HHS: 85% of Medicare payments to be based on value by 2018

Announcement signals accelerated shift toward value-based payment reform

posted 2.4.15

The Department of Health and Human Services has signaled its intention to embrace value-based payment reform with the announcement that by the end of 2018, it plans to tie half of all fee-for-service Medicare payments to quality or value through alternative payment models like accountable care organizations, or ACOs. HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.

By setting these goals, HHS Secretary Sylvia M. Burwell has added the weight of Medicare behind the building momentum toward a system-wide transition from volume to value. “We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement,” Burwell said in an HHS release.

AAFP CEO and Executive Vice President Douglas Henley, MD, voiced support for the move in the release. “We’re all partners in this effort focused on a shared goal. Ultimately, this is about improving the health of each person by making the best use of our resources for patient good. We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health.”

Payment models like ACOs, primary care medical homes, bundled payments for episodes of care, and others were proposed in the Affordable Care Act as ways to increase quality and efficiency across the health care delivery system. By aligning incentives to reward physicians for coordinating care, proponents hoped to reduce duplicative or unnecessary tests and procedures, provide better care to patients transitioning out of the hospital, and improve management of chronic diseases.

Even before this announcement, HHS has seen promising results on cost savings in many of these models. At the end of last year, the Centers for Medicare and Medicaid Services reported Medicare ACOs in the Shared Savings Program and the Pioneer ACO program combined to save $417 million in 2013.

The first of the new deadlines comes at the end of 2016, when 30 percent of Medicare payments should be made to physicians in alternative payment models. In 2011, that kind of payment was almost nonexistent, but in 2014, 20 percent of Medicare’s $362 billion in fee-for-service payments went to alternative payment models.

With this latest announcement by HHS, it is likely that the introduction of value-based plans in the private market will accelerate as well, raising the question: are frontline physicians prepared to care for their patients successfully in an alternative payment model or under value-based contracts?

TAFP CEO Tom Banning believes family physicians face a critical decision during this time of transition. They can be passive victims of changes shaped by others or they can be active agents shaping a better future for their patients and their colleagues.

“Many practicing physicians have been sitting on the sideline waiting for a sign that payment reform was really going to happen. This announcement puts the full force of the federal government and the Medicare program behind the shift to value-based payment,” Banning says. “Commercial insurers have already shown they’ll follow Medicare’s lead and embrace value-based payment. For family physicians the time to embrace change and lead that change is now.”