Featured Health Business Daily Story, Feb. 9, 2015

Insurers Applaud CMS’s Goal to Diminish FFS, Boost Value-Based Payment Model

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February 2, 2015Volume 25Issue 4

Both HHS and commercial health insurers are trumpeting new initiatives to make performance- or value-based payment and care delivery the “norm” in the next three years. It’s out with fee-for-service (FFS), for the most part, and in with accountable care organizations (ACOs) and bundled payment models. For health insurers, this means the value-based payment and delivery model will have even more momentum behind it with the weight of the Medicare program, pushing more providers to move to more efficient pay-for-value programs.

On Jan. 26, HHS Sec. Sylvia Burwell said by the end of 2016, the final year of the Obama presidency, the goal is to tie 30% of traditional Medicare payments to quality through alternative payment models, and increase this benchmark to 50% by 2018. The Burwell plan also calls for 85% of the remaining traditional Medicare payments to include a quality- or value-based component by 2016, and 90% by 2018. This could be met through initiatives such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction programs, she said.

Health insurers should benefit from the move as more managed care takes hold in more segments of the industry, but the progression may be uneven and take time. “I think it [the impact] will vary a lot,” Brian Weible, vice president and actuary at Wakely Consulting Group, tells HPW. “In places with high managed care penetration, where providers are accustomed to taking risks and are familiar with options — whether that is some kind of capitation, whether it is some kind of global-based payment — I don’t think it will be a huge impact there. But I think in a lot of areas where there was less penetration or maybe none, I think it will be kind of a two-pronged effect,” he says.

The first includes providers, notably ones that occupy geographical pockets where some have “just out and out refused to get involved with managed care in terms of HMOs or any arrangements like that. I think by CMS effectively breaking the ice, it will be good for Medicare patients right away,” Weible says. “It kind of aligns incentives, not to say that providers are providing care that is inappropriate, but there are probably more cost-effective methods out there.”

The second prong is health insurers, which should benefit. “A lot of providers used to be anti-managed care, but might actually become pro-managed care. They would rather deal with local or at least state-based health plans compared to receiving a federal payment — if you want to call it a managed care or at-risk payment from CMS — that might not be as sensitive to whatever local nuances there are with respect to health care resources or care coordination or things like that,” Weible says.

HHS Wants Alternative Payments to Spread

In her announcement, Burwell also urged other payers like Medicaid and commercial insurers to move in the direction of performance-based payments. To make the HHS goals “scalable beyond Medicare,” the secretary unveiled the creation of a Health Care Payment Learning and Action Network, which will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models.

“CMS has been pretty clear this is intended for multiple payers, not just Medicare, but Medicaid, and that she hopes to work with public and private payers and providers as well,” Tricia Neuman, senior vice president, Kaiser Family Foundation, tells HPW.

Ellen Lukens, a vice president at Washington, D.C.-based consulting firm Avalere Health LLC, says this broader approach could lead to more standardization across the industry. “For example, if you’re developing an ACO for the Medicare population, then it would make sense that you would be able to provide for the commercial side of the population,” she tells HPW.

Lukens also predicts that HHS’s commitment to alternative payment could extend the life of current pilots, like the bundled payment program that will see its second round go live in July, Lukens says. “CMS has not asserted yet whether they will have another round but with this announcement I think it is possible they would enter into another round,” she adds.

The important thing for now, according to Neuman, is to see which of the alternative payment models bears the most fruit, be it ACOs, bundled care or other ideas.

Aetna Says All Good With HHS Goals

Health plans liked the HHS moves. Aetna Inc. spokesperson Walt Cherniak tells HPW: “We have been working with providers to advance value-based models of care for more than seven years and we have proof that these programs are working, particularly for Medicare beneficiaries.” An example is the Aetna-NovaHealth collaboration in Maine. “We were able to achieve preventive care for 99% of patients, fewer hospital days for 50% of patients, fewer hospital readmissions for 45% of patients and a 16% to 33% reduction in medical costs,” he says.

The Blue Cross Blue Shield Association and America’s Health Insurance Plans also applauded the Burwell announcement.

And in addition to backing the HHS goals, a group of insurers and providers on Jan. 28 introduced a new coalition to promote performance-based payment. Called the Health Care Transformation Task Force, it seeks a consensus on payment models in order to avoid requiring doctors and hospitals to negotiate multiple contracts with Medicare and each private insurer. The task force includes health systems like Boston-based Partners HealthCare and insurers including Aetna and Blues operator Health Care Service Corp., among others.

The new group is the brainchild of Richard Gilfillan, M.D., the former director of CMS’s Center for Medicare and Medicaid Innovation, and current CEO of CHE Trinity Health, a Catholic provider system active in 21 states headquartered in Livonia, Mich.

© 2015 by Atlantic Information Services, Inc. All Rights Reserved.

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