Value Based Payment

Where Is the Federal Government Going on Value-Based Pay?

March 9, 2018 5:36 pm


Evidence is growing that the administration is planning an aggressive push toward direct primary care, one policy watcher says.



March 9—Comments from the leader of federal healthcare policy disparaging the leading value-based payment models and hinting at new directions left some industry analysts confused, but others saw evidence of emerging models.  


U.S. Department of Health and Human Services (HHS) Secretary Alex Azar II this week doubled down on the federal government’s long-standing push to “drive the value-based transformation of our entire healthcare system.”


That shift will go beyond the dominant value-based models, namely accountable care organizations (ACOs) and bundled payments, both of which Azar criticized. For instance, he described ACO results as “lackluster” and dismissed “tinkering with how to build the very best joint-replacement bundle.”


“We want to look at bold measures that will fundamentally reorient how Medicare and Medicaid pay for care and create a true competitive playing field where value is rewarded handsomely,” Azar said this week during a speech at the Federation of American Hospitals policy conference.


New Models

Azar gave little indication as to what the new pay models will entail, but other administration talking points may give clues, policy watchers said.


In October, Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS), told a Washington, D.C., gathering of healthcare payment innovation leaders that her agency plans to pursue new demonstrations that focus on direct primary care (DPC), among other areas. Additionally, CMS has held several invitation-only physician listening sessions that were focused on DPC.


“If you stitch that thread, you’ll see that’s where they want to go,” said Kavita Patel, MD, formerly a senior healthcare adviser to President Barack Obama.


The Trump administration finds DPC appealing because it is physician-led, considered more free market-oriented, and acknowledges that ACOs are not a great model for practices that are not hospital-owned, she said in an interview.


Medicare could operationalize a DPC model by paying the monthly subscription fee that most DPC practices charge and then paying fee-for-service rates for services offered.


“That would change the game,” Patel said. “Those practices would proliferate like crazy.”


A limitation on the model would be the shrinking number of independent practices.


“That’s why they have this urgency around these town halls and interesting listening sessions,” Patel said.


The push to pay to fund DPC through Medicare has garnered some influential advocates. For instance, in its response to a request for information (RFI) that was issued in the fall of 2017 regarding new payment models, the American Academy of Family Physicians (AAFP) urged CMS to consider DPC.


“Direct primary care thrives on removing the administrative requirements that are found in the current FFS system,” John Meigs Jr., MD, board chair pf AAFP wrote in a letter to CMS. “A model that is looking to test how DPC can help reduce cost and increase quality should look to model those attributes.”


Azar specifically cited providers’ responses to RFIs as driving new directions on payment models.


“They have been immensely valuable, and we will act on them,” he said about RFI responses.


Another possibility is a new model that blends elements of Medicare Advantage (MA) and traditional Medicare. Such a model was proposed by America’s Physician Groups (formerly known as CPAG) and called “ the third option.”


Donald Crane, JD, president and CEO of America’s Physician Groups, said the advanced payment model for physician organizations that are ready to assume financial risk for population health has been presented a couple times to CMS officials and is a “live proposal.”


“It’s directly contracting CMS to groups,” Crane said in an interview. “ACOs done right is how we refer to it colloquially.”


Such an alternative is needed, Crane said, to move care away from hospitals, which are the source of a lot of overspending because they have to support a big cost structure that includes, among other components, long-term labor contracts, mortgages, and retooling requirements to better match the new healthcare environment.


Bigger Push?

Azar noted that the Affordable Care Act and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) vest HHS with “tremendous power to experiment with new payment models.”


“We are mindful that aggressive models have not always worked out, so appropriate guardrails will always be essential,” Azar said. “But make no mistake: We will use these tools to drive real change in our system.”


James Robinson, PhD, professor of health economics at the University Of California Berkeley School Of Public Health, said Azar could use such authority to accelerate the value-based payment shift.


“He could say, ‘Providers, if you don’t go for these value-based payment things that I’ve just defined over here, then FFS is 20 percent cut; we’re really going to make it real,’” Robinson said in an interview.


Such a strategy would be a sharp departure from Azar’s predecessor, Tom Price, MD, who was moving federal models from mandatory to voluntary approaches before resigning in September.


Existing Models

Patel said Azar should use his expansive authority in a hard-charging way to improve existing payment models by removing barriers that impede their functioning, such as data limitations, a lack of electronic health record interoperability, a lack of device integration, and flaws in MACRA’s primary physician payment program.


“Make what’s existing perform at an optimal level—he has the authority to do it,” she said.


Crane noted that the expansion of value-based payment has been hampered because it was built on Medicare, “and that is a poor chassis,” he said, referring to rules that require that beneficiaries be free to choose providers, which causes them to move in and out of payment models.


“The penetration of value-based products is happening, but it rather slowly; there is a frustration with that,” Crane said.


Public and private ACOs increased in volume over seven years to reach 1,367 such arrangements by early 2017, according to a Leavitt Partners tally. That included 708 ACOs among commercial health plans, 563 in Medicare, and 88 in Medicaid. The challenges faced by ACOs were apparent in the fact that in 2016, according to Leavitt figures, CMS lost $39 million in the Medicare Shared Savings Program, the most popular Medicare ACO.


Some prefer that HHS keep its focus on those existing models because so much time and effort has been poured into them and they need improvements.


“I love ACOs and bundled payments, but we are so primitive in our ability to have physicians be able to fully take advantage of them; the bulk of folks are still trying to figure out how to make an ACO work,” said Reed Tuckson, MD, a healthcare consultant and formerly an executive with the American Medical Association and with UnitedHealth Group. “How do they make a financial go of it, plus get the quality outcomes of an ACO?”


ACOs are still trying to figure out how to coordinate care better, identify potentially sick members before they become seriously ill, provide real-time interventions to improve quality, reduce costs, and earn rewards, Tuckson, managing director of Tuckson Health SConnections, said in an interview.


“What’s beyond that? Let’s just get this done,” he said.




Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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