Opinion

Party Doesn’t Matter: Value-Based Payments Are Here to Stay

It doesn’t really matter what party controls Congress or resides in the White House. Value-based payments – which come in the form of Accountable Care Organizations and bundled payments – will only continue to grow.

Starting with the passage of the Affordable Care Act and bolstered by HHS Secretary Burwell’s announcement this year to tie 30 percent of Medicare payments to value-based payment models by the end of 2016—and 50 percent of payments by 2018—we are likely near a tipping point where the healthcare industry orients its care models around value.

It is true that a Republican in the White House could question the Centers for Medicare and Medicaid Services Center for Innovation’s existence, as well as the results of all ACA-mandated programs implemented to date. However, we are likely too far down the path to dismantle what has already begun.

CMS has been testing alternative payment models under the Bundled Payment for Care Improvement initiative for a few years, and is now looking to expand these tests further into payment models for chronic care.

When CMS announced in July that a bundled payment model for joint replacement procedures (the “Comprehensive Care for Joint Replacement” model) would be mandatory for many providers, it signaled that the government is accelerating its move away from traditional fee-for-service payments.

So how have these new models begun to play out?

Bundled Payments for Care Improvement

There has been significant provider interest, but not enough time to ascertain whether there have been quality improvements and Medicare savings from reduced readmissions and/or more efficient utilization of hospital and post-acute care, or PAC.

A payer provides a single, “bundled” payment that covers all services delivered by multiple providers during a single episode of care or over a specified period of time.

On August 13, CMS announced that several hundred providers had transitioned to Phase 2—the risk-bearing phase—of the BPCI Initiative, raising the total number of Phase 2 participants to 2,115. While this is a significant step, there are just over 8,000 participants in BPCI in total, which means that a substantial number of organizations will remain in Phase 1.

Because the risk-bearing phase has just begun, it is difficult to make any conclusions as of yet regarding savings in bundled payments. We all know that there is plenty of potential for savings in post-acute care.

SNFs may have high potential to gain the most in the transition to alternative payment models, as it is a lower-cost setting in the PAC spectrum.

Joint Replacement Payment Bundles: A Bold Move

CMS recently announced the CCJR model—a mandatory bundled payment arrangement for lower extremity joint replacement episodes.

The model holds 800 hospitals in 75 “big” and “small” cities accountable for the quality of care they deliver for hospital stays and 90-day post-discharge episodes. It is a five-year payment model, with no downside risk in the first year.

CMS has proposed for the model to begin on January 1, 2016, but we anticipate tweaks to be made to the program as proposed.

Notably, Medicare savings are not expected to be significant (approx. $150 million), but this announcement signals a willingness to potentially expand the mandatory program to other MS-DRGs in the future.

ACOs: A Boost for Quality… But Cost Savings?

Accountable Care Organizations are groups of providers that come together to coordinate patient care. When that coordinated care is of high quality and lower cost, the ACO may share in savings.

As with bundling, CMS is also scaling ACOs in Medicare. CMS began to support ACOs with a limited group of “Pioneer ACOs” in 2012 designed for organizations with care-coordination experience, and continued with the launch of the Medicare Shared Savings Program in 2013.

Results for the MSSP have shown improvement on 30 of 33 quality measures, with $300 million in shared savings under the program. Pioneer ACO results have shown improvement on 28 of 33 quality measures and $68 million in shared savings.

While the demonstrated improvements in quality provide significant support for the ACO model, the cost savings have not been as significant as many had hoped. In fact, some experts surmise that—all told—ACOs have not saved any Medicare dollars.

Chronic Care Models: Tougher Sell But Bigger Savings Potential

Seniors with chronic conditions have generally incurable conditions such as heart disease, cancer or diabetes. According to the Partnership to Fight Chronic Disease, there are 133 million Americans with at least one chronic disease, and the CDC says that seven out of every ten deaths is attributable to a chronic condition. Chronic disease accounts for 86% of our nation’s healthcare costs.

CMS has not yet implemented either of the two chronic care models announced by the agency. Patients with co-morbidities are difficult to manage, despite potential savings. Also, disease focused programs may be tough to continue given the overlap in patient conditions.

The End-Stage Renal Disease Seamless Care Organizations represents one initiative that CMS is undertaking in the chronic care space. Delayed past its July 2015 start date, it is a shared savings and losses model that aims to improve care for individuals with ESRD.

The Oncology Care Model is the second specialty care model that CMS announced will start in 2016. The model defines a 6-month episode for any cancer type. It is modeled after private pay models, and will use a two-part payment approach: a per-beneficiary-per-month payment of $160 for Medicare beneficiaries, and a performance-based payment.

Looking Forward

With no opposition to higher quality, better managed, incentive-based healthcare, we see no stoppage in sight for alternative payment arrangements.

Given the slow rollout of the chronic care models (Cancer and ESRD), it is doubtful that CMS will announce additional chronic care bundles any time soon. Rather than disease-specific bundling, CMS may choose the coordinated, patient-centered care route in order to address costly and many times overlapping chronic conditions.

ACOs have also seen explosive growth, covering 23.5 million lives. The Next Generation ACO is designed to improve upon traditional ACOs.

There a paucity of evaluation data to make thoughtful conclusions regarding Bundled Payments, but with the recent announcement of the hip & knee replacement program, bundling is only moving full steam ahead.

Even with a Republican in the White House, the government is unlikely to dismantle these now entrenched programs. Many of the alternative payment concepts have seeped into the private sector (and vice versa), and it will be nearly impossible to unscramble the eggs.

Ipsita Smolinski is Managing Director for Capitol Street, a healthcare research and consulting firm in Washington, DC.

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