Medicare Payment Reforms Spark Calls for Sweeter Incentives

Expect a lot of lobbying by hospital organizations to scale back the federal government's plans to drastically raise the percentage of Medicare payments linked to value-based care, says one observer.Today, more than half of Medicare payments are linked to quality measures, such as those that depend on performance in the value-based purchasing and ...

Expect a lot of lobbying by hospital organizations to scale back the federal government's plans to drastically raise the percentage of Medicare payments linked to value-based care, says one observer.

Today, more than half of Medicare payments are linked to quality measures, such as those that depend on performance in the value-based purchasing and readmissions programs, or in innovative structure like the four bundled payment models and ACOs.

But the Obama Administration's pledge Monday to raise that level to 85% by 2016 and to 90% by 2018—and from 20% to 30% for payments made to providers participating in accountable care and bundled payment models—may be an impossible goal. At least without some major changes to the rules, several healthcare analysts say.

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"I'm happy it's on the table and it's great that we have some targets. But the likelihood that we can be as successful as they imagine, I think that's very low," says Paul Keckley, managing director of the Navigant Center for Healthcare Research and Policy Analysis.

"If you back into those numbers, it means they have to accelerate the VBP and avoidable readmissions programs big time," he says. Keckley predicts a lot of lobbying by hospital organizations and others to scale back the three-year timeline in the months ahead.

Increasing the dollars at risk in those programs, and the hospital-acquired condition program, which max out at 2%, 3%, and 1% of a hospital's DRG payments, would take an act of Congress to amend the Patient Protection and Affordable Care Act.

Keckley and Nancy Foster, vice president of quality and patient safety policy for the American Hospital Association, say they weren't surprised at Centers for Medicare & Medicaid Services' announcement, because CMS the has long made it known its goal is to move away from the current fee-for-service Medicare payment system.

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"We're supportive of rewarding people for more comprehensive care, and moving away from the DRG payment system to something that makes more sense…but as always, the devil is in the details," Foster says.

"CMS has to build these structures for payment to recognize the investment in infrastructure that is required, for hospitals and physician groups, and others to move to this new form of payment."

Joanna Hiatt Kim, the AHA's vice president of payment policy, says that in particular, the AHA applauds the administration's goal to move alternative payment models such as CMS's ACOs and bundled payments to a higher percentage based on quality scores.

"CMS came out in December with the proposed rule on ACOs that moves in the right direction," Kim says, "but they clearly have to do more to make that program attractive to people to get them to that 30% goal."

For example, CMS is allowing Track 1 Medicare Shared Savings Program (MSSP) participants, who receive shared savings, but are not at risk to share losses, to stay in the program three more years. "But they reduced the percentage of savings that these folks are able to share in. That's a pretty big disincentive because they're reducing what is already a low-sharing rate even more."

A 'Cacophony of Measures'
Foster notes that when groups of providers agree to participate in an innovative payment model, they also agree to be judged on many additional quality measures, a fact of life the AHA would like to see streamlined.

"They're not relieved of their hospital reporting quality… or their physician quality reporting activities. And they have to take on the new ones that are associated with whatever new [payment] structure they're taking on. So you've got this cacophony of measures, and that really kind of overwhelms you. And you're not sure how to focus attention in an effective way."

"Overall, we think there's a lot more that CMS can and should do to sustain program participation, and recognize that ACOs are all along the continuum of being able to take on risk, [moving] down that path at extremely variable speeds. To try to push them along too quickly could really result in them dropping out of the program," Kim says.

Over the last three years, payments to many other providers besides hospitals will be adjusted based on quality scores, although arguably not a lot of that revenue will be at risk.

Skilled nursing facilities will begin a value-based purchasing program with a 2% cut for higher readmissions in FY 2018. Outpatient departments and ambulatory surgical centers will soon be paid based on quality scores, and for physicians, the value-based payment modifier is now in effect. Long-term acute care providers will soon be added.

There might not be that much room to expand in those sectors without adding more specialty care types of bundled programs, which CMS says it intends to do.

But the administration wants to do a lot more. "We are dedicated to using incentives for higher-value care, fostering greater integration and coordination of care and attention to population health… we can accelerate these improvements and integrate them into the fabric of the U.S. health system," Health and Human Services Secretary Sylvia Burwell wrote in in the New England Journal of Medicine Monday.

Until that happens, however, Keckley says he thinks CMS is pinning a lot of hope on its ability to expand bundled payment and ACO models to many more providers. But the most important thing, he says, was for CMS to get out early in the year reminding the public that the PPACA already does include tools to lower costs and improve quality.

In part, he says, the timing of the announcement was strategic. "I do find it intriguing that the CMS announcement came out right after the President's State of the Union address, just after the 114th Congress is seated, and the book (critical of the PPACA) by Steven Brill is out. Now we have this announcement that we're going to ramp up, and ramp up attention to these VBPO programs because we want to reinforce the fact there's something in the law about this."

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Keckley says there will be a lot of criticism and opposition. "I guarantee you, [Rep. Paul] Ryan [R-WI] and the gang on the hill will have these folks in front of their committees. We have 30 some doctors in Congress. It just can't happen quite this fast."

"And I think there's some tongue-in-cheek there (with respect to CMS's percentage goals). I don't think the 2016 numbers will come in anywhere near this. Yes, I think they can get closer, but I'm having a hard time imagining they can get as close as they say they want to."