, CMS will use various methods of bundling payments to move toward greater performance-based reimbursement. Once such program is the recently announced Oncology Care Model. This multi-payer payment and care delivery model is designed to support better care coordination for cancer care and will include 24-hour access to practitioners for beneficiaries undergoing treatment with an emphasis on coordinated, person-centered care, aimed at rewarding value of care, rather than volume.

The Oncology Care Model encourages participating practices to improve care and lower costs through episode-based, performance-based payments that financially incentivize high-quality, coordinated care. Participating practices also will receive monthly care management payments for each Medicare fee-for-service beneficiary during an episode to support oncology practice transformation, including the provision of comprehensive, coordinated patient care.

But bundled payments come with some difficulties of their own. According to Dina Overland in a September 2014 FierceHealth Payer article, with the focus so specifically on cost, bundled payments may discourage “experimentation of new drugs, devices and procedures” or discriminate against “high-risk patients since flat fees compel them to treat patients unlikely to experience complications.”

Overland suggests that only through add-on payments and carve-outs for certain medical therapies, along with a coordination of efforts to improve quality and outcomes, will bundled payments be an effective vehicle in HHS’s journey toward performance-based payment methodologies.

Increasing Buy-In

According to a recent Health Affairs Blog post, about 80 percent of physicians surveyed (2014 Survey of U.S. Physicians, Deloitte) are not in favor of changes in the structure of reimbursement or in economic incentives for care. The biggest worries include being held accountable for outcomes out of their control and not receiving credit for aspects of care that do improve outcomes.

However, many of those same physicians acknowledge that the current system doesn’t offer value to those it serves. And with as much as 50 percent of their income being tied to pay-for-performance in the next ten years, the first change that needs to happen is in the perspective of the physicians themselves.

“Compensation and incentives must be viewed within broader objectives of value based care—cost and quality—rather than simpler data points, which tend to yield an oversimplification of the model’s goals,” writes Susan Browning, VP for several service lines within North Shore-LIJ Health System, in that Health Affairs post. “And physicians and hospitals must be brought more closely into the discussion to facilitate more sustainable process redesign.”

— All rights reserved. For use or reprint in your blog, website, or publication, please contact us at cipromsmarketing@ciproms.com. Photo above by Mercy Health, via Flickr, used with permission under the Creative Commons License. Photo by 401(k) 2012 via Flickr used with permission under the Creative Commons License.


Charity Singleton Craig

Charity Singleton Craig is a freelance writer and editor who provides communications and marketing services for CIPROMS. She is responsible for creating, editing, and managing all content, design, and interaction on the company website and social media channels in order to promote CIPROMS as a thought leader in healthcare billing and management.

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