The Centers for Medicare and Medicaid Services (CMS), the Federal government agency in charge of the Medicare and Medicaid programs, is the largest payer in the U.S. health care system.
CMS typically is the first mover on important changes in the health care system and, due to CMS’ stature as the dominant payor, commercial insurers generally follow CMS’ lead. The Patient Protection and Affordable Care Act of 2010 (ACA) contained funding for important demonstration programs which change the current fee-for-service payment system and introduce value and risk-based programs such as the Pioneer ACO Program, the Medicare Shared Savings Program (MSSP), another ACO program, and the Bundled Payment for Care Improvement Program (BPCI). These programs focus on shifting payment models away from the Fee-for-Service model we know today, towards those that incentivize care coordination, cost containment, and patient outcomes.
Despite all of this activity by CMS, many have speculated that the ACA would be repealed, or doubted CMS’s ability to move aggressively towards more broadly implementing these new payment mechanisms. Those questions were recently answered with startling clarity by CMS and the private sector. On January 26, 2015 CMS announced that by 2016 it will tie 30% of all fee-for-service payments to providers to quality initiatives through alternative payment models--particularly ACOs and bundled payments. This percentage will rise to 50% by 2018.1 This rapid pace of change is more aggressive than many expected and demonstrates CMS’ commitment to transitioning away from the fee-for-service system to these alternate payment models at a more rapid rate than most would have dared to predict.
The private sector is not only following suit but is upping the ante. Only two days later, on January 28, 2015, The Health Care Transformation Task Force (several of the nation's largest health systems and insurers) announced the goal of shifting 75% of their business by 2020to contracts with incentives for quality and lower-cost healthcare. Initial efforts will focus on accountable care, bundled payments and management of the cost and quality of care for high-cost patients.2
As can be seen from these important announcements, these new payment systems can no longer be viewed as experiments that may have meaningful impact at some future date. They are here today, here to stay, and will be the predominant payment methodologies in just two or three years. It is imperative that health systems and physicians begin to engage in such contracts to learn how they work so they can remain competitive. These programs typically give not only the health system, but also physicians groups the ability to take financial accountability (bear risk) for patient outcomes; they would either profit from, or have to pay for their patients’ care based on their performance and results. In both the MSSP and BPCI programs health systems initially took the risk in the early stages of the program, but as physicians learned of this opportunity they began to take risk more frequently until the majority of entities taking the risk were physician groups. This trend is expected to continue and is likely to disrupt long-standing relationships between physicians and hospitals.
Now is the time for health systems and physicians groups to figure out their strategies for navigating and thriving under this fast changing landscape. They need to commit the time and resources to assessing their organization’s opportunities for improvement and infrastructure for taking risk. Most hospitals and physician groups will not feel comfortable flipping the “volume-to-value” switch over night. Developing a step-wise approach to developing the experience and building the necessary infrastructure to take risk under value-based care models will ensure opportunities to course-correct and safely learn how to compete in this rapidly evolving environment. Health care organizations no longer have the luxury of taking a “wait- and-see” approach regarding these new payment systems. If an organization is not already gaining experience in these new systems, its competitors are. By failing to learn these new systems, an organization risks ceding a critical advantage to its competitors that may be difficult to overcome. The future of these new payment systems is not some far off date; the future is today!
Paul Jawin, JD, Vice President, Alignment, Strategy and Reform
Paul brings more than 30 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.
Paul is a regular speaker at industry conferences and events, including the American Academy of Orthopaedic Surgeons Hospital-Physician Alignment Symposium. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.
Lisa Fraser, MHA, Program Manager
In her role as a Program Manager, Lisa consults with clients on innovative payment reform strategies, such as co-management arrangements, bundled payment initiatives and accountable care organizations. Her extensive experience in organizational strategic planning, project management and program implementation allows her to help customers improve service line performance and turn healthcare reform into opportunity.
Previously, Lisa was a Strategic Management Consultant on the Organization and Strategy team at Booz Allen Hamilton in Washington, D.C. She graduated from Duke University with a Bachelor of Arts degree in Public Policy and earned a Master of Health Administration degree from the University of North Carolina at Chapel Hill.