Innovation and Disruption

New Directions in Healthcare Innovation

November 30, 2017 11:12 am

In October, HFMA held its 11th annual Thought Leadership Retreat in Washington, D.C. The retreat began as a venue in which to discuss payment reform, but in more recent years, it has focused on findings from HFMA’s Value Project and on HFMA’s initiative to facilitate conversations across provider organizations, health plans, and clinical settings.

The retreat brings together senior executives from hospitals and health systems, physician practices, health plans, and HFMA business partners for two days of discussion on key issues facing the industry and on leading practices that are moving the industry forward.

The Future of Value

The theme for this year’s retreat was “The Future of Value,” and a significant part of the conversation addressed the impact of new innovations, ranging from payment and care delivery redesign to digital technology to service models that demonstrate what “patient centric” really means.

We chose “The Future of Value” theme because more than a decade after the most recent movement toward reform of payment and care delivery models began, healthcare organizations in most markets still operate within a predominantly fee-for-service system. Significant experimentation with new payment and care delivery models has occurred in both public programs and the private sector: accountable care structures, bundled or episode-based payments, and reference-based pricing are just a few examples. And the passage of the Medicare and CHIP Reauthorization Act of 2015 (MACRA), with a clinician compensation track tied to participation in advanced alternative payment models (APMs), seems likely to increase demand for new models that qualify for APM status. At the same time, new leadership in the White House and in Congress suggest potential changes in direction to innovation within the healthcare system, while payment and care delivery experiments to date have not yet identified a clear path forward.

On the first day of the retreat, a significant focus was on the Center for Medicare & Medicaid Innovation (Innovation Center). The Innovation Center was created by the Affordable Care Act, with a budget of $10 billion over 10 years to test innovative payment and care delivery models that have the potential to improve quality or reduce expenditures for Centers for Medicare & Medicaid Services (CMS) program beneficiaries.

The Innovation Center has introduced models that are familiar to many in the industry: Pioneer and Next Generation accountable care organizations (ACOs), the Bundled Payments for Care Improvement (BPCI) initiative, the Comprehensive Care for Joint Replacement (CJR) model, the Comprehensive Primary Care Plus (CPC+) model, and many others. Many of the models are still in active testing; results from others have already led to new initiatives that try to improve on earlier efforts. For example, lessons from the Pioneer ACO model have been incorporated into the Next Generation ACO model design, while CPC+ builds upon the original Comprehensive Primary Care model. But few models to date have met the statutory requirements that allow the secretary of the U.S. Department of Health & Human Services to expand a model through rulemaking. In short, these requirements include proven improvements in quality of care with no impact on cost, reductions in cost with no impact on quality, or improved quality at lower cost (the best-case scenario). In addition, the model cannot alter coverage or provision of benefits to CMS beneficiaries.

The low number of models that have met the criteria for expansion through rulemaking does not mean that the models introduced to date have been failures. Instead, it points to the complexities of identifying and refining models that have the greatest potential to improve value. It is worth noting that the Innovation Center was given 10 years to test and refine models, a recognition that significant change to payment and delivery models takes time. As we see initial models move into new iterations, as with Next Generation ACOs and CPC+, we also see indications that these models, despite needing improvement, have merit and deserve further refinement.

At the same time, the Innovation Center is signaling new directions in its efforts. In a request for information (RFI) released earlier this fall, it sought reactions to a proposed set of guiding principles that will shape new model design. These principles emphasize themes of choice and competition, reduced administrative complexity, voluntary provider participation in models, and small-scale testing. Proposed focus areas include more APM options for clinicians under MACRA, market-driven innovations, physician specialty models, prescription drug models, Medicare Advantage innovations, behavioral and mental health models, state Medicaid program innovation, and program integrity, with a focus on reducing waste. The RFI suggests that value will remain a focus, but the future may lead us down new paths.

The Impact of Innovation

The second day of the retreat focused on innovation, particularly the potential of new digital technologies to enable change within health systems or disrupt existing business models. Discussions affirmed that the pace of digital change is accelerating, with the focus changing from business-to-business to business-to-consumer models. Most attendees indicated that their health system has begun actively exploring or investing in digital technology to improve patient access or experience; the advice they heard was, “invest a little to learn a lot” as new technologies continue to emerge.

It is noteworthy, however, that one of the models of successful innovation profiled at the retreat takes a more low-tech approach. The model was Chicago-based Oak Street Health, subject of a recent case study from the Harvard Business School. a The model’s goal is simple: Keep patients happy, healthy, and out of the hospital.

Focusing on Medicare Advantage and dual-eligible populations, the Oak Street clinics support patients with multidisciplinary care teams. But clinics also have outreach teams, providing door-to-door transportation services, as well as community rooms where patients can play bridge or bingo (whether they are waiting for an appointment or not) and that have been used as neighborhood cooling centers during hot spells and warming centers during cold snaps. The results include 5-star HEDIS ratings and hospital admission rates that are more than 40 percent below market benchmarks.

The discussion of innovation at the retreat was a reminder that, although new technologies will certainly play a role in the future of value, innovation can also come from an idea as simple as serving patients well. If we focus on the Oak Street Health goal of keeping patients happy, healthy, and out of the hospital—using whatever high-tech or low-tech means available—value should have a bright future.

James H. Landman, JD, PhD, is director of healthcare finance policy, perspectives and analysis, for HFMA.


a. Porter, M.E., Lee, T.H., and Alger, M.A., “Oak Street Health: A New Model of Primary Care,” Harvard Business School Case Study, July 7, 2017

James H.Landman, JD, PhD, is director of healthcare finance policy, perspectives and analysis, for HFMA.


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