- Quickening the pace of the value-based payment transition is a major focus for HHS, the department’s new Secretary Alex Azar recently told attendees of the Federation of American Hospitals’ annual Public Policy Conference in Washington DC.
“On the delivery side, back in the 2000s, shifting to a value-based system was just getting going as well,” he said. “And yet here we are today — more than a decade later — and value-based payment is still far from reaching its potential.”
“So this is no time to be timid. Today’s healthcare system is simply not delivering outcomes commensurate with its cost.”
Hitting the value-based reimbursement tipping point is key to reducing the fast-growing pace of healthcare spending. CMS actuaries recently projected healthcare to account for 19.7 percent of the economy by 2026 as national healthcare spending growth accelerates to 5.5 percent over the next eight years.
“It would be one thing if this were accompanied by increasing quality — spending 20 percent of GDP on healthcare to boost our life expectancy to 100 sounds like a pretty good deal,” he remarked. “But it’s not the deal we’re getting right now. As all of you know, part of the problem happens to be the equation that we’ve used for healthcare in this country for decades now: paying for procedures and sickness.”
HHS recognized the fee-for-service issue almost a decade ago, but the results have been underwhelming, especially for accountable care organizations (ACOs) created under the Affordable Care Act, Azar continued.
Medicare Shared Savings Program (MSSP) ACOs earned impressive care quality scores in 2016, but the program continued to operate with a net loss. Only 31 percent of the organizations earned shared savings payments despite an average composite quality score of 93.4 percent across all MSSP ACOs, a recent Health Affairs analysis showed.
The program ended the 2016 performance year with a net loss of $39 million.
In addition, only 18 percent of MSSP ACOs have transitioned to downside financial risk tracks by 2018, which is the ultimate goal of the program.
Despite underwhelming alternative payment model results, according to Azar, there is no turning back to fee-for-service payments.
“In fact, the only option is to charge forward — for HHS to take bolder action, and for providers and payers to join with us,” he said. “This administration and this President are not interested in incremental steps. We are unafraid of disrupting existing arrangements simply because they’re backed by powerful special interests.”
To accelerate the value-based payment transition, Azar emphasized the implementation of Medicaid and Medicare alternative payment models. As the largest payers in the industry, Medicaid and Medicare have the market power to be the first mover in the accelerated value-based reimbursement transition.
While programs like MACRA are working to transition the industry, HHS also plans to develop new alternative payment models. But these models may look different than those created under previous administrations, Azar stated.
“Simply put, I don’t intend to spend the next several years 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,” he said.
HHS intends for new alternative payment models to motivate ACOs and other providers to assume downside financial risk, as well as reduce the quality burden reporting on providers.
New alternative payment models will also reduce government burdens on providers as they transition to value-based payment. For example, the federal department plans to tackle anti-healthcare fraud laws that impede care coordination and FDA communication policies that prevent pharmaceutical companies and payers from collaborating.
Additionally, HHS plans to move to a value-based healthcare system by increasing patient access to health information through interoperability and promoting price transparency.
The healthcare industry should empower patients just as other industries put information into the hands of the consumer to make high-value decisions. But the healthcare industry is far from achieving a true consumer experience as evident by Azar’s personal story that he shared with attendees.
Back in Indiana, he received a routine echocardio stress test a few years ago. Although his doctor prescribed the test, Azar was sent to an affiliated medical center, where he had to manually give his information to another receptionist because of a lack of interoperability.
In addition to interoperability woes, the receptionist also could not give Azar an estimated price for his procedure because the information was not readily available. Azar continued to ask medical center staff and eventually, a clinic manager told him $5,500.
But the clinic manager failed to give Azar the negotiated rate that his insurer had with the medical center, which Azar eventually found to be $3,500.
“Now, there I was, the former deputy secretary of Health and Human Services, and that is the kind of effort it took to find out how much I would owe for a procedure,” he said. “What if I had been a grandmother? Or a 20-something with a high-deductible plan?”
Healthcare consumers face a lack of healthcare price transparency every day. Forty-three states received a failing grade for their healthcare price transparency legislation or lack thereof from the Catalyst for Payment Reform and the Health Care Incentives Improvement Initiative in 2016.
Sixty-three percent of healthcare providers also experienced trouble providing accurate prices to patients, a 2016 survey showed. About 18 percent also said they do not have a patient-facing cost estimation tools and 13 percent lack the staff to address price information issues.
Offering price estimates is not only key to collecting payments from consumers in high-deductible health plans, but empowering consumers to shop around for high-value care. As someone with a high-deductible health plan, Azar was stuck with thousands of dollars in bills for a routine echocardio stress test.
But he could have been charged just $550 if the test had been performed in his doctor’s office, he explained. Discovering a lower priced option was a challenge for Azar and it prevented him from saving thousands of dollars.
“This is simply wrong,” Azar said. “It cannot continue if, as most people in America agree, we want some degree of a consumer market when it comes to healthcare. I believe you ought to have the right to know what a healthcare service will cost — and what it will really cost — before you get that service.”
The healthcare industry can achieve the four HHS goals of developing alternative payment models, reducing government burdens, improving interoperability, and promoting price transparency by working together.
Azar emphasized that change will take a marketplace of actors with some help from the federal government. All healthcare stakeholders from providers to patients should be ready to participate in a value-based marketplace that will drive innovation and competition, resulting in lower prices and better outcomes.
“The key theme uniting these four priorities is the recognition that value is not accurately determined by arbitrary authorities or central planners,” he said. “It is best determined by a marketplace of many players — in the case of healthcare, patients and, where necessary, their third-party payers. Each piece of our plan for value-based transformation recognizes this, and it’s the main reason I am optimistic that we may have more success, and sooner, than past efforts.”