On June 6, 1944, 156,000 Allied forces, supported by 5,000 ships and 11,000 aircrafts, made an amphibious landing along Normandy’s coast. Although D-Day began the retaking of Western Europe, the famous battle at Omaha Beach initially appeared disastrous. Tanks sank, strong winds blew men to the wrong place, German firepower was significant, and Allied casualties mounted. By the end of the day, not a single objective had been reached. However, by June 11, the beaches were secured and by the end of August the Allies had liberated Paris and were prepared to march on Germany. The battle at Omaha beach had failed to achieve its short-term objectives, but the broader goal of liberating Europe was ultimately successful.
How does D-Day relate to health care? Policymakers and researchers alike are wont to evaluate the early results of individual initiatives and programs from the myriad payment and care models regularly released by the Centers for Medicare and Medicaid Services (CMS). However, in doing so they may miss the broader landscape of varied approaches that CMS is taking to push health care forward. D-Day relied on many land, sea, and air attacks that collectively led to the ultimate Allied victory that was more than the sum of its parts. Likewise, CMS is developing a variety of strategies to transform a health system ailed by high costs and fragmented care. To understand the bigger picture of how CMS is driving change, one must zoom out from the program-level and evaluate the tapestry of CMS models and initiatives in their entirety.
In January 2015, Secretary of Health and Human Services (HHS) Sylvia Burwell announced clear goals for Medicare. The goals are to advance health care toward the “triple aim” of making the population healthier, making the experience of receiving care better, and reducing the cost of health care. This means moving health care away from a system where doctors are paid based on the volume of services they provide (fee-for-service) and toward one where doctors are paid based on the quality of those services (value-based care and alternative payment models).
Specifically, CMS’ goals are to: 1) tie 30 percent of all Medicare provider payments to value through alternative payment models by the end of 2016 and 50 percent by the end of 2018; and 2) tie 85 percent of all Medicare fee-for-service payments to quality and value by 2016 and 90 percent by 2018. While it is still unknown if the new administration will endorse these specific goals, there is significant bipartisan support for driving providers toward value-based payment models. Concurrent to government initiatives, the private sector has made a strong push toward value-based payment models, efforts that will likely be endorsed by a Republican administration. We expect CMS to continue to advocate for new payment models that reward value.
Historical Evolution of Medicare Payment Models
When Medicare was established in 1965, reimbursement for physicians was based on usual, customary, and reasonable charges, which left significant room for interpretation and significant cost increases. The Health Maintenance Organization (HMO) Act, passed in 1973, was an effort by the government to change the way health care was delivered and doctors were paid by developing networks of providers. After various pilot programs through the 1980s and Medicare+Choice in the 1990s, what we now know as Medicare Advantage ultimately emerged. With participation in the program still voluntary, most Medicare beneficiaries still rely on traditional Medicare.
In the 1980s and 1990s, new payment models were introduced. Medicare sought to incent hospitals to be more efficient by establishing a prospective payment system (PPS) and diagnosis-related groups (DRGs) in 1983. This system capped Medicare payments to hospitals and rewarded efficiency. In the 1990s, the effort to standardize payments continued with the physician fee schedule, which established a fee for each type of service based on the time, effort, and expense involved. Shortly thereafter, a hospital outpatient prospective payment system was established that provided a fixed payment for defined groups of services.
Despite these changes, doctors were still paid based on the volume of services they provided and had no incentive to coordinate with other providers to improve quality outcomes. To incent more coordination in a fragmented system, Medicare introduced the Coronary Artery Bypass Graft (CABG) bundled payment in 1988 and the Physician Group Practice demonstration in 2005 that created a set of quality measures and tied pay to performance. The Affordable Care Act (ACA) advanced value-based payment models, defined as those programs that promote quality, even further. The ACA also created the Centers for Medicare and Medicaid Services Innovation Center (CMMI) and tasked it with developing, testing, launching, and evaluating new value-based payment and delivery methods. These new efforts, though, are built upon 50 years of payment experience.
Figure 1: Evolution of Medicare payment models
Recent Medicare Activity
The aggressive pursuit to achieve the goal of better, smarter, healthier care has led to the rapid growth of initiatives, models, and programs that focus on the shift to value-based care. CMS’ efforts to accelerate alternative payment model adoption include making some demonstration models mandatory. Importantly, the newly finalized Medicare and CHIP Reauthorization Act rule (MACRA) ties all Medicare Part B provider payments to quality and encourages physicians to pursue alternative payment models. CMS’ 2016 focus areas included implementing new and innovative models, monitoring and optimizing results, and analyzing its portfolio of programs to identify more ways to advance value-based care.
Categorizing the Models and Initiatives
To understand the broad landscape of CMS activity, we first identified 74 Medicare payment and care initiatives, models, and programs. We analyzed each of these programs and determined their stage of development, which we categorized as research, testing, and adoption. We defined research initiatives as those designed to create knowledge and accelerate the implementation of innovative models (see Figure 2). These represented 4 percent of CMS programs and examples include the Health Care Payment Learning and Action Network and Hispanic Health Services Research Grant Program. We defined testing programs as those actively investigating new payment and delivery models. Models in this phase represent a majority (59 percent) of CMS’ activities; examples include the Next Generation Accountable Care Organization (ACO) and the Oncology Care Model. We defined models in the adoption phase as those currently integrated into Medicare. Adopted models represent 37 percent of the CMS portfolio and include Hospital Value-Based Purchasing and the Diabetes Prevention Program.
A review of the three-tiers of programs helps identify gaps that can be filled by new innovation models. Of note, while CMS conducts some specific research programs, much research is conducted by other agencies and organizations including the Agency for Healthcare Research and Quality (AHRQ), Medicare Payment Advisory Commission (MedPAC), and the National Institutes of Health (NIH); these research programs were not included in our analysis.
Figure 2: Medicare’s 74 models, initiatives, and programs categorized by phase: research, testing, and adoption
Putting Payment Models Into Focus Areas
Categorizing each payment model into focus areas indicates the areas CMS is testing to achieve its payment reform goals. Figure 3 shows nine categories of programs and indicates the breakdown of research, testing, and adoption programs within each category. The growing number of models creates more confusion so the identification and adoption of best practices is vital. CMS is targeting specific areas, including those to drive the adoption of population and episodic payments and initiatives that support the adoption of best practices among providers.
Figure 3: Medicare’s programs categorized by type of initiative
Figure 4 shows the number of participants in either a single organization-type model or a multiple organization-type model. CMS is shifting their strategy from single organizations to multiple organizations working together to improve care coordination across provider types. This strategy seeks to ensure more holistic and comprehensive patient care while decreasing overall costs through improved outcomes.
Figure 4: Medicare’s programs categorized by number of participants
The program types (Figure 5) show the distribution of research, testing, and adopted programs among population, episode of care, and quality outcomes programs. Currently adopted models focus primarily on outcomes and specific targeted populations. CMS programs in the testing phase are shifting away from quality toward population and episode-based care. The test models generally have a higher level of risk than the already adopted programs.
Figure 5: Medicare’s programs categorized by type
Figure 6 includes payment models focused on specific disease states and highlights that there are relatively few disease-state programs compared to the overall number of CMS Medicare programs. CMS has an opportunity to expand to other high-cost disease-specific models, including frequently diagnosed co-morbid condition groupings.
Figure 6: Medicare’s programs categorized by disease state
The final chart (Figure 7) shows the risk spectrum among CMS models. Capitation and bundled payments are tied to models that create value, giving CMS reason to pursue additional capitation and bundled payments. While bundled payments are considered risk payments, there is still no incentive for providers to decrease the numbers of the indicated procedures. Shared savings and shared risk solely within the investigative models are indicative of the shift to increased accountability needed to drive value-based care.
Figure 7: Medicare’s programs by risk spectrum
D-Day’s success in 1944 depended, in part, on the vision and leadership of Allied forces commander Dwight Eisenhower who coordinated the largest invasion in human history. Unfortunately, no single person, or even any group of people, at CMS has played a comparable role to Eisenhower and presented the public vision of a single master plan. With 74 health care initiatives and programs in different stages of research, testing, and adoption, CMS needs to clearly articulate its overall strategy to push health care providers and payers to engage in reform that lowers costs and improves quality. The diversity of CMS’ initiatives—like the land, sea, and air assault of Normandy—provides opportunity and flexibility for physicians but will also require overarching vision and leadership in the coming years.
The election of Donald Trump might change the strategy of advancing health care reform, but the movement toward value-based care both preceded the Affordable Care Act and has bipartisan support. The approach may be different, but the goals of achieving better care, a healthier population, and lower costs will likely remain the same. Expected appointees Tom Price (HHS Secretary) and Seema Verma (CMS Administrator) should begin their tenure with defined goals and a clearly articulated strategy to achieve them.
As CMS continues to evolve its portfolio of programs we expect the following focus areas:
Expand population-based models and disease-specific models
As ACOs mature and stabilize, opportunities exist to expand them to cover more lives and allow more providers, payers, and organizations to participate in accountable care. More established ACOs will need to expand the spectrum of health care providers they work with including behavioral health, post-acute care, and pharmacy providers, and will need to consider the socioeconomic needs—like transportation, housing, and education—of their patient populations.
CMS has relatively few disease-specific models, which offers an opportunity to take knowledge gained from current programs and expand to other diseases and comorbidities through either specialty ACOs or bundled payment programs. The Oncology Care Model and the Comprehensive End-Stage Renal Disease (ESRD) Care Model are two examples of disease-specific models. The ACO movement has focused around primary and general care, but ACOs are most successful when they include providers that are involved at all levels of patient care, including specialists. Moreover, bundled payments move health care towards value-based care by encouraging coordination between hospital and post-acute care providers. CMS recently proposed to make its cardiac care bundle mandatory and opportunities exist for bundles that consider multiple chronic conditions.
Seek to show more significant cost-savings
As the health care culture shifts towards understanding and adopting value-based care, opportunities exist for more payment models and models that involve higher levels of risk, though mandatory demonstration models are unlikely to continue if Representative Price is confirmed as HHS Secretary. The ACO model is unique in that it measures performance on quality and cost, which together serve as a system of checks and balances to make sure one does not take exclusive priority. The early aim of the movement was to tie payment to quality measures, but to truly transform the health care system and achieve the triple aim, costs need to be reduced while care is better coordinated. As ACOs demonstrate success and more physicians have confidence in accountable care, ACOs can move from shared savings-only to taking on more risk.
The recently passed MACRA ruling establishes the Quality Payment Program and requires physicians with Medicare patients to be in one of two tracks, both of which focus on value and quality. The Merit-based Incentive Payment System track ties payment adjustments to a set of measures and is budget neutral, meaning a negative payment adjustment will occur for underperformance. MACRA encourages physicians to participate in alternative payment models, which must include risk. To help a wide variety of providers have viable options to qualify for bonus payments under MACRA, CMS will need to continue to develop initiatives that qualify as advanced Alternative Payment Models (APMs). With MACRA’s favorable focus on APMs, the number and diversity of these innovation models will continue to increase.
Encourage the growth of multi-payer, state, and region-level initiatives
Multi-payer initiatives spread cost among different payers—for example, commercial and Medicaid—and provide a shared incentive to improve quality and care. When multiple stakeholders work together toward a common goal, collaboration is rewarded and patients benefit. State and regional initiatives also allow states greater flexibility in implementing programs that work best for their populations.
Maryland, Vermont, and Colorado serve as examples of state multi-payer initiatives. Each of these state’s programs are designed to improve primary care through promoting care coordination, health management, patient-centered care, and disease prevention. Comprehensive Primary Care Plus (CPC+) uses a regionally based multi-payer payment model to improve and strengthen primary care. It has currently been adopted statewide in 10 states and exists in participating counties in four additional states.
Another state-level initiative, 1115 waivers, provide flexibility to states in how they implement Medicaid expansion. So far, six states have received waivers. A different program, 1115 demonstrations, also are available and allow states to develop their own innovative pilot programs for Medicaid that focus on expanding eligibility, improving outcomes, and strengthening the quality and efficiency of care. In each of these models, CMS is using its statutory flexibility to allow states to move toward value-based arrangements with payment models that are adapted to the unique needs of the states.
Develop concurrent models
For some physicians, particularly specialists, aligning different payment models might make more sense than being restricting to a single model. For example, participating in different bundled payment programs could benefit a specialist who has less influence than a primary care physician over a patient’s overall health management. CMS has an opportunity to provide clarity and guidance to physicians on which models work best together for different types of physicians or practices.
Through a variety of initiatives and programs that change how heath care is delivered and physicians are paid, CMS is driving health care toward the goals of improving quality and reducing costs. Our analysis of these programs and models in different stages of research, testing, and adoption allows for an understanding of how CMS is approaching its goals, and how to identify areas for future development. While there is not a single, articulate plan that describes how CMS will approach the move toward value-based arrangements, there is much that can be learned by looking at the steps they have already taken.