Medicare’s Mission to Change How Health Care is Paid for and Delivered: A Cloud with a Silver Lining or Just a Dark Cloud?

A recent policy perspective was published in the New England Journal of Medicine March 5, 2015 by the Secretary of Health And Human Services, Sylvia Burwell, on setting value-based payment goals for Medicare [1]. These goals include having at least 30 % of the Medicare payments provided through such mechanisms as accountable care organizations (ACOs) and bundled episodes of care by 2016, rising to 50 % by 2018. ACOs are commonly full risk or risk shared arrangements where the provider is ‘‘on the hook’’ for the cost of care provided to a set group of Medicare enrollees. In other words, if at the end of a period of time (e.g. one year) the cost for care is less than the ‘‘yearly budget’’, then the provider keeps the difference (e.g. profit). If the cost for care is more than this, the provider is ‘‘on the hook’’ for the loss. As well, bundled episodes for care are a derivative of the diagnostic related group (DRG), which has been in place by Medicare since 1983. DRGs are essentially bundled payments for the hospital portion of a patient’s stay and are acute in nature. Under bundled episodes of care, commonly all provider services (hospital plus physician) are extended past this period of hospital stay in caring for a patient and can include: physician care, hospital care, nursing home care post-hospital discharge, and home care. These same goals were expressed by a representative from Center for Medicare and Medicaid Services (CMS) at a recent (April 10, 2015) Samuel Martin Memorial lecture held by the Leonard Davis Institute (LDI) at the University of Pennsylvania. Is it very interesting to note how aggressive CMS has been in setting and announcing these payment reform goals. At a recent Academy Health meeting held in early February 2015 in Washington, DC, payment reform was discussed by Professors Michael Chernew and Michael McWilliams from Harvard and Peter Hussey from the RAND Corp. All three are nationally regarded experts on payment reform. This panel’s conclusions on how well these types of payment reform initiatives were progressing and the resultant cost saving were not encouraging. First, a bundled payment demonstration that took place from 2010–2013 in California (by the Integrated Health Association and funded by the government) was not successful. The hospitals that were involved in this demonstration only enrolled 35 patients over a 3-year period. The issues stated by those involved in the demonstration were that it was very complex—it was too much work, there was a lack of technical infrastructure, and as well a lack of trust between parties. The conclusion made was that: ‘‘Despite great initial support, enthusiasm and effort, episode-of-care payment does not offer an easy fix to the nation’s healthcare financing problems [2]’’. As it related to ACOs, again the way in which they were configured created issues— with an unsuccessful end result. The recommendations made during this session were that patients needed to be kept in the ACO for the entire year (and cannot be allowed to float in and out of this arrangement) and that the risk needed to be two sided (e.g. both Medicare and the providers being at risk). The take-home messages from their findings w as follows: better data are required from these demonstrations, and the payment models will take time before they are fully baked. & Jeffrey Voigt [email protected]