By Rachel M. Werner, M.D., Ph.D., Ezekiel Emanuel, M.D., Ph.D., Hoangmai H. Pham, M.D., M.P.H., Amol S. Navathe, M.D., Ph.D.
Penn, Leonard Davis Institute of Health Economics, February 2021
A decade after the passage of the Affordable Care Act, the vision of moving the U.S. health care system “from volume to value” has been partially realized, with few value-based payment initiatives systematically reducing spending or improving quality. While participation in value-based payments continues to grow, the adoption of advanced forms of value-based payment through alternative payment models lags behind both the goals set by the Secretary of Health and Human Services in 2015 and the threshold required for widespread practice transformation. Furthermore, the complexity of the current suite of alternative payment models and allure of traditional fee-for-service prevent the widespread adoption of full risk-bearing contracts. The high costs of care with the impending insolvency of the Medicare trust fund, persistence of poor quality of care and health disparities along racial and socioeconomic lines, and mixed success of alternative payment models indicate the need for a revamped vision for the 2020s.
The 2020s require a new strategy that moves from a short-term focus on testing new payment models to a long-term focus on expanding models that are most likely to generate substantial savings and improve quality. This white paper outlines a new direction for the federal government — primarily through the Centers for Medicare and Medicaid Services (CMS) — to chart over the next decade aimed at completing the transition to a health care system that pays for value and reduced health disparities, rather than high volumes of services.
First, CMS must articulate a clear vision for the future of value-based payment. In particular, the vision must align across all publicly financed health care, driving change beyond Medicare and Medicaid. Second, CMS must dramatically simplify the current value-based payment landscape and engage late-adopting providers. Third, for health systems already participating in value-based payment, CMS must accelerate the movement from upside-only shared savings to risk-bearing, population-based alternative payment models while curtailing the ability of providers to opt out of value-based payment altogether. Fourth, CMS must not only pull providers toward advanced alternative payment models, but also structure incentives to push providers away from fee-for-service payment. Finally, achieving health equity must be a central feature and goal of value-based payment. Taken together, these five recommendations provide a path toward widespread adoption and success of alternative payment models, producing better health outcomes for all Americans, reducing wasteful inefficiencies and health disparities, and more effectively stewarding taxpayer funds to support other national priorities.
From the Introduction
A Decade of Movement from Volume to Value
Since the passage of the Affordable Care Act (ACA) in 2010, the Centers for Medicare and Medicaid Services (CMS) has sought to transform U.S. health care from a system that incentivizes volume to one that rewards value. A key part of this strategy has been shifting from fee-for-service (FFS) payment to mechanisms that link provider reimbursement to improved quality and reduced costs. In 2015, Health and Human Services (HHS) Secretary Sylvia Burwell publicly committed CMS to tying at least 90% of traditional Medicare fee-for-service payments to quality by 2018.
However, simply adding bonuses and penalties to fee-for-service payments is not enough to transform a system with historically high prices and inefficient care processes. Therefore, CMS has also developed advanced alternative payment models (APMs) that hold providers financially accountable for the quality and cost of care delivered to patients. These APMs include accountable care organizations (ACOs), episode-based payment models, Comprehensive Primary Care models, and other arrangements. Beyond committing to tying 90% of traditional Medicare fee-for-service payments to quality, CMS also sought to have at least half of payments flowing through APMs by 2018. According to the latest available data, while CMS has successfully tied 90% of payments to value, only about 40% flowed through APMs.
However, the transition to a health care system that rewards value has slowed in recent years, and the promise of curtailing health care spending while also improving quality has remained elusive.
Where We Are Now: Efficacy of Value-Based Payment and Health Disparities
The past decade of experimentation with APMs has had successes and failures. But it has provided proof-of-concept that if designed well, APMs are capable of driving cost savings and value improvements. There have been notable successes with the more advanced models that shift greater accountability onto providers, particularly those that do so over longer time horizons. Critics of value-based payment argue the movement is largely a disappointment, with only a small number reducing costs for Medicare, and many generating substantial losses. Observers are right to note that the current APM landscape includes many underperforming models, which have failed to produce the desired practice transformation. However, a decade of middling results does not imply that CMS should abandon value-based payment. The decade of experimentation has produced the necessary knowledge to design and implement APMs to transform health care delivery. We must build upon the most successful APMs and phase out those that have not delivered on their promise.
In the decade since the passage of the Affordable Care Act, the health care system has reached a series of important milestones in its shift to paying for value. Led by CMS, a growing share of payers have moved away from outmoded fee-for-service payment. More providers than ever before are engaged in some form of quality-linked payment, and a smaller cadre have begun experimenting with advanced forms of population-based payment and large-scale practice transformation.
We now need a more focused, whole-of-government push toward a high-quality, efficient system. The persistence of health disparities, uneven quality, and continued rise of health care costs, and the concomitant threat to federal and state budgets, requires renewed focus on spreading the adoption of advanced forms of alternative payment models. These models must move from experimentation to an entrenched, nationwide standard.
The past decade of experimentation shows that alternative payment models as currently implemented are not driving large-scale, systemic change. But a careful study of the lessons from both successful and underperforming models suggests that properly designed APMs can yield improvements in value through cost reductions and quality improvements. The next decade must put those lessons into practice by engaging late adopters, ramping up already adopted and successful APMs, driving payment and practice transformation in commercial insurance, and integrating equity front and center in value-based payment. The goal of a sustainable health care system that pays for better quality, equity, and efficiency is both audacious and fully achievable.
Report to the Congress: Medicare Payment Policy
MedPAC, March 2021
One way traditional FFS Medicare has attempted to slow the growth in its spending is through alternative payment models (APMs). APMs are intended to give providers financial incentives to deliver care efficiently, to counteract FFS payment systems’ incentives to maximize the volume of services provided.
Most APMs are piloted in different parts of the country for three to six years at a time. Models are evaluated by researchers, and CMS uses findings from these evaluations to develop successor APMs that build on lessons learned. CMS is allowed to make permanent any APMs that save Medicare money while maintaining quality or that improve quality without increasing spending. Evidence analyzing the impact of APMs is still emerging, and APM impacts, even when positive, have been modest. Some types of APMs (population-based models and episode-based payment models for some conditions) have performed better than others. Despite modest effects to date, the Commission believes APMs hold great promise and is currently exploring potential improvements to APMs that could increase their success rate.
MedPAC report to Congress – over 500 pages:
By Don McCanne, M.D.
For about a decade now we’ve been fixated on paying for value instead of volume. But what does that mean? All health care has “volume” – time, effort and resources devoted to health care. Volume varies tremendously depending on the clinical situation. Think of management of a common cold as opposed to management of severe multiple injuries in an accident. Can payment schemes ignore volume? Of course not. Volume is built into the problem.
What about value? It seems to be defined as cost reductions and quality improvements. When you are trying to provide optimal care, is cost what you are really looking at? Just as you are not looking at increased volume to increase costs, you are also not looking at reduced volume to reduce costs. You are looking at what is best for the patient. And quality? Quality is important. Striving for excellence in care is always a goal. But the few quality measures used today hardly reflect overall excellence in care. They represent a minuscule portion of care delivered and, at that, they are crafted in a manner that they can easily be gamed.
Yet “value instead volume” has led to accountable care organizations (ACOs) and other alternative payment models (APMs), and has led to complexity in medical record systems that is contributing to burnout of health professionals. Experimentation over the past decade has led to conclusions such as “the promise of curtailing health care spending while also improving quality has remained elusive” (Penn), or “APM impacts, even when positive, have been modest” (MedPAC). To date, this experimentation has been largely a failure.
The policy community is claiming that we can learn from the experiments of the past decade and that we must move forward with these models by not only pulling providers towards APMs but also pushing them away from fee-for-service payment (Penn). Do not pay them for the services they provide, but pay them for “value,” even if there is no satisfactory model of measuring value, whatever it is.
They express confidence that, with concerted effort over the next decade, we can meet the “audacious” goal of “a sustainable health care system” (Penn) since “APMs hold great promise” (MedPAC). No, they don’t. The goal is not to satisfy smug policy wonks, but rather it is to provide the health care needs of patients. Enacting and implementing a single payer, improved Medicare for All would move us a lot closer to “value” as we might define it, no matter the volume of cases we are presented with.
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