On Monday, January 26, 2015, the Department of Health and Human Services ("HHS") announced a timeline for moving physicians and hospitals into new payment systems and tying Medicare reimbursements to quality of care. This will effect hundreds of billions of dollars in Medicare payments (the goals apply to Medicare Parts A and B, which paid out more than $350 billion last year). According to the Obama Administration and HHS, these reforms will tie fees "more closely to the quality of care rather than the quantity," with HHS planning to evaluate whether patients are "healthier," "among other measures."

By the end of 2016, HHS intends to: (i) link 85% of payments in Medicare Parts A and B to quality or value (up from 80%); and (ii) have 30% of payments in Parts A and B go to providers in alternative payment models, such as accountable care organizations (up from 20%). Further, by the end of 2018, HHS intends to raise these goals to 90% and 50%, respectively. 

This announcement marks the first instance in which regulators have vocalized specific goals for the implementation of such reforms, and it serves to reinforce HHS's commitment to such implementation. This commitment comes despite the understanding that the reforms – largely introduced in the Affordable Care Act – have a mixed track record in their early stages. As such, the announcement should be a signal to health care providers that adaptation to the reforms is necessary and imminent.

It is not yet clear how the Centers for Medicare & Medicaid Services ("CMS") plans to achieve the newly articulated goals. Both the American Medical Association and American Hospital Association have responded to the announcement by expressing a desire for more information with respect to phasing in the new goals. It also remains unclear what types of partnerships among health care providers will be viewed by CMS as "alternative models." For instance, on the date of the announcement CMS described a category of "alternative payment models built on fee-for-service architecture," evidencing its intent to count at least some hybrid approaches toward its goal.

CMS' transition of Medicare to a value-based payment structure will almost certainly spur similar changes in the way in which private insurance plans structure their payments. According to the nonprofit Catalyst for Payment Reform, 40% of private insurance reimbursements were linked to quality last year. This is a sharp increase from only 10% in 2013 – an increase that dovetails with Medicare’s rising quality requirements. Notably, CMS made sure that private insurers were on board prior to making the "historic" announcement, and CMS explicitly indicated that it wants private plans to mimic its approach. On Monday, CMS announced its creation of a task force to facilitate collaboration among government officials, large employers, private insurers, providers, and other stakeholders in synchronizing quality-based payments.

HHS's announcement underscores the necessity that health care providers discuss their current plans for compliance with experts in the field, and align their systems with the established timeline. Akerman's health care attorneys are well-equipped to help memorialize fee arrangements implementing CMS's quality mandates