Feds Step Up Changes to Hospital Payments

Hospitals will have to speed up changes in how well they treat Medicare patients or face lower payments under plans announced Monday by the Department of Health and Human Services.

HHS hopes to tie 30% of traditional Medicare payments to quality or value through what are known as “alternative payment models” by the end of 2016, up from 20%. These models include accountable care organizations, which are groups of doctors, hospitals and other health care providers responsible for the health of a group of patients.

The plans include “bundled payments,” which are groups of payments for treatments for the same issue, such as an injury. By the end of 2018, HHS hopes to link 50% of payments to these arrangements.

“Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” HHS Secretary Sylvia Burwell said in a news release. “We believe these goals can drive transformative change, help us manage and track progress and create accountability for measurable improvement.”

Health care, including for Medicare patients, has traditionally used the “fee for service” model that pays providers for each individual treatment rather than for the overall treatment of a patient or group of patients. That is, they are paid for making people better; not just for trying.

For consumers, the end result of HHS’ push should be better health care, but it may not seem that way to some.

“Burdens are being placed on doctors who have to explain that more care isn’t always the best care,” says physician Lisa Bielamowicz, chief medical officer and executive director at the Advisory Board, which provides health care research and consulting. Americans have believed for years “that another test and another prescription is always better, but clinical evidence shows that isn’t always the case.”

HHS’ Center for Medicare and Medicaid Services set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016 and 90% by 2018 through programs such as its “value-based purchasing” and readmission reduction programs. These programs reward or penalize hospitals depending on their quality, which is sometimes defined as whether patients need to be readmitted within 30 days of being discharged.

This is the first time HHS has set goals for alternative payment models for Medicare.

In 2011, Medicare made almost no payments to providers through alternative payment models, but today such models make up about 20% of Medicare payments. The goals announced Monday represent a 50% increase by 2016. In 2014, Medicare fee-for-service payments were $362 billion, so even seemingly small changes can save a lot of money.

To expand the alternative payment models to the private sector, Burwell announced the creation of a Health Care Payment Learning and Action Network. HHS will work with insurance companies, employers, consumers, doctors, hospitals, states and state Medicaid programs and others to do this.

Medicare is “often sharply confined by politics and bureaucracy,” says Kip Piper, a former state and Centers for Medicare and Medicaid Services official. States get “pushback” when they try to make changes in payment or in how health care is delivered, he says.

“Partnering and collaborating with other public and private sector health care purchasers will give CMS political cover,” says Piper, a health care consultant.

Debra Ness, president of the National Partnership for Women and Families, was quoted in the HHS release saying the change will “drive fundamental changes in how care is delivered, making the health care system more responsive to those it serves and improving care coordination and communication.”

Bielamowicz agrees: “It is a big signal from the country’s largest payer that they are very serious about moving to a system that … rewards the value of care delivered to patients.”

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