Payment Reform

By Miranda Crowell

In Part 1 of The Shift, we gave our readers an informational crash course on the shift of Medicare payments from fee-for-service to fee-for-value. In Part 2 of The Shift, we hope to provide our readers with arguments for and against this type of payment system, realizing that such a discussion is for information purposes only. This change in the healthcare market is going to happen, but that doesn’t mean that all the kinks are ironed smooth just yet. Nonetheless, the future looks bright (and getting brighter as time passes!)

The Good

Now that the hype from the resplendent payment-reform unveiling has died down, it is time to see the plan in action. The working parts of Medicare payment reform look promising, and reform is proving a positive shift for the many players in the healthcare field. For starters, the old-school Sustainable Growth Rate formula of Medicare payments was scrapped in April, and everyone on both sides of the aisle could high-five in agreement that a broken formula was finally given the boot. Furthermore, the ACA gives involved agencies a broad range of authority to promulgate rules to help the whole reform process run smoothly; perhaps some good ole’ fashioned notice-and-comment rulemaking is just the trick for all those worried that certain facets of shifting payments is not broad enough. For example, the Center for Medicare and Medicaid Innovation is authorized to work with states to test all-payer payment reforms. Maryland has seen some success in setting payment rates at the same level for both public and private payers and operating in a system constraining both volume and price. Others passionately argue that a combination of patient-care navigators, IT tools, and cultural change have led to success in bundled care. Amedisys, a company out of Baton Rouge, Louisiana, saw a 21% decline in 90-day readmission rates in one of their regions testing bundled payments – an undeniably impressive feat.

The Sort-of Bad and The Kind-of Ugly

Recall that the goals of shifting Medicare payments from fee-for-service to fee-for-value are to rid the healthcare market of payment systems that promote a piecemeal approach to patient care, to improve patient outcomes, and to decrease the costs of healthcare on both a patient and market level. Arguably, Accountable Care Organizations (ACOs) may be off to a slow start; but they are steadily gaining steam. As the Center for American Progress reports, ACOs are maturing. Most of the saving incurred by ACOs were seen in the Pioneer Model, or the select few healthcare providers that bought into ACO lifestyle early on. As the Center for American Progress reports, “Of the 23 ACOs that participated in the second year of the Pioneer program, only 11 earned shared savings while 6 [ACOs] generated more than $25 million in gross losses.” Second year savings by ACOs represented only 0.008% of net Medicare spending in 2013. Additionally, a (somewhat limited) report posited that there was little difference in the quality of care received by a bundled payment group compared to a non-bundled payment group. (You can access the report here.) But as good science tells us, a larger sample size and timeline are needed in order to get an accurate account of ACO and bundled payment successes; anything else should be considered merely preliminary.

While not universally felt, some healthcare providers may be displaying appreciation and apprehension at the same time. There is appreciation because the idea of promoting better health outcomes is certainly a charming goal, and the marketing of these promises is pretty impressive. As recently as the end of May, the Million Hearts Cardiovascular Disease Reduction Model was announced to compliment shifting payment models, and generally, people seem on board. It’s hard not to be dazzled by the idea of it all. There may be some apprehension because providers’ goals can be treatment- and answer-driven, while those of administrators may be more numbers- and efficiency-driven. Overall, it is expected that both providers and administrators will be speaking the same language soon enough. And this type of initial hesitation is to be expected where any major system-shocking changes are introduced into the industry – these things just take some time.

Final Thoughts

So far, the successes and failures of Medicare payment reform show that, like any other large change, market reform takes time. Lessons from succeeding Pioneer Model providers can be shared to similarly situated providers, and some early pilot programs seem promising. Small sample sizes and relatively short time frames make testing the outcomes of payment reform difficult. (You can read more about drawing conclusions of payment reform via Modern Healthcare.) In general, there is hopeful anticipation when it comes to ACOs and the new payment models, and there are tools like Fibroblast to help along the way. In our final piece of this series, you can find out how such shifting Medicare payments will impact parties working with the healthcare market, but not necessarily within it.