The Timeline

Recently, HHS Secretary Sylvia Burwell announced an ambitious timeline for transitioning away from the fee-for-service payment system to one based on value.  Specifically, HHS’s goal is for 30% of all Medicare provider payments to be in “alternative payment models” by 2016 and for 50% of Medicare provider payments to be in alternative payment models by 2018.  By alternative payment models, HHS means accountable care organizations (“ACOs”) (partnerships of providers delivering care to circumscribed patient populations  with the aim of improving quality, decreasing costs and sharing the resultant savings among the ACO members); patient-centered medical homes (e.g., primary care clinics) that focus on care coordination, disease management and preventive care; and bundled payment models where a group of providers is reimbursed a lump sum for all the costs associated with an “episode of care” (e.g., back surgery).  These payment models focus on improving quality, safety and patient centeredness and eliminating wasteful health care spending.  Burwell’s announcement can be found here.

HHS also aims to tie “virtually all” Medicare fee-for-service payments to quality and value – at least 85% by 2016 and 90% by 2018.  Hospital Value-Based Purchasing Programs and Hospital Readmission Reduction Programs are examples of payment programs that reward quality and cost-effectiveness.  “This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments,” according to an HHS press release.

Finally, HHS announced the creation of a “Health Care Payment Learning & Action Network” to encourage public-private sector partnership so that the quality/value/efficiency revolution continues to develop beyond the Medicare program.

Practical Takeaways

Since the passage of the Affordable Care Act in 2010, health care industry stakeholders have focused on trying to understand how alternative payment systems work and how they can be implemented on a case-by-case basis to transition away from the fee-for-service payment system.  Burwell’s announcement offers health care transformation a shot of Red Bull insofar as it establishes a definitive timeline and the expectation that providers will conform.  While most understand the importance of continuing to slow the growth of health care costs and the benefit of rewarding quality, change is hard.  But given the ambitiousness of the timeline, latecomers will have to find a way to change their care processes – for health care transformation is no longer the future, it is now.