HHS Announces Plan To Move Toward Alternative Payment Models

On Monday, HHS announced it will seek to make 30% of Medicare payments for hospitals and physicians through alternate payment models like accountable care organizations and bundled payments by 2016, the Wall Street Journal reports.

Medicare -- which paid $362 billion to providers caring for more than 50 million U.S. residents in 2014 -- began to tie payments to performance as part of the Affordable Care Act. About 20% of payments made by the insurance program are now made through alternate payment models (Radnofsky/Beck, Wall Street Journal, 1/26).

Writing in the New England Journal of Medicine, HHS Secretary Sylvia Mathews Burwell outlined the major goals for the Medicare system in the coming years.

Along with the alternative payment models goal for 2016, Burwell also wrote that HHS will seek to have 50% of Medicare payments through alternate payment models by the end of 2018.

Further, she wrote that HHS will seek to have 85% of Medicare hospital fee-for-service payments tied to quality or value -- through programs such as the Hospital Value-Based Purchasing Program or the Hospital Readmissions Reduction Program -- by the end of 2016. That percentage would increase to 90% by the end of 2018 (Demko, Modern Healthcare, 1/26).

"This is the first time in in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments," according to an HHS release (HHS release, 1/26). A spokesperson for HHS said that a "majority" of fee-for-service payments are already linked to quality and value but did not disclose a precise percentage (Mangan, CNBC, 1/26).

To facilitate the transition away from fee-for-service care, Burwell announced the formation of a Health Care Payment Learning and Action Network (O'Donnell, USA Today, 1/26).

Through the network, HHS will collaborate with private payers, consumers, employers, providers, Medicaid programs and other partners to expand alternate payment models into non-Medicare programs.  "Whether you are a patient, a provider, a business, a health plan or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people," Burwell said (HHS release, 1/26).

'Major Shift' for Providers

According to Bloomberg, the new goals represent a "major shift" for providers and more than double the reach of alternate payment models that federal health officials say have saved millions so far (Wayne, Bloomberg, 1/26).

However, some experts say it remains unclear whether the new payment models will succeed in efforts to reduce cost and improve care. A RAND Corporation study funded by HHS last year concluded that "[w]e still know very little about how best to design and implement [value-based payment] programs to achieve stated goals and what constitutes a successful program" (Millman, "Wonkblog," Washington Post, 1/26).