Accelerating Medicare Payment Reform With Alternative Models and Value-Based Arrangements

In January of 2015, the US Department of Health & Human Services (HHS) announced plans to ramp up efforts to shift Medicare reimbursement from the traditional fee-for-service (FFS) payment model to alternative payment models and value-based care. Such a shift has been underway since the passage of the Affordable Care Act (ACA) in 2010, which introduced a number of new health care payment models centered on delivering value-based care (focused on quality and the patient) versus volume-based care (focused on quantity of services). In 2011, no payments to Medicare providers were paid through alternative payment models. By 2015, alternative payment models comprised about 20% of Medicare payments.

According to an HHS press release announcing the plans by HHS to accelerate Medicare payment reform, the aim is to tie 30% of FFS Medicare payments to alternative payment models (eg, accountable care organizations [ACOs] and bundled payments) by the end of 2016 and 50% by the end of 2018, and to tie 85% of traditional Medicare payments to value-based payments (eg, Hospital Value Based Purchasing and the Hospital Readmissions Reduction Program) by 2016, and 90% by 2018.

On March 3, 2016, CMS announced that it had already hit its first goal of shifting 30% of Medicare payments to alternative models, nearly 10 months ahead of schedule. As of January, approximately $117 billion of the projected $380 billion in total FFS Medicare payments will be from alternative payment models.

As payment reform picks up steam, hardly a day goes by without some news on the many initiatives underway that are being used to implement alternative payment models and value-based purchasing in both the public and private sector. Recently published reports provide good information on the current status of many of these initiatives.  

This article provides a brief update on two initiatives: value-based care arrangements in Medicare Advantage (MA) plans, and recent updates from CMS on proposed changes to and final rule on fraud and abuse waivers for the Medicare Shared Savings Program.

Value-Based Care Arrangements: Medical Advantage Plans

More than 17 million people are now enrolled in MA plans—up from 11 million in 2010. Nearly one-third of Medicare beneficiaries now are in MA plans.  

A primary goal to accelerate payment reform is to move most traditional Medicare payments to value-based payments. As such, CMS plans on testing new value-based care models with MA plans. 

On September 1, 2015, CMS announced the demonstration of a novel value-based insurance design (VBID) model in the MA program. This is the first test project announced by the Division of Health Plan Innovation (DHPI), a division with the Centers for Medicare & Medicaid Innovations (CMMI) established in 2015 to focus on health plan initiatives.

As the first in an expected number of pilot projects for MA organizations, 7 states (Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee) will be allowed to incorporate VBID principles in their MA plans (and thereby bypass the “uniformity” rule that requires all enrollees in MA plans to receive the same benefits and costs). 

According to a CMS spokesperson, “CMS will be studying whether providing MA plans the opportunity to employ VBID strategies has an overall impact on enrollee health outcomes, behavior, service use, quality of care, and costs to health plans, enrollees, and to Medicare.”

Using the VBID model, the MA plans are required to develop interventions that target plan enrollees who have one or more of 7 chronic conditions (diabetes, chronic obstructive pulmonary disease, congestive heart failure, past stroke, hypertension, coronary artery disease, and mood disorders).

According to A. Mark Fendrick, MD, director, Center for Value-Based Insurance Design, University of Michigan, Ann Arbor, MI, the 7 specific chronic conditions included in the test project were chosen because they are common in Medicare beneficiaries and drive a lot of the spending. 

He noted that each condition has well-established, evidence-based quality metrics that have been documented to be underutilized in the Medicare population, possibly due to increased levels of patient cost-sharing.

Basically, VBID plans align patients’ out-of-pocket costs, such as copayments, with the clinical value of services. These innovative products are designed with the tenets of “clinical nuance” in mind.

“These tenets recognize that medical services differ in the amount of health care produced, and the clinical benefit derived from a specific service depends on the consumer using it, as well as when and where the service is provided,” he said.

By emphasizing that VBID is a consumer engagement (not provider facing) initiative, Dr Fendrick notes that far less attention has been directed to how consumer behavior can be directed as a policy lever to bring about a more efficient delivery system.

“I propose that value-driven consumer incentives—through benefit design reforms that promote smart decisions and enhanced personal responsibility—must be aligned with payment reform initiatives to achieve clinical and financial goals for the health care system,” he said, stressing that achieving the Triple Aim of improving the experience of care, improving the health of populations, and reducing per capita costs of health care is more easily and rapidly accomplished when provider and consumer incentives are aligned.

Alternative payment models that provide financial incentives to clinicians for practicing high-quality care, for example, to lower cholesterol for patients with heart disease, will have more difficulty achieving their quality metrics if these patients are not enrolled in a health plan that generously covers their cholesterol-lowering medication.

“I find it incomprehensible when my patients’ insurance coverage—such as a high deductible health plan—does not offer easy access for those exact clinical services for which I am benchmarked,” he emphasized.

Whether or not VBID achieves improved outcomes by better aligning patient and provider incentives will be better known in 5 years—the time CMS has allotted for implementation of the model. 

Medicare Shared Savings Program

Currently, the Medicare Shared Savings Program includes 434 ACOs that serve more than 7.7 million Medicare beneficiaries. 

On January 28, 2016, CMS proposed changes to the regulations governing the Medicare Shared Savings Program. The proposed changes focus on incorporating regional FFS expenditures into the methodology for establishing, adjusting, and updating an ACO’s historical benchmark for its second or subsequent agreement period, according to a CMS spokesperson. 

“CMS has also proposed further modifications to streamline the methodology used for adjusting the ACO’s benchmark for composition changes, to encourage ACOs to transition to performance-based risk arrangements, and to provide greater administrative finality around the program’s financial calculations,” said CMS.

March 28, 2016, is the last day to submit comments on these proposed changes.

On November 5, 2015, CMS and the HHS Office of Inspector General (OIG) published the Final Rule on fraud and abuse waivers in connection with the Medicare Shared Savings Program. This long-awaited Final Rule essentially finalizes the 5 waivers identified in the Interim Rule published in 2011, according to a commentary written by attorneys at the international law firm, Jones Day. 

According to Andrew Jack, an associate in the Columbus, Ohio office of Jones Day, the main difference in the Final Rule is that it eliminates the waiver of the Civil Monetary Penalties (CMP) Law relative to gainsharing arrangements. Whereas in the Interim Rule the “gainsharing CMP” waiver appeared in 4 of the 5 fraud and abuse waivers, this waiver does not appear in the fraud and abuse waivers finalized in the Final Rule due to recent legislative changes that narrowed the scope of the CMP Law, he said, adding that this resulted in the decision by CMS and OIG that the “gainsharing CMP” waiver was no longer needed.

“The most important thing to know about the Final Rule,” said Mr. Jack, “is that CMS and OIG have acknowledged the benefits of the fraud and abuse waivers and intend to continue providing such waivers in order for an ACO to engage in innovative arrangements between or among its participants and providers/suppliers, as well as outside providers/suppliers that have a role in coordinating care for ACO beneficiaries,” he said.

He also emphasized that many ACOs nationwide are not yet taking advantage of the “breadth and power” of the waivers, and recommended that ACOs “take a closer look at how they may benefit from pursuing arrangements in accordance with the requirements of the waivers.”

References:

1. US Department of Health & Human Services. HHS Press Release, January 26, 2015. https://www.hhs.gov/about/news/2015/01/26/better-smarter-healthier-in-historic-announcement-hhs-sets-clear-goals-and-timeline-for-shifting-medicare-reimbursements-from-volume-to-value.html

2. Bipartisan Policy Center. Transitioning From Volume to Value: Accelerating the Shift to Alternative Payment Models. July 2015. Available at: https://bipartisanpolicy.org/wp-content/uploads/2015/07/BPC-Health-Alternative-Payment-Models.pdf

3.  FasterCures. A Closer Look at Alternative Payment Models. Available at: https://www.fastercures.org/assets/Uploads/PDF/VC-Brief-AlternativePaymentModels.pdf

4. Pear R. Surge in Medicare Advantage Sign-Ups Confounds Expectations. New York Times. Feb. 12, 2016; available at: https://www.nytimes.com/2016/02/13/us/politics/surge-in-medicare-advantage-sign-ups-confounds-expectations.html?_r=0

5. Deloitte. Unlocking the Potential of Value-Based Care in Medicare Advantage. 2016. Available at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-dchs-medicare-advantage-vbc-final.pdf

6. Synder LS, Fingold HI, Hall MB. New Value-Based Insurance Design Model for Medicare Advantage Plans Is the First of Multiple Medicare Plan Innovations Anticipated from CMS. September 2015.  https://www.ebglaw.com/news/new-value-based-insurance-design-model-for-medicare-advantage-plans-is-the-first-of-multiple-medicare-plan-innovations-anticipated-from-cms/

7. Centers for Medicare & Medicaid Services (CMS). Proposed Changes to the Medicare Shared Savings Program Regulations. Available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-01-28-2.html

8. Federal Register. Medicare Program: Final Waivers in Connection With the Shared Savings Program. 80(209):66726. Available at: https://www.gpo.gov/fdsys/pkg/FR-2015-10-29/pdf/2015-27599.pdf

9. Jones Day. CMS and OIG Issue Final Fraud and Abuse Waivers in Connection With the Medicare Shared Savings Program. Jones Day. November 2015. Available at: https://www.jonesday.com/files/Publication/aaab426d-f957-418d-8799-832d07ecd02a/Presentation/PublicationAttachment/c0d815ac-9673-46b3-b83e-8aec9e1c56ef/CMS%20and%20OIG%20Issue.pdf