Payment Trends

The Future of Value

March 21, 2017 2:52 pm

With a new administration and Republican control of Congress, healthcare organizations may think it is time to take a breath while the future of the nation’s healthcare system is debated.

Although the future of healthcare legislation is uncertain at this point, some trends are likely to continue no matter what happens with the effort to repeal and replace the Affordable Care Act (ACA). The move toward value is one such example. Healthcare organizations should plan for continued movement toward value, with potentially new paths and pace.

In Government Programs

The future of value for government programs rests on two foundations, neither of which has been weakened by the outcome of the November election.

The first is the proposition that greater value for the healthcare dollar is a bipartisan issue. Democrats and Republicans may disagree on how greater value can and should be achieved, but they do not disagree on the goal of greater value.

The second foundation is the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), legislation that was supported by both parties to replace the long-suffering sustainable growth rate formula for physician compensation. The success of MACRA depends on the further development of advanced alternative payment models (APMs) for physicians and other clinicians willing to take on some risk for potentially greater financial rewards than the compensation offered under MACRA’s Merit-based Incentive Payment System (MIPS).

The ACA’s primary focus is on access and coverage, and that also will be the focus of any “repeal and replace” legislation. But the future of the ACA is not irrelevant to the future of value. The ACA has had an impact on the development of value-based payment and care delivery models, primarily through its funding of the Center for Medicare & Medicaid Innovation (CMMI). CMMI has piloted programs such as the Next Generation accountable care organization (ACO) model, the Bundled Payments for Care Improvement (BPCI) initiative, and the Comprehensive Care for Joint Replacement (CJR) model. Some CMMI initiatives—particularly those that have made participation mandatory in designated markets (e.g., the CJR model)—have been controversial. Thomas Price, the new secretary of the Department of Health & Human Services (who is an orthopedic surgeon as well as a former representative in Congress), has been particularly critical of models with mandatory participation. At the same time, in testimony during his confirmation hearing, Price spoke in terms of “mov[ing] CMMI in a direction that actually makes sense for patients,” not of eliminating CMMI.

Given the need for continued innovation in payment models to support MACRA, CMMI will likely continue to be funded, but its programs probably will look more like existing initiatives, such as BPCI, in which participation is voluntary. The Centers for Medicare & Medicaid Services (CMS) and CMMI also may be less inclined under the new administration to pursue models that expose providers to risk (particularly small or rural providers). In her confirmation hearings, CMS administrator Seema Verma expressed a willingness to pursue greater coordination of care and accountability for outcomes with small and rural providers but questioned their ability to assume risk. Those questions may not apply to larger systems, however, as Verma distinguished between small and rural providers and large health systems that have significantly greater available resources.

In sum, to the extent that the future of value in government programs experiences change, that change will be one of path and pace, not yes or no. The path likely will emphasize voluntary models, with potentially lower exposure to risk, and the pace may well be slower. Greater value, however, will remain the goal.

Beyond Government Programs

Outside the world of Medicare and Medicaid, the future of value also remains promising, but similar questions of path and pace apply.

The movement toward value is perhaps best evidenced by the growth of ACOs. According to an analysis by Leavitt Partners and the Accountable Care Learning Collaborative, the number of ACOs nationally has grown from 64 in 2011 to 838 in January 2016, with a growth rate of more than 12 percent from 2015 to 2016 alone. The number of lives covered by these ACOs has grown from 2.7 million in 2011 to 28.3 million in 2016. And while much of the attention has been focused on the ACOs supported by CMS and CMMI programs, 17.2 million of those 28.3 million lives are in commercial ACOs. a

At the same time, total penetration of accountable care models remains low. As of 2016, less than 9 percent of the population nationally was receiving care from an ACO, and that percentage varies widely at the state or hospital referral region level. The degree of risk that ACOs are willing to accept varies widely as well. In a separate report, Leavitt Partners says, “ACOs are generally not taking on downside risk and have a strong preference to remain in upside risk-only contracts.” b The report notes that most ACOs remain in the category of “toe-dippers” instead of “all-in ACOs.”

The data on commercial ACOs confirms what we have seen and heard in markets across the country. Much time and effort has gone into planning and preparing for a future of value, but fee for service remains the predominant form of payment in almost every market. In many markets, the missing piece appears to be a catalyst—for example, widespread employer demand for a new payment model—that would move both provider organizations and health plans toward a tipping point that would speed the transition to more value-based models.

Such a circumstance raises the question of what path best leads from the catalyst to that tipping point. To be effective under accountable care models, for example, provider organizations prefer plan designs that encourage members to remain in network. Employers, on the other hand, have been generally reluctant to move toward plans that limit provider choice. They are, however, attracted to models that offer greater predictability and stability on costs (e.g., bundled pricing and reference-based pricing).

It is probably too soon to decide on the appropriate path. We do not yet have a firm understanding of the results different payment models can achieve for the different populations served by government programs and private health plans. But even if the path to the future of value is uncertain, the demand for that future is not. Healthcare organizations will need to watch their footing while keeping their eyes on what lies ahead.

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


a. Muhlestein, D., and McClellan, M., “Accountable Care Organizations in 2016: Private and Public-Sector Growth and Dispersion,” Health Affairs Blog, April 21, 2016.

b. Tu, T.,  Caughey, W., and Muhlestein, D., Accountable Care Organizations and Risk-Based Arrangements: Strong Preference for Upside-Only Contracts, Leavitt Partners, 2016.


googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text1' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text2' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text3' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text4' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text5' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text6' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text7' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-leaderboard' ); } );