Value-based payment gains policy consensus after 15 years of CMMI models

Saying it’s time to phase out the fee-for-service payment model would have been controversial a decade ago, but today such sentiment is accepted in policy circles, according to insights from a recent webinar.

In a discussion among past directors of the 15-year-old Center for Medicare & Medicaid Innovation (CMMI), a key takeaway was the degree to which they perceive that the conversation has shifted over the last decade.

Patrick Conway, CEO of Optum and formerly director of CMMI during the Obama administration, recalled recently hearing a top healthcare official in the Trump administration speak at a dinner and say fee-for-service should recede.

“I was like, ‘I said that 10 years ago, and I got destroyed,’” Conway said. “Now it is more reasonable to say, but more importantly we’ve made a ton of progress.”

Conway spoke along with fellow former CMMI directors Adam Boehler (first Trump administration) and Elizabeth Fowler (Biden administration) this month during an event marking the 10^th anniversary of the Healthcare Payment Learning & Action Network, a public-private partnership to accelerate VBP.

Lessons from value-based payment

Key lessons from past VBP efforts at CMMI include the need to ensure that incentives go beyond payment bonuses, said Boehler, currently managing partner and founder of the healthcare investment firm Rubicon Founders.

“What was clear was that upside risk is good, but with downside risk — holding people accountable,” he said.

Models should be tailored to all provider types rather than primarily toward large systems, and some should be mandatory, he added.

Pushing VBP into the mainstream, rather than just testing models, requires reducing administrative burden, said Fowler, now a Distinguished Scholar at the Johns Hopkins Bloomberg School of Public Health.

“Now we’re getting to those [issues of] what we need to do from an operational perspective to make sure that being in value-based care is second nature and not something that takes a lot of time and effort and that is a high hurdle for those who want to jump in,” she said. “Are there enough pathways for people to jump in? Do they have the tools and the infrastructure that they need to join?”

More than just payment innovation

New care delivery models are being driven by VBP, Boehler said, citing the example of a private-sector effort to provide accountable care for pediatric Medicaid beneficiaries who have complex conditions that can require dozens of hospital visits per year.

Under VBP, providers can offer technology-enabled, 24/7 team-based support to those patients and use data from claims and the electronic health record to predict issues before they occur.

“I view that business as totally different from if we had started that business even a few years ago, in using technology to drive workflows and clinical outcomes for those patients,” Boehler said.

CMMI has given 10-year windows to at least two recently announced models, including an updated accountable care organization (ACO) model called the Long-term Enhanced ACO Design (LEAD) Model, the panelists noted. That’s a key development since providers may have hesitated to invest in VBP due to model churn and uncertainty.

It might not be a bad thing if VBP shifts resources away from large, relatively prosperous healthcare organizations, Boehler suggested.

“Let’s take that margin condensement and let’s put it into patients to get more services, to get premium [healthcare], and not to just do the same thing with market dominance,” he said. “That is something I will tell you all of us know and all of us are united behind.”

How Medicare Advantage relates to value-based payment

Medicare Advantage (MA) is farther along than traditional Medicare in incorporating downside risk, global budgets and enhanced benefits for enrollees. CMMI models can benefit from those elements, Fowler said.

Hindrances in the current environment include “some of the barriers to greater beneficiary engagement and the lack of financial tools to provide some of the enhanced benefits relative to Medicare Advantage,” she said.

Boehler said the Trump administration “did exactly the right thing” in late January when it issued a surprisingly small payment increase for MA plans in the advance rate notice for 2027 (subject to change in the final notice).

He said CMS wants to remove any perception that MA is favored over traditional Medicare, ensuring beneficiaries make their choice based on what works best for them rather than because of payment distortions.

“They’re evening the playing field, and doing it in a fell swoop,” Boehler said. “This will allow Medicare Advantage plans to price that in when they do rates, and address it.”

How technology will boost value-based payment

The next stage of VBP advancement is likely to come from technology rather than payment design, the panelists suggested.

“We’re in an era of digital technology, and AI, where rapid-cycle change and reducing administrative burdens, and AI powering the clinical innovations, will bear an acceleration of all these models,” Conway said. “So, you’ve set the outcomes, and I think they’ll increase the likelihood of success.”

VBP models increasingly have the potential to reduce the friction that often pervades revenue cycle management processes in traditional models.

“How do you actually have in real-time [a situation where] the payer knows what they’re going to pay, the provider knows what they’re going to be paid, and the consumer knows? We’re doing that across payers and systems,” Conway said. “There’s a huge bucket of administrative savings that I think is very large.”

AI is the engine in a controversial new initiative of the Trump administration called the Wasteful and Inappropriate Service Reduction (WISeR) Model, which adds technology-driven prior authorization to a set of services in traditional Medicare.

Although the administration has taken criticism for the model, which got underway in January, Fowler said she wishes the idea had occurred to her during the Biden administration.

“I think they came up with a creative solution to try to address low-value care using AI and using a way that I hope can circumvent these decisions and make the process more smooth,” Fowler said.

Bipartisanship pervades value-based payment

The concept of VBP, as executed at CMMI, has been a rare area of continuity across administrations during the past 15 years. When new leaders took over at the center, they looked to build on what worked rather than discard it.

Boehler described a moment in the early days of the Biden administration when two healthcare policy veterans of the Obama administration published criticism of the direct-contracting strategy for accountable care. The first Trump administration had promoted direct contracting in a set of models.

Fowler pushed back on the calls to overhaul the concept, saying CMMI needed to pursue its mission to test new approaches. The Biden administration subsequently applied direct contracting in ACO REACH, which is wrapping up this year but will feed into the LEAD Model.

“Liz and a group of folks stopped it from becoming politicized,” Boehler said. “That made a big difference. It shows the example, and everyone saw that.”