Editor's note: On March 16, Paul B. Ginsburg testified before the California Senate Committee on Health on fostering competition in consolidated markets. Download the full testimony here.

Mr. Chairman, Madame Vice Chairman and Members of the Committee, I am honored to be invited to testify before this committee on this very important topic. I am a professor of health policy at the University of Southern California and director of public policy at the USC Schaeffer Center for Health Policy and Economics. I am also a Senior Fellow and the Leonard D. Schaeffer Chair in Health Policy Studies at The Brookings Institution, where I direct the Center for Health Policy. Much of my time is now devoted to leading the new Schaeffer Initiative for Innovation in Health Policy, which is a partnership between USC and the Brookings Institution. I am best known in California for the numerous community site visits over many years that I led in the state while I was president of the Center for Studying Health System Change; most of those studies were funded by the California HealthCare Foundation.

The key points in my testimony today are:

• Health care markets are becoming more consolidated, causing price increases for purchasers of health services, and this trend will continue for the foreseeable future despite anti-trust enforcement; 
• Government can still play an effective role in addressing higher prices that come from consolidation by pursuing policies that foster increased competition in health care markets. Many of these policies can be effective even in markets with high degrees of concentration, such as in Northern California.

[1] Gaynor, M., and R. Town, The Impact of Hospital Consolidation – Update, Robert Wood Johnson Foundation Synthesis Report (June 2012).

[2] Baker, L. C., M.K Bundorf and D.P. Kessler, “Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending,” Health Affairs, Vol. 35, No 5 (May 2014).

[3] Chapin White and Megan Egouchi, Reference Pricing: A Small Piece of the Health Care Pricing and Quality Puzzle. National Institute for Health Care Reform, Research Brief No. 18, October 2014.

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According to an August 2015 survey, 72 percent of Americans find drug costs unreasonable, with 83 percent believing that the federal government should be able to negotiate prices for Medicare. Recently, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS) Andy Slavitt commented that spending on medicines increased 13 percent in 2014 while health care spending growth overall was only 5 percent, the highest rate of drug spending growth since 2001.

Some of the most expensive drugs are covered under Medicare’s medical benefit, Part B, because they are administered by a physician. They are often administered in hospital outpatient departments and physician offices, and most commonly used to treat conditions like cancer, rheumatoid arthritis, and macular degeneration. Between 2005 and 2014, spending on Part B drugs has increased annually by 7.7 percent, with the top 20 drugs by total amount of Medicare payments accounting for 57 percent of total Part B drug costs. While overall Part B drug spending is a small portion of Medicare drug spending, the high growth rate is a concern, especially as new expensive breakthrough cancer drugs enter the market and have a negative effect on consumers’ pockets.

Unlike Part D, the prescription drug benefit, there are fewer incentives built in to Part B for providers to consider lower cost treatments for patients even if the lower cost drug may be clinically equivalent to the more expensive drug, because prior to budget sequestration, providers received 6 percent on top of the Average Sales Price (ASP) of the drug. Larger providers and hospitals often receive discounts on these drugs as well, increasing the amount they receive directly on top of the out-of-pocket cost of the drug.

This leads to more out-of-pocket costs for the consumer, as patients usually pay 20 percent of Part B services. The Government Accountability Office (GAO) estimated that in 2013, among new drugs covered under Part B, nearly two-thirds had per beneficiary costs of over $9,000 per year, leading to out-of-pocket costs for consumers of amounts between $1,900 and $107,000 over the year. On top of these high costs, this can lead to problems with medication adherence, even for serious conditions such as cancer.

A New Payment Model

To help change these incentives and control costs, CMS has proposed a new demonstration program, which offers a few different reimbursement methods for Part B drugs. The program includes a geographically stratified design methodology to test and evaluate the different methods. One of the methods garnering a lot of attention is a proposal to lower the administration add-on payment to providers, from current 6 percent of ASP, to 2.5 percent plus a flat fee of $16.80 per administration day.

Policymakers, physician organizations, and patient advocacy organizations have voiced major concerns raising the alarm that this initiative will negatively affect patient access to vital drugs and therefore produce poorer patient outcomes. The sequester will also have a significant impact on the percentage add on, reducing it to closer to an estimated .86 percent plus the flat fee. But we believe the goals of the program and its potential to reduce costs represent an important step in the right direction. We hope the details can be further shaped by the important communities of providers and patients who will deliver and receive medical care.

Geographic Variation

Last year, we wrote a Health Affairs Blog that highlighted some of the uses and limitations of publicly available Part B physician payment data. One major use was to show the geographic variation in practice patterns and drug administration, and we particularly looked at the difference across states in Lucentis v. Avastin usage. As seen in Exhibit 1, variation in administration is wide among states, even though both are drugs used to treat the same condition, age-related macular degeneration, and were proven to have clinically similar outcomes, but the cost of Lucentis was $2,000 per dose, while Avastin was only $50 per dose.

Using the same price estimates from our previous research, which are from 2012, we found that physician reimbursement under the proposed demonstration would potentially change from $120 to $66.80 for Lucentis, and increase from $3 to $18.05 for Avastin. Under the first payment model, providers were receiving 40 times as much to administer Lucentis instead of Avastin, while under the new proposed payment model, they would only receive 3.7 times as much.

While still a formidable gap, this new policy would have decreased financial reimbursement for providers to administer Lucentis, a costly, clinically similar drug to the much cheaper Avastin. As seen in Exhibit 1, a majority of physicians prescribe Avastin, thus this policy will allow for increased reimbursement in those cases, but in states where Lucentis is prescribed in higher proportions, prescribing patterns might start to change as a result of the proposed demonstration.

Source: Author’s estimates using 2012 CMS Cost Data and Sequestration Estimates from DrugAbacus.org

The proposed demonstration program includes much more than the ASP modifications in its second phase, including:

• discounting or eliminating beneficiary copays,
• indication-based pricing that would vary payments based on the clinical effectiveness,
• reference pricing for similar drugs,
• risk-sharing agreements with drug manufacturers based on clinical outcomes of the drug, and
• creating clinical decision tools for providers to help develop best practices.

This is all at the same time that a new model in oncology care (OCM) is being launched, which could help to draw attention to total cost of care. It is important that CMS try to address rising drug costs, but also be sure to consider all relevant considerations during the comment period to fine-tune the proposal to avoid negative effects on beneficiaries’ care.

We believe CMS should consider offering a waiver for organizations already participating in Center for Medicare & Medicaid Innovation (CMMI) models like the OCM, because financial benchmarks are based on past performance and any savings recognized in the future could be artificial, attributable to this demonstration rather than to better care coordination and some of the other practice requirements that are part of the proposed OCM. Furthermore, because this demonstration sets a new research precedent and because it is mandatory in the selected study areas rather than voluntary, CMS must try to anticipate and avoid unintended consequences related to geographic stratification.

For example, it is possible to imagine organizations with multiple locations directing patients to optimal sites for their business. Also, without a control group, some findings may be unreliable. The proposed rule currently lacks much detail, and there does not seem to be enough time for organizations to evaluate the impact of the proposed rule on their operations. Having said that, it will be important for stakeholders of all types to submit comments to the proposed rule in an effort to improve the final rule prior to implementation.

The critical question for the policymakers and stakeholders is whether this model can align with the multitude of other payment model reforms — unintended consequences could mitigate all the positive outcomes that a CMMI model offers to beneficiaries. Helping beneficiaries is and should be CMS’ ultimate obligation.

Editor’s Note: This analysis is part of The Leonard D. Schaeffer Initiative for Innovation in Health Policy, which is a partnership between the Center for Health Policy at Brookings and the USC Schaeffer Center for Health Policy and Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

The passage of the Medicare Access and CHIP Reauthorization Act (MACRA) just over a year ago signaled a strong and unique bipartisan agreement to move towards value-based care, but until recently, many of the details surrounding how it would be implemented remained unknown. But last week, the Centers for Medicare and Medicaid Studies (CMS) released roughly 1,000 pages that shed more light on how physician payment will hopefully dramatically change for the better.

Some Historical Context

Prior to MACRA, how doctors were paid for providing care to Medicare patients was subject to a reimbursement formula known as the Sustainable Growth Rate (SGR). Established in 1997 to control the rate of increase in spending on physician services, the SGR pegged total spending among all Medicare-participating physicians to an overall budget target. Yet in this “tragedy of the commons,” no one physician benefitted from her good stewardship of health care resources. Total physician spending often exceeded the overall budget target, triggering reimbursement rate cuts. However, lawmakers chose to push them off into the future through what were called “doc fixes,” deferring the rate cuts temporarily. The pending cut rose to over 21 percent before MACRA’s passage as a result of compounding doc fixes.

Moving Forward with MACRA

When it was signed into law on April 16, 2015, MACRA ended the SGR, its cuts, and many previous payment incentive programs. In their place, MACRA established two overarching payment incentive schemes for providers to choose from:

1. the Merit-Based Incentive Payment System (MIPS) program, which supplants three previous payment incentives and makes positive or negative adjustments to a physician’s payment based on her performance; or


2. the Alternative Payment Model (APM) program, which awards a 5 percent bonus through 2024—with higher annual payment updates thereafter—for having a minimum percentage of Medicare and/or all-payer revenue through eligible APMs. Base physician fee rates for all Medicare providers would be updated 0.5 percent for each of the first four years, followed by no increases until 2026, when base fees would increase at different rates depending on the payment incentive program in which a physician participates.

MIPS addresses providers’ longstanding complaints that reporting that reporting under the existing programs—the Physician Quality Reporting System, the Value-Based Modifier, and Meaningful Use — is duplicative and cumbersome. Under the new MIPS program, physicians report to the government payer directly (CMS) and receive a bonus or penalty based on performance on measures of quality, resource use, meaningful use of electronic health records, and clinical practice improvement activities. The bonus or penalty physicians may see starts at 4 percent of the fee schedule in 2019 (based on their performance two years prior—in this case 2017) and increases successively to 5 percent in 2020, 7 percent in 2021, and 9 percent from 2022 onward. From 2026 onward, MIPS providers would receive an annual increase of 0.25 percent on their base fee schedules rates.

In contrast, the APM incentive program awards qualifying physicians a fixed, annual bonus of 5 percent of their reimbursement from 2019- – 2024, and provides that their fee schedule rates grow 0.5 percentage points faster than those of MIPS in 2026 and beyond, in recognition of the risk they assume in these contracts.

Yet, according to MACRA, not all APMs are created equal. APMs eligible for this track must use quality measures similar to those of MIPS, ensure electronic health records are used, and either be an approved patient-centered medical home (PCMH) or require that the participating entity “bears more than nominal financial risk” for excessive costs. Then, in order to receive the APM track bonus, physicians must have a minimum of 25 percent of their revenue from Medicare come through eligible APMs in 2019, with the minimum increasing through 2023 up to 75 percent. In 2021, a new all-payer Advanced APM option becomes available, allowing providers in APM contracts with other payers to participate in the Advanced APM incentive. To do so, they must meet the same minimum thresholds—50 percent in 2021, 75 percent in 2023—but through all provider contracts, not solely Medicare revenue, while still meeting a significantly lower Medicare-specific threshold. By creating an all-payer option, CMS hopes to enable greater provider participation by allowing all payer revenue to count toward the same minimum threshold. Under the all-payer model in 2021, for example, providers must have no less than 25 percent of Medicare revenue through Advanced APMs and 50 percent of all revenue through Advanced APMs.

MACRA Implementation Details Revealed

The newly released proposed rule provides answers to significant questions that had been left unanswered in the law surrounding the specifics of implementation of MIPS and the APM incentives. At long last, providers are gleaning insight into how CMS intends to implement MIPS and the APM track. Given the fast-approaching MIPS performance period in January 2017, here are three key highlights providers need to know:

1. Qualifying for the APM incentive track—and getting out of MIPS—will be difficult. In order to qualify for the bonus-awarding Advanced APM designation, APMs must meet the “nominal financial risk” criteria, which will be measured in three ways: an APM’s marginal rate sharing for losses, minimum loss ratio (the threshold above which providers would begin sharing in losses), and total potential risk as a percent of expected costs. Clinicians must further have a minimum share of revenue that comes in through the designated APMs.


2. Providers will have fewer opportunities to see and improve their performance on MIPS. Despite calls from provider groups for more frequent reporting and feedback periods, MIPS reporting periods will be annual, not quarterly. This is true for performance feedback from CMS, as well, though they may explore more frequent feedback cycles in the future. Quarterly reporting and feedback periods could have made the incentive programs more “actionable” for providers, alerting them to their performance closer to the time the services were rendered and providing more opportunities to improve performance.


3. MIPS allows greater flexibility than previous programs. Put simply, MIPS is the performance incentive program clinicians will participate in if not on the Advanced APM track. While compelling participation, the proposed MIPS implementation also responds to stakeholder concerns that earlier performance incentive programs were onerous and sometimes irrelevant—MIPS reduces the number of measures required in some categories and allows physicians to select from a set of measures to report on based on relevancy to their practice.

With last week’s release of the proposed rule, the Leonard D. Schaeffer Initiative for Innovation in Health Policy is kicking off a series of work products that will focus dually on further MACRA implementation issues and on translating complex policy into providers’ experience. In the blogs and publications to follow, we will dive into greater detail and discussion of the pieces of MACRA implementation highlighted here, as well as many other emerging physician payment reform issues, as the law’s implementation unfolds.

The Center for Medicare and Medicaid Innovation (CMMI, or “the Innovation Center”) recently announced an initiative called Comprehensive Primary Care Plus (CPC+). It evolved from the Comprehensive Primary Care (CPC) initiative, which began in 2012 and runs through the end of this year. Both initiatives are designed to promote and support primary care physicians in organizing their practices to deliver comprehensive primary care services. Comprehensive Primary Care Plus has some very promising components, but also misses some compelling opportunities to further advance payment for primary care services.

The earlier initiative, CPC, paid qualified primary care practices a monthly fee per Medicare beneficiary to support practices in making changes in the way they deliver care, centered on five comprehensive primary care functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement; and, (5) planned care and population health. For all other care, regular fee-for-service (FFS) payment continued. The initiative was limited to seven regions where CMMI could reach agreements with key private insurers and the Medicaid program to pursue a parallel approach. The evaluation funded by CMMI found quality improvements and expenditure reductions, but savings did not cover the extra payments to practices.

Comprehensive Primary Care Plus uses the same strategy of conducting the experiment in regions where key payers are pursuing parallel efforts. In these regions, qualifying primary care practices can choose one of two tracks. Track 1 is very similar to CPC. The monthly care management fee per beneficiary remains the same, but an extra $2.50 is paid in advance, subject to refund to the government if a practice does not meet quality and utilization performance thresholds.

The Promise Of CPC+

Track 2, the more interesting part of the initiative, is for practices that are already capable of carrying out the primary care functions and are ready to increase their comprehensiveness. In addition to a higher monthly care management fee ($28), practices receive Comprehensive Primary Care Payments. These include a portion of the expected reimbursements for Evaluation and Management services, paid in advance, and reduced regular fee-for-service payments. Track 2 also includes larger rewards than does Track 1 for meeting performance thresholds.

The combination of larger per beneficiary monthly payments and lower payments for services is the most important part of the initiative. By blending capitation (monthly payments not tied to service volume) and FFS, this approach might achieve the best of both worlds.

Even when FFS payment rates are calibrated correctly (discussed below), the rates are pegged to the average costs across practices. But since a large part of practice cost is fixed, it means that the marginal cost of providing additional services is lower than the average cost, leading to incentives to increase volume under FFS. The lower payments reduce or eliminate these incentives. Fixed costs, which must also be covered, are addressed through the Comprehensive Primary Care Payments. By involving multiple payers, practices are put in a better position to pursue these changes.

An advantage of any program that increases payments to primary care practices is that it can partially compensate for a flaw in the relative value scale behind the Medicare physician fee schedule. This flaw leads to underpayment for primary care services. Although the initial relative value scale implemented in 1992 led to substantial redistribution in favor of evaluation and management services and to physicians who provide the bulk of them, a flawed update process has eroded these gains over the years to a substantial degree.

In response to legislation, the Centers for Medicare and Medicaid Services are working correct these problems, but progress is likely to come slowly. Higher payments for primary care practices through the CPC+ can help slow the degree to which physicians are leaving primary care until more fundamental fixes are made to the fee schedule. Indeed, years of interviews with private insurance executives have convinced us that concern about loss of the primary care physician workforce has been a key motivation for offering higher payment to primary care physicians in practices certified as patient centered medical homes.

Two Downsides

But there are two downsides to the CPC+.

One concerns the lack of incentives for primary care physicians to take steps to reduce costs for services beyond those delivered by their practices. These include referring their patients to efficient specialists and hospitals, as well as limiting hospital admissions. There are rewards in CPC+ for lower overall utilization by attributed beneficiaries and higher quality, but they are very small.

We had hoped that CMMI might have been inspired by the promising initiatives of CareFirst Blue Cross Blue Shield and the Arkansas Health Care Improvement initiative, which includes the Arkansas Medicaid program and Arkansas Blue Cross Blue Shield. Under those programs, primary care physicians are offered substantial bonuses for keeping spending for all services under trend for their panel of patients; there is no downside risk, which is understandable given the small percentage of spending accounted for by primary care. The private and public payers also support the primary care practices with care managers and with data on all of the services used by their patients and on the efficiency of providers they might refer to. These programs appear to be popular with physicians and have had promising early results.

The second downside concerns the inability of physicians participating in CPC+ to participate in accountable care organizations (ACOs). One of CMMI’s challenges in pursuing a wide variety of payment innovations is apportioning responsibility across the programs for beneficiaries who are attributed to multiple payment reforms. As an example, if a beneficiary attributed to an ACO has a knee replacement under one of Medicare’s a bundled payment initiatives, to avoid overpayment of shared savings, gains or losses are credited to the providers involved in the bundled payment and not to the ACO. As a result, ACOs are no longer rewarded for using certain tools to address overall spending, such as steering attributed beneficiaries to efficient providers for an episode of care or encouraging primary care physicians to increase the comprehensiveness of the care they deliver.

Keeping the physician participants in CPC+ out of ACOs altogether seems to be another step to undermine the potential of ACOs in favor of other payment approaches. This is not wise. The Innovation Center has appropriately not established a priority ranking for its various initiatives, but some of its actions have implicitly put ACOs at the bottom of the rankings. Recently, Mostashari, Kocher, and McClellan proposed addressing this issue by adding a CPC+ACO option to this initiative.

In an update to its FAQ published May 27, 2016 (after out blog was put into final form), CMMI eased its restriction somewhat by allowing up to 1,500 of the 5000 practices expected to participate in CPC+ to also participate in Medicare Shared Savings Program (MSSP) ACOs. But the prohibition continues to apply to Next Gen ACOs, the model that has created the most enthusiasm in the field. If demand for these positions in MSSP ACOs exceeds 1,500, a lottery will be held. This change is welcome but does not really address the issue of disadvantaging ACOs in situations where a beneficiary is attributed to two or more payment reform models. CMMI is sending a signal that CPC+, notwithstanding its lack of incentives concerning spending outside of primary care, is a powerful enough reform that diverting practices away from ACOs is not a problem. ACOs are completely dependent on primary care physician membership to function, meaning that any physician practices beyond 1,500 that enroll in CPC+ will reduce the size and the impact of the ACO program. CMMI has never published a priority ranking of reform models, but its actions keep indicating that ACOs are at the bottom.

The Innovation Center should be lauded for continuing to support improved payment models for primary care. Its blending of substantial monthly payments with lower payments per service is promising. But the highest potential rewards come from broadening primary care physicians’ incentives to include the cost and quality of services by other providers. CMMI should pursue this approach.

Editor's note: This piece originally appeared in Health Affairs Blog.

Event Information

An American Enterprise Institute-Brookings/USC Schaeffer Initiative Event
 

For most of the last five decades, the most-discussed finding by the Medicare trustees has been the insolvency date, when Medicare’s trust fund would no longer be able to pay all of the program’s costs. Last year’s report projected that the hospital insurance trust fund would be depleted by 2030 – just 14 years from now. The report also predicted a more immediate and controversial event: the Independent Payment Advisory Board (IPAB), famously nicknamed “death panels,” would be required to submit proposals to reduce Medicare spending in 2018, with the reductions taking place in 2019. Do we remain on this path to automatic Medicare cuts next year?

The American Enterprise Institute and the Schaeffer Initiative for Innovation in Health Policy, a collaboration between the USC Leonard D. Schaeffer Center for Health Policy & Economics and the Brookings Institution, hosted a discussion of the new 2016 trustees report on June 23. Medicare’s Chief Actuary Paul Spitalnic summarized the key findings followed by a panel of experts who discussed the potential consequences of the report for policy actions that might be taken to improve the program’s fiscal condition. You can join the conversation at #MedicareReport.

Video

• Introduction and keynote address
• Panel discussion

Audio

• The 2016 Medicare Trustees Report: One year closer to IPAB cuts?

Event Materials

• AEI TR16 final
• 20160623_medicaretrusteesreport_transcript

Given the lackluster healthcare exchange enrollment numbers, unaffordable coverage, and increasing overall healthcare costs, President Obama is wrong to think the Affordable Care Act (ACA) needs just a few tweaks – its most fundamental aspects need to be rethought. Obama’s essay marks the first time a modern sitting president has had a piece published in the journal.

Much of the progress made under the ACA expanding healthcare coverage to the uninsured has been thanks to increased enrollment in Medicaid -- not the exchanges -- a harbinger of even less progress to come.  Secretary of Health and Human Services Sylvia Burwell sharply adjusted down projections of new exchange enrollees in 2016 to 1.3 million. Furthermore, the Congressional Budget Office (CBO) has estimated that over the next decade, as the population increases, coverage will expand only modestly and the proportion of the uninsured will cease to decline.

Six key areas in the ACA are flawed -- and need to be fixed if healthcare reform is to meet its promise and not have rampant cost problems:

1. Subsidies still leave plans too expensive. Congress must continue income-related subsidies while making coverage affordable to both households and taxpayers, which is “no easy task” because it could drive up costs of the ACA considerably.
2. The Cadillac tax needs to be fixed. While better than nothing, it doesn’t confront the underlying problem of health insurance being tax deductible, which is regressive and inefficient. One suggestion is a modification of the Cadillac tax that makes any excess plan costs above a cap be considered taxable income to the employee, as opposed to an excise tax.
3. Increase federalism in the healthcare system. States should apply for waivers under Section 1332, which takes effect in 2017 and gives states flexibility to meet the law’s goals while retaining its basic protections. The Administration has made a serious mistake in dragging its feet and acting overly restrictively with states who could launch their own bold and far-reaching experiments, as it has itself in encouraging conservative states to expand Medicaid under the ACA.
4. The exchanges need to be the primary vehicle for health insurance – not Medicaid expansion. Equalizing the subsidy structure for exchange plans and the tax treatment of employer-sponsored benefits, more employees would go on the exchanges which gives them greater choice and portability.
5. Replace the Independent Payment Advisory Board with a premium support system for Medicare. Premium support would enforce a long-term budget for Medicare by allowing greater control of the beneficiaries themselves, as opposed to imposing payment and price controls; it would also accelerate innovation in the design and pricing of Medicare services.
6. The ACA should focus more on the “upstream” determinants of health – beyond just medical services. We need to find ways to blend health, housing, transportation, social services and other items to reduce the need for costly medical services, he writes.

If it were a separate economy, the US health system would be equivalent to the first or sixth largest economy in the world. It is both pragmatic and principled to recognize that achieving agreement on how to redesign an economy that large, or to do it successfully in 1 piece of legislation, is beyond the capabilities of the federal government. That is why core parts of the ACA need to be reassessed and revised and why empowering the US system of federalism to adapt and experiment with this law is so important.

Read "The Future of the Affordable Care Act: Reassessment and Revision."

Since the Affordable Care Act’s (ACA) health insurance marketplaces first took effect in 2014, news story after story has focused on premium increases for certain plans, in certain cities, or for certain individuals. Based on preliminary reports, premiums now appear set to rise by a substantial amount in 2017.

What these individual data points miss, however, is that average premiums in the individual market actually dropped significantly upon implementation of the ACA, according to our new analysis, even while consumers got better coverage. In other words, people are getting more for less under the ACA.

Covered California, that state’s marketplace, just announced premium increases averaging 13.2 percent. But even if premiums increase by the 10 or 15 percent overall that some are predicting for 2017, they will still be far lower than premiums otherwise would have been in the absence of the law. Moreover, this analysis does not include the effects of premium and cost-sharing subsidies that serve to make ACA marketplace plans more affordable for many people.

2014 Premiums In the ACA Marketplaces Were 10-21 Percent Lower Than 2013 Individual Market Premiums

While many stories of pronounced increases are simply the natural result of a law that works differently in every region and for people of different health statuses, it appears to be conventional wisdom that the ACA increased premiums in the individual, non-group insurance market, if only because it increased the quality and robustness of coverage. Indeed, many of the ACA’s new rules do have the anticipated effect of increasing premiums, such as:

• mandated guaranteed issue regardless of health status;
• restrictions on the ability to charge different premiums based on anything besides age and smoking habits;
• requirements for plans to offer certain benefits deemed “essential;”
• limits on out-of-pocket costs an enrollee can pay for covered services in a given year; and
• the elimination of any lifetime limits on coverage.

However, many features of the ACA push in the opposite direction and save consumers money. The individual mandate and federal subsidies greatly expanded the number of people purchasing coverage in the individual market, pushing premiums down both by increasing the sheer size of the market – the bigger the market, the lower the prices – and including many healthier people who previously went uninsured. In addition, the ACA created relatively transparent marketplaces where insurers must compete on premiums for products standardized by actuarial value, allowing competition to drive down prices.

Together, by creating a much larger and more competitive market, these changes placed strong downward pressure on insurance premiums, outweighing the factors pushing in the opposite direction. Stronger rate review and minimum requirements for how much an insurance plan must spend on actual health care expenses furthered this downward pressure on prices.

According to our analysis, average premiums for the second-lowest cost silver-level (SLS) marketplace plan in 2014, which serves as a benchmark for ACA subsidies, were between 10 and 21 percent lower than average individual market premiums in 2013, before the ACA, even while providing enrollees with significantly richer coverage and a broader set of benefits. Silver-level ACA plans cover roughly 17 percent more of an enrollee’s health expenses than pre-ACA plans did, on average. In essence, then, consumers received more coverage at a lower price.

Download "Affordable Care Act Premiums are Lower Than You Think" »

Editor's note: This piece originally appeared in Health Affairs.

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As the nation still struggles with high healthcare costs that consume larger and larger portions of patient budgets as well as government coffers, the search for ways to get costs under control continues. Total healthcare spending in the U.S. now represents almost 18 percent of our entire economy. One promising cost-savings approach is called “reference pricing,” where the insurer establishes a price ceiling on selected services (joint replacement, colonoscopy, lab tests, etc.). Often, this price cap is based on the average of the negotiated prices for providers in its network, and anything above the reference price has to be covered by the insured consumer.

A study published in JAMA Internal Medicine by James Robinson and colleagues analyzed grocery store Safeway’s experience with reference pricing for laboratory services such as such as a lipid panel, comprehensive metabolic panel or prostate-specific antigen test. Safeway’s non-union employees were given information on prices at all laboratories through a mobile digital platform and told what Safeway would cover. Patients who chose a lab charging above the payment limit were required to pay the full difference themselves.

Employers see this type of program as a way to incentivize employees to think through the price of services when making healthcare decisions. Employees enjoy savings when they switch to a provider whose negotiated price is below the reference price, whereas if they choose services above it, they are responsible for the additional cost.

Robinson’s results show substantial savings to both Safeway and to its covered employees from reference pricing. Compared to trends in prices paid by insurance enrollees not subject to the caps of reference pricing, costs paid per test went down almost 32 percent, with a total savings over three years of $2.57 million – patients saved $1.05 million in out-of-pocket costs and Safeway saved $1.7 million.

I wrote an accompanying editorial in JAMA Internal Medicine focusing on different types of consumer-driven approaches to obtain lower prices; I argue that approaches that make the job simpler for consumers are likely to be even more successful. There is some work involved for patients to make reference pricing work, and many may have little awareness of price differences across laboratories, especially differences between those in some physicians’ offices, which tend to be more expensive but also more convenient, and in large commercial laboratories. Safeway helped steer their employees with accessible information: they provided employees with a smartphone app to compare lab prices.

But high-deductible plans like Safeway’s that provide extensive price information to consumers often have only limited impact because of the complexity of shopping for each service involved in a course of treatment -- something close to impossible for inpatient care. In addition, high deductibles are typically met for most hospitalizations (which tend to be the very expensive), so those consumers are less incentivized to comparison shop.

Plans that have limited provider networks relieve the consumer of much complexity and steer them towards providers with lower costs. Rather than review extensive price information, the consumer can focus on whether the provider is in the network. Reference pricing is another approach that simplifies—is the price less than the reference price? What was striking about Robinson’s results is that reference pricing for laboratories was employed in a high-deductible plan, showing that the savings achieved—in excess of 30 percent compared to a control—were beyond what the high deductible had accomplished.

While promising, reference pricing cannot be applied to all medical services: it works best for standardized services and where variation in quality is less of a concern. It also can be applied only to services that are “shoppable,” which is only about one-third of privately-insured spending. Even if reference pricing expanded to a number of other medical services, other cost containment approaches, including other network strategies, are needed to successfully contain health spending and lower costs for non-shoppable medical services.

Editor's note: This piece originally appeared in JAMA.

Choosing a health plan on one of the new public or private exchanges is no easy task. That’s especially true for those with medical conditions who want to be very sure the plan they enroll in will provide the services they need.

This challenge is not unique to buying health plans, however. It’s always hard for consumers to buy complex and technical services or products when they have little or no expertise in the field. Health insurance can be especially daunting, with so many factors to consider, and even the terminology can be confusing.

Standardizing choices and terms can be helpful to a point. Grouping health plans according to premiums and out-of-pocket costs – bronze, silver, gold and platinum plans – has worked well in the public exchanges. But standardization will always be in tension with innovation, and the reality is that most exchanges will carry a larger inventory of plans than what the typical consumer wants to scroll through. So the question of “choice architecture” – how the plans are filtered or screened – will come to the fore. 

Consumers will have many questions.  What is the price? How do I assess the trade-off between lower premiums and higher cost sharing? Is my doctor in the plan’s network? Are the drugs I take in the formulary (whatever that is)? Things can get real complicated real fast, and it can feel like there are too many, not too few, choices. No wonder some call that “choice anxiety”.

But that view overlooks how technology is likely to reduce choice anxiety in health care, just as it has for other complicated searches.  It used to take a librarian to find an obscure article or a travel agent to plan a vacation. Today a few keystrokes on Google locates the article, and Travelocity makes vacation planning a cakewalk, with everything from on-time flight arrival data to pictures of hotel rooms and customer reviews arranged by star ratings.

Expect technology to have the same dramatic impact on buying health coverage in the near future. There are several reasons for this:

The presentation of consumer information will get better. When large new markets for products and services are created and the demand for buyers’ information rises sharply, the incentive for entrepreneurs – both for-profit and nonprofit – to provide customer-friendly information also rises. We’ve already seen this in parts of the health care market where there has been plenty of choice. Millions of federal employees have for many years been able choose among a wide range of plans with differing benefits.  Many have turned to the highly regarded Consumers’ Checkbook to help them understand and readily compare plans in the federal program.

Checkbook has launched a similar comparison tool for the  Illinois exchange and recently won the Robert Wood Johnson Foundation’s (RWJF) first "Plan Choice Challenge," a nationwide competition to design a technology application that helps people choose their best health plan options.

Navigation technology will make searches simple and quick.  Most consumers don’t want to spend a lot of time comparing plans; they want to find the best buy for their situation as quickly as possible.  That’s why brokers have traditionally encouraged employers to offer their employees a carefully limited set of shopping choices, but we expect plan navigation technology to constantly improve the shopping experience in ways that will help customers search a larger inventory and still make choices more easily.   Stride Health, a San Francisco startup and finalist in the RWJF Challenge, has developed a recommendation technology that searches massive data sets on networks and formularies in seconds to help consumers find a “match” that fits their budget and health care needs.  (Full disclosure – author Joel Ario is an investor).  

Stride is one of more than 40 “web brokers” that has met federal consumer protection and privacy standards enabling it to work with the federal exchange to enroll subsidy-eligible individuals in coverage.  Expect increasing collaboration between public exchanges and private vendors, with a surge of apps and gadgets to make navigation easier and easier in health exchanges.

Technology will allow choices to be tailored to medical history.  Advances in technology won’t just make it technically easier to pick and choose by price and reputation. These advances will also empower Americans to base their choices on their likely medical needs. Today, tailoring your coverage to your medical condition usually means trying to get a doctor– or several doctors– to help you figure out what you should look for in a plan. Even with that help, for the average person it’s still a hit-or-miss proposition. But new forms of choice technology are beginning to utilize questions about medical history to guide buyers towards the plans that are most suited to their condition.  

Checkbook and Stride already allow consumers to enter more detailed health histories and get more sophisticated assistance, and this will only improve as exchanges publish more data in machine readable formats.   Expect more and increasingly sophisticated customized navigators, especially as patients get more access to their electronic medical records.  Also expect sellers to respond with products than bundle services to meet the new demand.

Does this mean that an iPhone app will be all that’s needed to ensure that every consumer can find his or her perfect plan? Not quite.  Health insurance marketplaces will continue to present thorny regulatory challenges.  Insurance regulators will need to guard against unfair practices, such as insurers’ designing benefit plans to drive away applicants with certain health conditions; privacy concerns will be raised whenever apps ask for medical history; and new forms of provider integration will test antitrust doctrine.

But one thing is clear. Improving technology will soon make picking the right health plan a far more precise and simple process – easy enough for many of our children to do on their smart phones or whatever gadget comes next.

In his wide-ranging interview with The New York Times, Republican presidential nominee Donald J. Trump stressed the importance of fighting ISIS while declaring “we are going to take care of this country first before we worry about everybody else in the world.” For counterterrorism (and I would argue for security in general), such thinking is dangerously wrong-headed: Fighting ISIS and stopping other foreign terrorist threats to the U.S. homeland requires close alliances and deep engagement abroad.

Allies may also have better access to a terrorist stronghold due to geography or historic ties. Saudi Arabia, Turkey, and Jordan are within easy bombing range of ISIS’ core: the U.S. homeland is not. Although military action against ISIS’ core in Iraq and Syria is vital, it is often quiet global intelligence cooperation that does much of the day-to-day counterterrorism lifting. Given the geographic span of ISIS operations, it is not realistic for the United States to have strong unilateral capabilities in every possible country where the terrorists might operate and use as a base for anti-U.S. operations. Foreign governments fill this gap, acting as a force multiplier for the United States. Shortly after 9/11, the United States was working with over 100 countries on counterterrorism; several years into the war on terror a senior CIA official testified that virtually every capture or killing of a suspected terrorist outside Iraq involved at least some help from a foreign intelligence service. 

Many allies have skilled intelligence services, and they also use their police and their domestic intelligence services to gather information. These services of course know local languages and are culturally aware. They can also take advantage of the law in their efforts to disrupt terrorism: Terrorism, after all, is a crime. Allies, particularly less savory ones, use a government’s coercive power as well. Although people automatically think torture, governments at times threaten to jail a relative of a suspected terrorist or withhold a business permit or the right to attend university. These seemingly mundane threats are something that the United States cannot do outside its own borders. 

Many of the most basic homeland security tasks do not begin or end with the homeland.

Given these advantages, the primary role of U.S. intelligence is to cajole and strengthen allies, not replace them. The United States might provide technical assistance, as many U.S. allies are far weaker in this area. In addition, U.S. intelligence often acts as a conductor of global liaison services. In 2010, al-Qaida of the Arabian Peninsula tried to bomb two cargo planes as they approached the United States. Efforts to disrupt the plot involved not only the United States and Yemen, but also the countries in transit, including Qatar, the United Arab Emirates, Germany, and the United Kingdom. And Saudi Arabia provided a key intelligence tip. 

Many of the most basic homeland security tasks do not begin or end with the homeland. Foreign governments provide information on terrorist suspects, and there is considerable cooperation on those who might travel to the United States. Much of the screening to hinder terrorist travel and operations is done “over there,” not in the United States.

Our world is too small, and terrorists too global, to think of U.S. security narrowly. If we want to fight ISIS and other foes, we need allies. That doesn’t mean we should do whatever our allies want or support them unconditionally. But we must recognize that if we expect them to help America fight its enemies, we must stand by them as well.

Five years ago, my mother needed an orthopedic surgeon for a knee replacement. Unable to find any data, we went with an academic doctor that was recommended to us (she suffered surgical complications). Last month, we were again looking for an orthopedic surgeon- this time hoping that a steroid injection in her spine might allay the need for invasive back surgery. This time, thanks to a recent data dump from CMS, I was able to analyze some information about Medicare providers in her area and determine the most experienced doctor for the job.  Of 453 orthopedic surgeons in Maryland, only a handful had been paid by Medicare for the procedure more than 10 times.  The leading surgeon had done 263- as many as the next 10 combined. We figured he might be the best person to go to, and we were right- the procedure went like clockwork.

Had it been a month prior to the CMS data release, I wouldn’t have had the data at my fingertips. And I certainly wouldn’t have found the most experienced hand in less than 10 minutes.

It’s been a couple of month since the release of Medicare data by the Centers for Medicare and Medicaid (CMS) on the volume and cost of services billed by healthcare providers, and despite the whiff of scandal surrounding the highest paid providers (including the now-famous Florida ophthalmologist that received $21 million) the analyses so far have been somewhat unsurprising. This week, coinciding with the fifth Health DataPalooza, is a good time to take stock of the utility of this data, its limitations, and what the future may hold.

The millions of lines of data was exactly as advertised: charges and paid services under traditional Medicare “fee-for-service,” including the billing provider’s ID and the costs to Medicare. The initial headlines touting “Medicare Millionaires” relied on some basic arithmetic and some sorting.  And the cautions piled up: the data could reflect multiple providers billing under a single ID; payments are not the same as a provider’s actual take home income; it’s not complete information as it doesn’t contain information about other insurers, or even Medicare Advantage, and so on.

But perhaps most damning was how little insight the data seemed to provide on the quality or value of care provided, as opposed to volume of services.  As Lisa Rosenbaum wrote in the New Yorker, “So much of that good isn’t captured by these numbers. You don’t bill for talking to a patient about how he wants to die. There’s no code for providing reassurance rather than ordering a test.”

Where is the value in the data?

Data bear witness to the fundamental flaw of the payment system that generates them. The absence of information on quality, safety, appropriateness, or outcomes appears to have been a genuine revelation to many, but it is in fact exactly the type of output that we should expect from this volume-based system that we have built. This is not a critique of the data release. It is an indictment of our payment system.

Data is revealing important trends in how we pay doctors differently. Not all physician payments are created equal, and the data certainly shows the disparities across specialties, primary care, and others. For example, the average total annual Medicare payment to geriatricians was less than $100,000, while dermatologists and radiation oncologists (who presumably also see non-elderly patients) received on average $200,000 and $360,000 respectively. The important question will be why and should it continue?

Figure 1: Distribution of Total Medicare Pay by Provider Type, 2012 

Source: Author's calculations based on Medicare data released in April 2014

Data is revealing important indicators of cost and pricing – a major contributor to rising health care costs. Why is it that a brief visit with a geriatrician is worth $13; a 45-minute visit with a geriatrician sorting through medications, educating family members, and developing a quality of life plan with a terminal cancer patient is worth $79; and a dermatologist treating suspected skin cancer can earn upwards of $600 for a procedure that takes them minutes?

Data sheds light on practice patterns. The data is also revealing important variances in utilization of drugs and treatments. For example, a block apart on Park Avenue, two ophalmologists differ significantly in their use of treatments for macular degeneration. One uses expensive injectable drugs and gets paid over $10,000 per injection, while the other receives less than $500 for the lower-cost equivalent.

A CBS News report looked at spinal fusion surgeries—a procedure where there is almost no evidence demonstrating a net benefit to patients compared to other conservative therapies. They observed that “while the average spine surgeon performed them on 7 percent of patients they saw, some did so on 35 percent.”

At the extremes, outlier “practice pattern” begins to raise questions of potential improper billing or outright fraud and abuse. For example, simply looking at the frequency and volume of services provided to individual beneficiaries can identify concerning outliers. This laboratory company billed for 28,954 blood glucose reagent strips in 2012- for 88 patients. And yes, that’s highly unusual.

Figure 2: "Outlier" Medicare Billing for Blood Glucose Reagent Strips, 2012

Source: Author's calculations based on Medicare data released in April 2014

One clinical social worker billed for 1,697 separate days of service on 28 patients (the size of the bubble is proportional to the total amount of reimbursement by Medicare in 2012).

Figure 3: "Outlier" Medicare Billing for Days of Service, 2012

Source: Author's calculations based on Medicare data released in April 2014

The most extreme outlier, Dr. Gary Ordog, was named by NPR and ProPublica in their examination of providers who are outliers on their pattern of coding for the highest intensity office. Ordog had previously lost the right to bill California’s state Medicaid program, and yet continued to charge Medicare for over $500,000 in billing in 2012. It’s important to caution however, that even in these extreme outliers, statistics alone cannot provide definitive evidence of abuse. There is a need for formal investigation.

Medicare and law enforcement officials will need to create new processes for dealing with a potential flood of outlier reports from amateur sleuths like me.

What's Next for Medicare Data?

Data can be trended. Updates of data releases can begin to show us not just snapshots, but moving pictures of our healthcare system as it undergoes rapid changes. The New York Times reported on the increase in charges for certain frequent causes of hospitalization between 2011 and 2012. It will be interesting to see whether the data release itself, and the Steven Brill landmark Time article on hospital charges, have an impact on reversing these trends.  

Data can be “mashed up”.  The value of open data is hugely greater than the sum of its parts. As more and more data becomes available, the files can be cross-linked and “mashed up” to be able to answer questions no one database could have.  ProPublica linked together cobbled together data on state actions and sanctions on physicians with the Medicare data release to ask why these physicians are still being paid by Medicare.

What does the future hold? Correlations with drug prescribing data, meaningful use, and referral patterns are possible today, Sunshine Act disclosures and quality reporting, and much more is soon to come.

As we get comfortable with the data, analysts can move past the basics of arithmetic and sorting, we have an opportunity to make more ‘meaningful use’ of this data. We can begin to identify practice patterns, overuse, variations in geography or demographics, and potentially even fraud and abuse. As more and more data becomes available, the files can be cross-linked and “mashed up” to be able to answer questions no one database could have addressed. What will determine the value of the Medicare data release will be the creativity of those data scientists, epidemiologists, and health services researchers (amateur as well as professional) who can ask the challenging questions that must be answered.

Although advancements in medical science have greatly improved overall life expectancy and the ability for many to survive a cancer diagnosis, a recent study predicts that cancer care alone will cost the American health system $157 billion by 2020. It is well known that a major driver of these surmounting costs is the rising cost of chemotherapy and other treatments, in addition to the variation in how these treatments are used across the health care system.  However, there are several ways that providers, payers, and patients can work together to establish a more medically and financially effective cancer care model that also reduce costs and inefficiencies in the system.

Figure 1: Estimates of the national expenditures for cancer care in 2010 and estimated increase in cost in 2020

Source: Journal of the National Cancer Institute

Develop “Clinical Pathways” to Reduce Inappropriate Use
For many cancers, there are multiple drugs that can be equally effective in treating a patient’s condition, but the price of these treatments can differ in cost by tens of thousands of dollars. Currently, oncologists are responsible for purchasing their own chemotherapy drugs, processing and maintaining them in a specialized pharmacy-like set up, and then administering them to their patients. Insurers then reimburse the oncologists for the cost of the drugs plus a margin to defray the price of maintenance and administration. Since oncologists receive a share of their income from the margins on the drugs they prescribe, insurers assert that there is an incentive to prescribe the pricier drugs, even when lower cost options of equal effectiveness exist.

One mechanism for ensuring that the most evidence-based treatment is used in the care of cancer patients is to use a set of “clinical pathways.” These pathways are based on clinical guidelines available to the public, but tailored for a particular set of patients or a type of oncology practice. Many professional societies have contributed to these guidelines and are working on developing more advanced tools to manage a patient’s care. The American Society of Clinical Oncology (ASCO) is developing a system to rate drugs for advanced cancer based on a combination of benefit, side effects and price.

Several health plans and providers are already showing results. A Pennsylvania-based collaboration with the University of Pittsburgh Medical Center and commercial payers achieved savings of more than $1 million in only six months by controlling and reducing the use of Avastin through clinical pathways. A Washington-based health plan also achieved $1 million in cost savings through a partnership with 22 medical oncologists.[i] Most recently, one of the nation’s largest health plans announced a new clinical pathways program that provides oncologists with $350 per patient per month (PMPM) for adhering to specific chemotherapy regimens. The program will be rolled out in July across six states with potential for expansion after its first year.

Develop Appropriate Value-Based Incentives that Improve Care and Reduce Costs
It will also be essential to develop alternative payment models that move away from a volume-based fee-for-service model that only pay oncology practices for traditional face-to-face office visits and parenteral medications. Instead, payers should support the transition to value-based models that reward non-traditional care, such as telephone and e-mail clinician support, patient education, and counseling services with a social worker.

ASCO also released a comprehensive payment reform proposal to transition to an episode-based payment system. The proposal outlines five types of flexible, bundled payments built around (1) taking on new patients; (2) providing treatment during a given month; (3) actively monitoring patients when they are not being actively treated; (4) the progression or recurrence of a patient’s disease that requires significant treatment regimen changes; and (5) a patient’s participation in a clinical trial. Additional recommendations include adding penalties or bonuses of up to 10 percent based on the quality of care provided, and complementing other payment reforms such as primary care medical homes and accountable care organizations (ACOs). A number of potential methods of reforming the oncology payment system have been explored elsewhere, including implementation of the Community Oncology Alliance (COA) Oncology Medical Home.

Replicate value-based models across the private and public sectors. Even with momentum from private insurers, comprehensive change must involve the public sector. When Medicare, the largest health insurer in the country, changes policies, many commercial insurance companies follow suit. Cancer care would be an ideal arena to launch a program like Medicare’s Comprehensive Primary Care Initiative, a multi-payer public sector-private sector collaboration to strengthen primary care.

In many ways, insurers’ decisions to take direct action to minimize variations in care and excessive costs sets the stage for what is to come next in health care reform. Not only does this represent a step toward broad payment reform in oncology, but marks a trend toward exploring new methods of payment in other specialties, and to align those efforts with primary care payment reforms.

To learn more about the Engelberg Center's efforts to reform payment in the field of oncology, join us on July 9th from 10:30 AM to 12:30 PM EST for MEDTalk: Reinventing Patient-Centered Cancer Care.

There are now more than 335 Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP) in 47 states, DC, and Puerto Rico. Early results show that most Medicare ACOs are succeeding at meeting their quality benchmarks, but only about a quarter of MSSP participants have been able to reduce their spending enough below projected financial targets to qualify for shared savings. While these results are encouraging, especially given the financial and practice transformation necessary to succeed as an ACO, they also suggest that more work is needed from both CMS and the providers to ensure continued sustainability of the MSSP ACOs.

Given that the first three year cycle of MSSP ends in 2015 and more providers will likely be entering the MSSP in the coming years , the Centers for Medicare and Medicaid Services (CMS) has indicated that they intend to release a Notice of Proposed Rulemaking (NPRM) that will establish the rule for participation in the Medicare ACO program. In anticipation of these coming changes, the Engelberg Center for Health Care Reform released an issue brief that identifies the "Top Eight ACO Challenges" to encourage further discussion and considerations for ensuring the continued success of ACOs. These potential policy alternatives build on discussions with ACO Learning Network members and other related stakeholders implementing accountable care across the country and include the following issues.

These issues, and many others, will be a focus of the discussions at the upcoming Fifth National ACO Summit later this week.

Top Eight Medicare ACO Challenges

1. Make Technical Adjustments to Benchmarks and Payments
In order for ACOs to qualify for shared savings, they must be able to hold spending below a financial benchmark set using historical spending patterns and meet a certain threshold of person and population-level quality metrics. A number of issues should be considered that affect the ACO’s chances of being able to attain shared savings and have more predictability about their performance: benchmark calculation methodology, how to adjust for regional variation in performance, and risk adjustment.

2. Transition to More Person-Based Payments
The ultimate goal of an ACO is to improve quality at the patient and population level and control the growth of health care costs. In order to successfully achieve this mission, ACOs must over time make a transition to payments that involve the assumption of more risk by the provider organization with a reward for better health outcomes for groups of patients. ACOs must have a clear transition path for increasing accountability and assumption of more risk for patient health outcomes.

3. Increase Beneficiary Engagement
Patients can play a critical role in helping to achieve the goals of an ACO. Health outcomes are determined by whether patients follow prescribed therapies. Increasing beneficiary engagement holds the potential to make patients more activated members of the ACO who can contribute to its success. A number of issues should be considered to improve beneficiary engagement, including adjusting attribution methods, creating more incentives for patients to seek care within the ACO, and finding opportunities to activate patients as part of the care team.

4. Enhance and Improve Alignment of Performance Measures
A central tenet of Medicare ACOs is delivering high quality health care as determined by performance on 33 measures established by CMS. ACOs must meet performance benchmarks in order to be eligible for shared savings, ensuring that these organizations are delivering high value, rather than simply cheaper, care. A number of barriers exist to achieving better performance measurement, including administrative burdens, lack of measure alignment among payers, lack of rewards for quality improvement, and concerns about measure selection.

5. Enable Better and More Consistent Supporting Data
In order to succeed as an ACO, organizations must be able to effectively collect, interpret, and use clinical and claims data to transform care of their patients. ACOs need to adopt new health IT systems and other technologies in order to collect and use the growing amount of data. ACOs currently struggle with reconciling data between different sources, dealing with patients who opt out of data sharing, lack of timeliness for receiving data, difficulty of tracking patients through the health system, and delays in performance feedback.

6. Link to Additional Value-Based Payment Reforms
ACOs are just one of many payment reforms that health care organizations across the country are implementing to improve quality and reduce costs. Aligning the vision and components of these other initiatives with ACO reforms has the potential to reinforce the shared goals and fundamentally change the health system. However, there are barriers to achieving this alignment such as lacks of linkages to bundled payments and other new payment models, multi-payer ACOs with different payment systems, and inability for organizations to participate in multiple CMS payment innovations.

7. Develop Bonus Payments and Other Incentives to Participate
In order to effectively transform clinical practice, ACOs must create or procure significant financial and human capital, as well as transform their information technology and delivery infrastructure. A recent survey estimates the average start-up cost for creating an ACO to be $2 million, with some ACOs investing significantly more in their first few years. Many ACOs, especially smaller ones, struggle to find sufficient start-up capital, are uncertain if they can assume the level of risk required for an ACO, and need significant staff and clinical change to effectively transform care.

8. Support Clinical Transformation
Becoming and succeeding as an ACO is a vast undertaking that requires immediately beginning to transform practice, finance, and operations. However, many providers, particularly those that are less experienced at systemic practice transformation, need more support in undertaking clinical transformation.

Downloads

• Issue Brief: Improving the Medicare ACO Program

Contributors: Alice M. Rivlin and Christine Dang-Vu

Recent data suggest that Accountable Care Organizations (ACOs) are improving important aspects of care and some are achieving early cost savings, but there is a long way to go. Not all ACOs will be successful at meeting the quality and cost aims of accountable care. The private sector has to date allowed more flexibility in terms of varying risk arrangements—there are now over 250 accountable care arrangements with private payers in all parts of the country—with notable success in some cases, particularly in ACOs that have been able to move farther away from fee-for-service payments. Future growth of the Medicare ACO program will depend on providers having the incentives to become an ACO and the flexibility to assume different levels of risk, ranging from exclusively upside arrangements to partial or fully capitated payment models.

Given that the first three year cycle of Medicare ACOs ends in 2015 and more providers will be entering accountable care in the coming years, the Centers for Medicare and Medicaid Services (CMS) has indicated that they intend to release a Notice of Proposed Rulemaking (NPRM) affecting the Medicare ACO program.

In anticipation of these coming changes, the Engelberg Center for Health Care Reform has identified the "Top Eight ACO Challenges" that warrant further discussion and considerations for ensuring the continued success of ACOs across the country. To support that discussion, we also present some potential alternatives to current Medicare policies that address these concerns. These findings build on the experiences of the Engelberg Center’s ACO Learning Network members and other stakeholders implementing accountable care across the country.  In some cases, the alternatives might have short-term costs, but could also improve the predictability and feasibility of Medicare ACOs, potentially leading to bigger impacts on improving care and reducing costs over time.  In other cases, the alternatives could lead to more savings even in the short term. In every case, thoughtful discussion and debate about these issues will help lead to a more effective Medicare ACO program.

Top Eight ACO Challenges

1. Make technical adjustments to benchmarks and payments
2. Transition to more person-based payments
3. Increase beneficiary engagement
4. Enhance and improve alignment of performance measures
5. Enable better and more consistent supporting data
6. Link to additional value-based payment reforms
7. Develop bonus payments and other incentives to participate
8. Support clinical transformation

Downloads

• Issue Brief: Improving the Medicare ACO Program

A recent blog suggested that CMS’ efforts to standardize assessment data was based on a goal of “….creating a functional measurement tool that could be used throughout the industry.” In fact, CMS has been working since 2005 to meet the Congressional directive to standardize assessment information at hospital discharge, and post-acute care (PAC) admission and discharge for payment and quality reporting purposes (Deficit Reduction Act of 2005). The CARE tool was developed as part of the national Post-Acute Care Payment Reform Demonstration (PAC PRD). The conceptual domains and items were selected with the input of the wide range of stakeholder communities working with PAC populations. Clinicians from acute hospitals and each of the four PAC settings, including long term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies (HHAs) identified items to test in four areas: medical status, functional status, cognitive status, and some social support factors. Input was given by physicians, nurses, physical therapists, occupational therapists, speech and language pathologists, social workers and case managers working in each of the different levels of care. Initial item selection was based on a review of existing assessment items, including those in the three Federally-mandated instruments, (the IRF-PAI, MDS 2.0, and OASIS-B which were in effect at this time) and the input of each of the scientific communities working in these areas.

Developers of proprietary systems such as the UDS-MR©, Inter-RAI ©, and AM-PAC ©, as well as public domain items tested in clinical trials such as the PROMIS items, were all reviewed as part of this process. The selected items needed to be in the public domain so the measures could be modified as science advanced practice.

Over 200 providers participated nationwide to submit over 53,000 CARE assessments over the course of the PAC PRD. Participating clinicians also provided feedback during training and exit interviews. In general, positive feedback was provided on most items. Feedback showed that almost all items were commonly collected on existing instruments in hospitals and PAC providers, although some of the information may have been informally noted in charts rather than provided in the structured form of the CARE items.

The items were tested for reliability so they could be applied consistently across populations and settings. Most of the items were previously tested and found reliable in at least one of the five levels of care. Two types of reliability tests were conducted on the final CARE tool item set used in the PAC PRD. The results showed that most items when applied to the other four settings were at least as reliable as the existing Federal assessment items (Kappa scores of 0.6 or better) ensuring their reliable use in future quality measures or payment models would reach consistent results. Complete reports on item reliability and PAC PRD results can be found here.

Data standardization is critical to allow providers to exchange information as they follow the patient. The Deficit Reduction Act of 2005 directed CMS to use standardized assessment items at acute hospital discharge and PAC admission and discharge to allow for empirical comparisons of key questions arising out of changing incentives in the Medicare payment policies. The standardized CARE items are consensus-based versions of the items already collected by clinicians. These and additional items being incorporated into CMS’ assessment item library represent the “best in class.” The team developing the CARE item set represented the leading experts in each of the areas – Dr. Margaret Stineman of the University of Pennsylvania, developer of the function-related groups associated with the proprietary FIM©, Dr. Deborah Saliba, UCLA, lead developer of the MDS 3.0, and Dr. Chris Murtaugh of the Visiting Nurse Service of New York. Team members included Drs. Anne Deutsch and Trudy Mallinson of the Rehabilitation Institute of Chicago. Input was also given by Dr. David Hittle, of the University of Colorado who has worked closely with the OASIS tool, Dr. Samuel Markello, formerly of the UDS-MR©, and Dr. Patrick Murray of Case Western University.

The blog suggested that, “the early reviews of the CARE tool have been poor.” While this clearly is not true, it is worth pointing out that the author owns one of the key proprietary assessment instruments. The CARE items have been evaluated for reliability and they meet the national standards; they allow providers and others the opportunity to download the e-specification of the items without charge and to have the clinicians trained for free under CMS’ regular assessment training initiatives. CMS is currently developing quality measures using the “best in class” assessment items which all meet scientific standards. The quality measure development process already requires CMS to submit measures for endorsement by the National Quality Forum. The “loophole” identified by the UDS-MR© author is non-existent. The Measures Application Partnership is part of the existing NQF process included in the IMPACT legislation. Further, use of uniform data elements across settings, such as those used in the currently collected pressure ulcer measure, allows for exchangeability and improves communication across the system, finally creating a “data follows the person” system.

Editor’s note: This post is adapted from a forthcoming full-length case study; the second in a series from the Engelberg Center’s Merkin Initiative on Physician Payment Reform and Clinical Leadership designed to support clinician leadership of health care delivery, payment, and financing reform. The case study will be presented during the Merkin Initiative’s “MEDTalk” event on July 9 from 10:30 AM to 12:30 PM EDT, featuring live story-telling and knowledge-sharing from patients, providers, and policymakers.

Oncology practices and hospitals across the nation struggle with providing sustainable, comprehensive, and coordinated cancer care. Clinical leaders with strategies and models to improve the quality and value of health care often don’t know how to navigate the landscape of payment and delivery reform options to sustain their innovations.

We use a case study approach to investigate and tell the story of the New Mexico Cancer Center (NMCC), an independent cancer center that is experimenting with innovative ways to improve patient-centered oncology care. We identify challenges for creating sustainable and supportive payments models, and we share the broader strategic and policy lessons for adopting alternative payment models.

The Clinical Scenario: Living With Cancer

Vicky Bolton, a 58-year-old full-time medical legal coordinator from Albuquerque, has stage 4 adenocarcinoma lung cancer. She started chemotherapy in 2003 and has consistently received treatments over the last 11 years. Vicky is one of 13 million Americans currently living with cancer, with more than 1.6 million new diagnoses added each year.

Although Vicky’s condition is currently stable, she is at high risk for venous thrombosis (blood clots), life-threatening infections, and other complications, which put her at high risk for repeated hospitalizations. In the past six months, she has taken advantage of “after hours” care on three occasions as an outpatient at NMCC. Fortunately, each of her providers and services — oncology, radiation therapy, labs, x-rays, and internal medicine — are centralized in a single location at NMCC, reducing the need for emergency room (ER) visits or hospitalizations for these episodes.

The Challenge: Controlling Spending While Improving Patient-Centered Care

Cancer is the second leading cause of death in the U.S. Forty-one percent of Americans will be diagnosed with cancer during their lives. Cancer care is also expensive, accounting for $125 billion of total health care spending annually. In 2011, Medicare alone spent nearly $35 billion in fee-for-service (FFS) payments for cancer care, representing 9 percent of all Medicare FFS payments.

The high costs of cancer care are driven by issues that plague the entire health system: uncoordinated care delivery, duplication of services, fragmentation, and volume-based payments. A common impact of these drivers in oncology is the use of the ER to relieve symptoms associated with adverse effects of chemotherapy or other treatments that can also result in hospitalization.

For example, research shows that the most common reasons for cancer patient ER admissions are pain, respiratory distress, nausea, and vomiting. More than half of the ER visits occurred on weekends or in the evening, and over 60 percent resulted in hospital admission. This suggests that if a patient’s symptoms could be managed at home or in the community, costly hospital admissions could be avoided. ER visits, where patients are exposed to germs and infections as they wait — often hours — to be admitted, can have catastrophic outcomes for patients that are actively in treatment since they have weakened immune systems and are more prone to infections.

In addition to the inherent issues with fee-for-service (FFS) payments — with payments incentivizing volume of procedures rather than the value of care delivered — the current payment system further exacerbates problems: If a practice provides higher-value care to patients at a lower cost to the overall system (that is, they perform fewer services and have lower revenue), the financial winner is the payer who reimburses fewer services, not the practice (which merely has less revenue). This combination of the misaligned incentives of FFS and the lack of financial benefit for improving care while reducing costs means that many practices simply cannot afford to make the transformations needed without other funding mechanisms.

The Real World: How Has An Independent Cancer Center Responded To These Challenges?

NMCC delivers care to roughly 2,700 patients and provides care to one in three New Mexicans with cancer. The changes that the center has made have focused on reducing the impact of fragmentation of care on their patients (Table 1).

A key innovation was enhancing comprehensive after-hours and weekend care on site and creating a telephone and urgent care triage program to avoid expensive emergency room and inpatient care, which NMCC termed the COME HOME model.

As part of its redesign process in 2012, NMCC – along with six community oncology practices — secured a $20 million Center for Medicare and Medicaid Innovation (CMMI) Health Care Innovation Award (HCIA), for a three-year period. The award has an explicit aim of reducing ER visits by 50 percent and hospitalizations by 20 percent to justify the program costs.

Table 1: Care Redesign Elements Undertaken by NMCC

The Key Levers: How Can COME HOME Be Sustained?

On the heels of the Affordable Care Act (ACA) and numerous quality and payment focused initiatives in the private sector, health care organizations need to enhance the competitiveness and efficiency of their systems in the marketplace.

Alternative payment models (APMs) such as Accountable Care Organizations (ACOs), bundled payments, and patient-centered oncology medical homes (PCOMH) are just a few of the initiatives supported by public and private payers to align care redesign and payment reform and encourage continuous improvement. (Clinical pathways, a strategy recently embraced by WellPoint, offer PCOMH-like incentives to encourage adherence to practice guidelines, a strategy primarily geared to encourage higher-value chemotherapy practice.)

Broader or larger case-based payments may also provide stronger incentives to limit costs, to help assure that promising delivery reforms actually lead to cost reduction, but this exposes oncologists to greater levels of financial risk, as shown in Table 2. Consequently, implementing payment reforms that are viewed as feasible and desirable by both providers and payers is difficult.

Table 2: Comparison of Alternative Payment Models for Oncology

The Path Ahead: How Can These Models Assist NMCC?

NMCC currently receives approximately $70,000 per month from the CMMI grant and has not yet identified a clear strategy to sustain the delivery reforms in the COME HOME care model past the end of the grant (July 2015). As for payment reform options, NMCC has been unable to contract as part of a comprehensive ACO due to local health care market conditions.

Clinical pathways are geared primarily to guidelines and chemotherapy adherence, and are not designed to provide funding for after-hours care or triage programs that are intended to achieve offsetting savings through avoiding costly complications. Possible remaining options include:

• PCOMH: Using the data it gathers, NMCC intends to quantify the additional costs the COME HOME model requires, and the savings that it achieves. Based on that estimate, NMCC could suggest a per-member per-month (PMPM) payment from a private insurer to cover the costs of providing higher quality care. To encourage participation, NMCC could also enter into a risk-sharing agreement, in which overall costs of inpatient care and ER visits would be compared against a target. The PMPM payment could be at-risk if the targets are not achieved after a certain period of time.

• Bundled Payments: NMCC could potentially use the medical home approach with risk sharing (described above) as a first, interim step toward a bundled payment system, NMCC’s long-term preferred model. Computing actuarially sound expected costs for the bundled payments would require merging claims data with clinical data (for example, ICD-9 codes fail to distinguish between subtypes of breast cancer that have radically different treatments). A bundled payment pilot might be performed for high volume cancers, such as breast and lung.

Lessons Learned

The experience of innovative pioneers like NMCC can shed some light on potential barriers to conceptualizing and implementing sustainable clinical redesign. The lessons learned have been sorted into three main categories: relationships with payers and networks, payment model selection, and data collection and quality improvement considerations.

Relationships with payers and networks. Though counterintuitive, merely demonstrating significant value from care design, perhaps from lower utilization of inpatient and emergency department utilization, does not automatically create a financial pathway for sustainable delivery reform. To do so, innovative providers should consider involving lead payer partners early on to help identify end-points of interest to payers and potential payment strategies that may emerge later.

Providing support for health care delivery reforms requires new activities by payers towards aligning their payments with value, rather than volume and intensity of services. However, fragmented health care markets face the challenge of the “free rider” problem: payers may be unwilling to shoulder delivery transformation costs that may benefit other payers’ clients while they wait for CMS or others to make the financial investment, pay for the program evaluation, and enact policy change). Other challenges include payer inertia and long lag times between care redesign and subsequent data demonstrating results.

Large ACOs and other integrated payer-provider plans, including those large enough to form Medicare Advantage plans, are moving forward on negotiating payment and delivery reforms. This may be more difficult for innovative, smaller practices, even if they can provide higher-value clinical services. In turn, this may have anti-competitive consequences, such as discouraging delivery innovation that leads to “demand destruction” of high-cost hospital-based services. Private and public payers should be particularly interested in developing models that enable smaller, specialized providers like oncology practices to undertake key delivery reforms.

Sustainable Payment Model Selection. While substantial attention has been paid to primary care focused APMs, specialty-focused APMs are needed for practices like NMCC. Their development should be a high priority for public and private payers. Clinical transformation grants, such as those offered by CMMI, should include clear pathways for transitioning to APMs if initial cost savings targets or projections are met. Otherwise, delivery system innovations are at high risk of failure despite evidence of improved value.

Data Collection and Quality Improvement Considerations. Timely sharing of actionable information from claims and other administrative data remains a major challenge, with complex and varied procedures for obtaining claims from payers; smaller practices are particularly challenged in interpreting the claims data. Some states, such as Maryland, Massachusetts, Vermont, and Colorado (among others) are proceeding with creating all-payer claims databases. (Maryland, for example, offers almost instantaneous provider feedback from claims through their CRISP database.)

Others, such as Minnesota, are using “distributed” approaches in which multiple payers and systems produce measures in consistent ways. As NMCC’s early efforts illustrate, practices can produce more clinically sophisticated performance measures. Strategies to achieve consistent methods for sharing key data on cost and quality need to be expanded to encourage quality improvement and payment reform.

Event Information

Many clinicians have terrific ideas for improving the quality and cost of health care, but often don’t know how to navigate the often baffling landscape of payment and delivery reform options. To address this need in clear, practical terms, we are pleased to announce the second MEDTalk event in the “Merkin Series on Innovations in Care Delivery.” The series is designed to support clinicians and policymakers who’ve always wondered how delivery reform occurs, but didn’t know where to begin. 

Our second case focused on the work of leaders from the New Mexico Cancer Center (NMCC), and their efforts to "Reinvent Patient-Centered Cancer Care." The event featured several brief “TED-style” talks that considered the challenges of delivering oncology care, while enhancing patient experience, improving coordination of care, and reducing costs. The agenda included firsthand experiences from patients, payers, policymakers, and NMCC's clinical leadership who explores sustainable improvement strategies, and the financial mechanisms available to encourage innovations in oncology.

Video

• A Day in the Life: The Patient Experience
• The Future of Oncology: Drugs, Genetic Testing and Personalized Medicine
• The Challenge of Delivering Cancer Care in a Triple Aim World
• What We're Learning from New Oncology Payment Models
• Supporting Care While Reducing Costs: What is Possible?
• The New Mexico Experience: Aligning Clinical Redesign and Payment Reform
• Sustaining Improvements in Patient-Centered Care
• Lessons Learned and the Path Forward
• MEDTalk: Reinventing Patient-Centered Cancer Care

Event Materials

• Oncology Case Study August 2014 FINAL WEB

Payment reform in health care is confusing, but the goal is simple: How can health care providers change their economic incentives to encourage value over volume? If you've wondered about how these new payment models work, we’re here to help. And if you want to see Dr. Patrick Conway, the head of the Center for Medicare and Medicaid Innovation, talk about it more in depth at our most recent MEDTalk event about oncology care reform, click here.

Where are we now?

Fee-for-Service. Traditionally, health care providers are paid in a "Fee-for-Service" (FFS) model. This is exactly what it sounds like: every time you have a blood test, a doctor's visit, a CT scan, or any other service, you (and your insurance company) pay separately for what you have received. Over the course of a long treatment or a chronic condition, that can add up to a huge expense.

The Fee-For-Service System

It is well known that FFS is draining the entire health care system. When paying for volume, a sick patient is worth more than a healthy patient , and this status quo results in uncoordinated care, duplication of services, and fragmentation. After all, the more doctors and providers do, the more they get paid.

Reformers hope to replace the traditional FFS model with something better, and they’ve come up with many different models of payment that could allow this to happen. (Note to reader:  these are simplified explanations; policy enthusiasts can learn much more about them through the Engelberg Center’s Merkin Initiative).

Here are four widely proposed and increasingly popular alternative payment models:

Accountable Care Organizations (ACOs) are groups of providers across different settings– primary care, specialty physicians, hospitals, clinics, and others – who chose to come together to jointly share responsibility for overall quality, cost, and care for a large patient population. These providers recognize that poorly coordinated care from these entities can lead to increased costs from things like redundant tests and overlapping care.

Accountable Care Organization Model

Here’s how it works in basic terms: the ACO physicians bill the way they always do, but the total costs get compared to an overall target. Plus, they have to measure some of their patient outcomes, to prove that they hit certain quality benchmarks. If costs are higher than the target, the ACO may get penalized. In the end, if they are under the cost target and satisfy their quality measures, they get a share of the savings.

By bringing all of these providers under the umbrella of an ACO, caregivers can all be on the same page, and the patients ideally receive coordinated care with a focus on prevention – since providers are encouraged to keep their patients healthy and not just earn more by doing more tests and procedures.

Bundles: A health care bundle estimates the total cost of all of the services a patient would receive per episode over a set time period for a certain problem, like a knee replacement or heart surgery. For example, a payer such as Medicare or an insurance company could calculate that a hypothetical 30-day bundle for a knee replacement surgery costs $10,000.

Without Bundled Payment...

The payer reduces the total cost of the episode by 2-3%, and hands the bundle over to the provider – in the knee surgery example, that becomes $10,000 minus 2%, so $9,800. The provider is then responsible for all costs of treatment – whether or not it exceeds the amount of money they were originally given. This encourages the provider (collaborating with the entire care team) to help the patient avoid preventable complications like a hospital readmission by better managing a patient’s care.

With a Bundled Payment...

If the provider keeps costs low, they can keep the margin on the bundle, while the insurance company already saved by reducing the cost of the episode by a small percentage when they created the bundle. So, in our example, if the provider was able to meet quality benchmarks and the total cost of the 30-day episode was $9,000, they get to keep the extra $800.

Patient-Centered Medical Homes set themselves apart by providing set monthly payments on top of existing funding models, in order to fund a highly coordinated team of primary care professionals, which may include, depending on the patient’s needs, physicians, nurse practitioners, medical assistants, nutritionists, psychologists, and possibly even specialists. The team works closely to build a strong relationship with each other,with their patients and their caregivers.

Patient-Centered Medical Home Model...

This extra money can be used to hire nurses or agencies to give special care and attention (by phone or home visits, for example) to high-risk patients, with the goals of reducing emergency room visits and other preventable problems in the long run. Other enhancements might include email communication with patients, more time to call and coordinate care between primary care doctors and specialists, and so on. In the end, the savings from better coordinated care make the extra monthly payments worthwhile.

Pathways, an idea which has gained traction in oncology care, provides a system of choices and decision making tools for providers and patients in order to prescribe the most effective and least costly treatment. For example, let’s say there are two cancer drugs proven to have the same effectiveness, with no differentiation in side effects, but one of them costs less than the other.

Same Effectiveness, Different Cost...

Like the medical home, the pathways model uses a “per-patient” add on fee (often much larger than for medical homes focused on primary care, since cancer patients need intensive treatment) that might encourage the provider to prescribe the less expensive of two equally effective treatments.

How Pathways Creat Savings...

When this is implemented on a broad scale, the savings could add up for payers, and defray the cost of the add-on fees.

Please feel free to use any of these images in your own work, presentations, or educational efforts, and to view and download the interactive versions here.  The images should be attributed to The Merkin Initiative on Clinical Leadership and Payment Reform at Brookings.

It is well recognized across the health care industry that the major goals of the Affordable Care Act (ACA) include not only expanding health insurance coverage, but also improving the quality of care and the patient health care experience. A key strategy in achieving these goals is improving the efficiency and delivery of care through innovative financing mechanisms and new delivery models, such as Accountable Care Organizations (ACOs), patient-centered medical homes (PCMHs), bundled payments for acute and post-acute care, and population-based models that aim to improve the health of entire communities. These alternative models emphasize quality and outcomes, while moving care away from the traditional and predominant method of fee-for-service (FFS).¹

The Frontline Work Force
Many conversations focused on the implementation of these models typically emphasize the role of physicians. However, the success of these models relies heavily on the support and manpower of a multidisciplinary team; particularly "frontline health care workers." Frontline workers may include medical assistants (MAs), medical office assistants, pharmacy aides, and health care support workers. Oftentimes, they provide routine, critical care that does not require post-baccalaureate training.²

For example, MAs can play an important role in a medical home model. Upon discharge from the hospital, frontline workers can provide direct outreach to patients that are at high risk for readmission, and discuss any lingering symptoms, worsening of conditions, or medication issues. If necessary, MAs can assign a high-risk patient to a social worker, care coordinator or nurse.³

In a team care environment, frontline health care workers are essential for taking over routine tasks and allowing physicians to employ their specialized skills on their most complex patient cases, which allows all team members to work at “the top of their license”.⁴ Frontline workers can also bridge the gap between patients and a multitude of providers and specialists; help deliver care that is culturally and linguistically appropriate; and provide critical patient education and outreach outside of regular office visits. 

A Workforce in Need of Reform
While team-based care is widely accepted as an industry norm, its current infrastructure is not well-supported. While the frontline workforce represents nearly half of all health care professionals, they are markedly underpaid, underappreciated, and lack formal training to transition into higher-skilled and/or higher paid positions.

A recent study by the Brookings Metropolitan Policy Program “Part of the Solution: Pre-Baccalaureate Healthcare Workers in a Time of Health System Change” demonstrates this glaring disparity between current frontline workforce investment and its value to health reform efforts. The study analyzes the characteristics of the top ten ‘pre-baccalaureate health care workers’ (staff that holds less than an associate’s degree) within the US’s one-hundred largest metropolitan areas (see Table 1).

Table 1: Top ten pre-baccalaureate health care workers in the US’s top one-hundred metropolitan areas

Personal care aides represent a striking example of the underinvestment in frontline workers. The study shows that personal care aides have the lowest levels of educational attainment compared to their peers (32% have no more than a high school diploma), and have the lowest median earnings ($20,000 annually). Meanwhile, The Center for Health Workforce Studies’ (CHWS) estimates that this profession is among the top three national occupations with the highest projected job growth between 2010 and 2020. They are also in highest demand: between 2010 and 2020 there will be an estimated 600,000 personal aide vacancies.⁵ According to this study, MAs are also among the least educated and lowest paid frontline professions. Ninety percent lack a bachelor’s degree and a significant share (29%) are classified as ‘working poor.’

Policy Solutions

A number of policy solutions can be applied to enhance the frontline worker infrastructure. Our recommendations include:

Invest in front line health care workforce training and education. Case studies from a recent Engelberg Center toolkit, outlines how providers are training their frontline workforce to master fundamental skills including care management, patient engagement, teamwork, and technological savviness.

For example, a New Jersey ACO carried out clinical transformation by investing in new frontline staff, and by redefining the role of medical assistants to include health coaching. The return on investment for employers is potentially large. After injecting a substantial initial investment into this project, this ACO saw a 12.3% decrease in net health care costs within the first year of the program’s implementation; as well as significantly improved efficiency, quality of care and patient experience. As the educational curricula for frontline professions are largely variable, more attention should also be spent on the quality of educational content to train these occupations, as well as on developing an understanding of how delivery systems are augmenting traditional educational curricula.

2. Active inclusion of frontline health care workers in payment reform. Although the services of frontline health care workers are beginning to play a role in new payment models, typically frontline staff does not benefit directly from any bonus payments or shared savings incentives. However, their increasingly valuable role in the care team may warrant allowing frontline health care staff to be included in the receipt of shared savings and/or bonus payments based on the achievement of specifically tailored performance and outcomes targets.

The increasing demand for frontline health care workers, driven in part by the ACA’s payment and delivery reforms, will likely spell out a brighter future for these occupations, whose services had routinely been undervalued and underpaid. Future policy efforts should be focused on extending educational grants that have been aimed at primary care and nursing to frontline workers, as well as considering dedicating portions of shared savings to enhancing the earning potential for frontline workers. Some efforts, such as the U.S. Department of Labor’s recent rule to grant wage and overtime protections to home health and personal care aides, are early suggestions of a shift toward greater respect and empowerment for these occupations. It is yet to be seen what effects the continuation of such efforts will have on their high projected attrition trends.

Event Information

The Brookings Institution and the American Enterprise Institute (AEI) collaborated to ask: if you were to redesign Medicare without spending more money, what would you keep and what would you change? A new report on a Center for Healthcare Decisions program provided insight into the public’s willingness to restructure Medicare in the face of tightening budget constraints. Using an interactive, computer-based system, program participants faced the challenge of making Medicare more responsive to the needs of current and future beneficiaries.

Were participants willing to accept limits on their choice of provider or reduced coverage of low-value medical care? Would they accept the need for greater personal responsibility in their use of health services? Would they agree that Medicare should adopt other policies to promote fiscal responsibility?

Watch event video.

The Centers for Medicare and Medicaid Services (CMS) recently reported more optimistic news about the Medicare Accountable Care (ACO) Program, which began in 2012.  CMS released final first year financial and quality results for the Medicare Shared Savings Program (MSSP) ACOs and preliminary year two financial and quality results for the Pioneer ACO Model (Pioneer ACOs).

Financial Results: To date, the two programs have generated savings of $817 million—$372 million of which has been saved by Medicare and another $445 that has been returned to the ACOs through shared savings. While these savings are not final calculations, they suggest that both programs have produced modest savings in the first two years with some variability across ACOs.

Pioneer ACOs: Pioneers, generally considered more advanced ACOs, were able to generate more total program savings in year two than in year one ($96 million vs. $87 million), while also qualifying for shared savings payments of $68 million. The Medicare Trust Fund saved approximately $41 million in year two of the Pioneer program. In total, Pioneer ACOs were able to achieve an approximately 1% lower spending trend overall for the Medicare population than fee-for-service (1.4 vs. 0.45 percent lower per capita growth). Seventeen of the 23 Pioneer ACOs had positive or neutral financial performance, eleven of which were able to slow health spending enough to share in savings. On average, those ACOs saved $4.2 million in 2013, up from $2.7 million in 2012; shared savings grew from $1.2 million to $13 million. Six Pioneers generated losses, three of which were significant enough to require those Pioneer ACOs to share in the losses. While remaining Pioneers have been able to attain bigger savings in year two of the program, almost a third of original participants have left the program—some have moved to the lower risk MSSP, while others have focused on commercial ACO contracts or higher levels of risk in MA programs.

MSSP ACOs: MSSP ACOs were likewise able to reduce overall cost trend by slightly less than 1 percent. Of the 220 MSSP ACOs that started in 2012 or 2013, roughly one-quarter (53) were able to reduce spending enough to qualify for total shared savings of over $300 million. An additional 52 ACOs reduced spending compared to their benchmarks, but not enough to qualify for shared savings. One ACO that opted for track two (two-sided financial risk) overspent its benchmark by $10 million and owed shared savings of $4 million. MSSP ACOs as a whole were able to reduce spending by $652 million below their financial benchmarks and saved the Medicare Trust Fund $345 million, including repayment for the track 2 ACO losses.

Quality Results
Medicare ACOs continue to improve significantly on overall quality scores.  Both Pioneer ACOs and MSSPs have been able to attain higher average performance than quality benchmarks and better performance than Medicare fee-for-service on measures with data, such as colorectal screening, tobacco cessation, and depression screening.

Pioneer ACOs: All 23 Pioneer ACOs that remain in the program out of the initial 32 successfully reported their quality measures in their first two years.  The mean quality scores for Pioneer ACOs increased by 19 percent, from 71.8 percent in 2012 to 85.2% in 2013. Pioneer ACOs increased average improvement by 14.8 percent across all quality measures and overall improvement on 28 of 33 quality measures. Patients also report a positive experience receiving care from Pioneer ACOs—the ACOs improved average performance scores for patient and caregiver experience across 6 out of 7 measures.

MSSP ACOs: MSSP ACOs, as a group, posted even more improvement in quality scores than the Pioneer ACOs. MSSP ACOs starting in 2012 and 2013 were able to improve 30 of 33 quality measures, including measures such as patients’ rating of clinicians’ communication, beneficiaries rating of doctors, health promotion and education, screening for tobacco use and cessation, and screening for high blood pressure. In total, MSSP ACOs are experiencing higher CAHPS patient experience survey scores than Medicare fee-for-service, suggesting that patients are engaged and satisfied with being a part of an ACO. Additionally, MSSP ACOs achieved higher average performance rates on 17 of 22 Group Practice Reporting Option (GPRO) Web Interface measures reported by other large physician group fee-for-service providers.  Over 125,000 eligible providers or supplier members of ACOs qualified for incentive payments through PQRS (Physician Quality Reporting System) in 2013. Unfortunately, nine MSSP ACOs failed to successfully report their quality scores, four of which would have otherwise qualified for shared savings.

Digging Deeper into the Results
While program level analysis of financial performance is meaningful, a deeper analysis of the data and organizational characteristics of those MSSP ACOs that earned shared savings reveals some interesting trends. A little over half of those earning shared savings were physician-led ACOs (26/49) and more than a third of these physician led ACOs operate in Florida (10/26). The continued success of physician-led ACOs is consistent with previous findings that these ACOs may be better positioned than institutionally-based ACO to reduce overall costs. In addition, analysis by The Center for Medicare and Medicaid Innovation (CMMI) found that there is no relationship between savings/loss performances and whether the ACO included a hospital. Hospital-led ACOs were overall less likely to share in savings than physician-led ACOs. These two findings together suggest that ACOs can experience success even without an official hospital affiliation, paving the way for more physician practices to join and excel at accountable care.

Interesting regional trends are beginning to emerge from the data. Florida and Texas had the highest concentration of ACOs sharing in savings. Of the 30 Florida-based MSSP ACOs, more than a third (11) were able to share in savings, while almost half (7/15) Texas-based MSSP ACOs qualified for shared savings. Furthermore, the top two earning MSSP ACOs were from Texas (Memorial Herman with $28.34 million) and Florida (Palm Beach ACO with $19.34 million), respectively. The concentration of shared savings in these two states raises important questions about what is driving the high level performance. Are these MSSPs more likely to succeed because of a higher financial benchmark based on disproportionately greater regional Medicare spending? Do these ACOs have a leg up from the start because of their patient population and historical spending trend? Are physician ACOs more likely to form and succeed in these higher-cost areas? The success of these programs should not be understated, but further analysis may be needed to better understand performance drivers so appropriate program adjustments may be considered to level the playing field among MSSP ACOs across all regions.

Next Steps
While these latest Medicare ACO results are encouraging, more work needs to be done. The Pioneer Program recently lost its tenth program participant, Sharp Healthcare, bringing the total number of Pioneers down to 22. Like some other Pioneers that have exited the program, Sharp was dissatisfied with the benchmark and payment methodology and was no longer willing to assume financial risk that they felt was too great. This is just one among many policy and implementation issues with which Medicare ACOs are struggling. In June, we published a set of recommendations to ensure the long-term sustainability of the Medicare ACO program by addressing eight major ACO challenges. These results seem to reinforce the need for several of these recommendations for change in the Medicare ACO Program.

CMMI, which administers the Pioneer ACO Program, has recognized some of these challenges and has begun giving ACOs some greater flexibility in operating within the program. These changes include allowing them to move to population-based payments, waiving the 3-day hospitalization rule to allow ACOs to directly admit qualified patients to skilled nursing facilities, and experimenting with “voluntary alignment” to allow beneficiaries to attest to a primary care physician to offset some of the limitations of the existing attribution process. These are moves in the right direction; however CMS must continue to engage providers across the country to make sure the program remains viable.

Meanwhile, the MSSP will add another round of participants in January 2015 and CMS is expected to release a notice of proposed rulemaking that will amend the current operating requirements for the MSSP program later this year. The scope and nature of changes could dramatically impact the interest of new organization, as well as the continued participation of current MSSP and Pioneer ACOs.  Medicare ACOs will likely be encouraged to continue innovating to improve quality and reduce costs in the Medicare program, but the Medicare ACO program must continue to evolve to meet provider and beneficiary needs to ensure continued success.

Note: This blog has been corrected since its original posting on September 22 to reflect more accurate data.

Downloads

• Changes to Medicare ACO Program

Event Information

Many clinicians have terrific ideas for improving the quality and cost of health care, but often don’t know how to navigate the frequently baffling landscape of payment and delivery reform options. To address this need in clear, practical terms, we are pleased to announce the third MEDTalk event in the “Merkin Series on Innovations in Care Delivery.” The series is designed to support clinicians and policymakers who’ve always wondered how delivery reform occurs, but didn’t know where to begin.

Our third case drew on the experiences of the Community Asthma Initiative, an enhanced pediatric asthma intervention, and their efforts in sustainability. The event featured seven brief “TED-style” talks that consider the challenges of delivering pediatric care, while tackling non-medical factors that drive suboptimal care, improving patient and family quality of life, and reducing costs. The agenda included firsthand experiences from patients, payers, policymakers, and clinical leadership from Massachusetts and Arkansas. Sustainable improvement strategies and the financial mechanisms available to encourage innovations in asthma were explored.

Video

• MEDTalk: Pediatric Asthma and Transforming Care for the Most Vulnerable
• A Day in the Life: The Patient Experience
• Challenge Accepted: Delivery of Asthma Care in a Triple Aim World
• The Community Asthma Initiative: A Case Study in Clinical Innovation
• Paying for Asthma Care: Options for Tackling Challenges
• State Medicaid Innovation: Opportunities and Barriers
• A Tale of Success: How to Get the Payer on Board
• Lessons Learned and the Path Forward
• Question and Answer Session

Event Information

Over the past few years, more than 600 Accountable Care Organizations (ACOs) have formed across the country, charged with the dual goals of improving health while also reducing health care costs. Increasingly, evidence on how public and private ACOs are progressing toward these goals is beginning to emerge. Based on these results, major regulatory changes are anticipated in the months ahead that will impact accountable care programs in Medicare, as well as future uptake within the private sector.

On October 20, the Engelberg Center for Health Care Reform hosted a half day forum to assess the latest evidence on accountable care, discuss strategies to overcome unique ACO challenges, and provide an overview of accountable care reforms. Sean Cavanaugh of the Centers for Medicare and Medicaid Services (CMS) provided keynote remarks on the latest Medicare ACO results and potential changes to the Medicare Shared Savings Program (MSSP). Panel sessions featured leading experts in ACO research, implementation and health care policy.

 Join the conversation on Twitter using #ACOFuture or follow @BrookingsMed

Video

• The Medicare Shared Savings Program (MSSP): Looking Ahead
• Big Issues for ACOs Going Forward
• ACO Policy Issues and Solutions on the Horizon

Audio

• The State of Accountable Care: Evidence to Date and Next Steps

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• ACO Public Event full deck FINAL
• 102014_Accountable Care_Transcript

Event Information

In its 50th year, the Medicare program currently provides health insurance coverage for more than 49 million Americans and accounts for $600 billion in federal spending. With those numbers expected to rise as the baby boomer generation ages, many policy experts consider this impending expansion a major threat to the nation’s economic future and question how it might affect the quality and value of health care for Medicare beneficiaries.

On June 5, the Center for Health Policy at Brookings and the USC Leonard D. Schaeffer Center for Health Policy and Economics hosted a half-day forum on the future of Medicare. Instead of reflecting on historical accomplishments, the event looked ahead to 2030—a time when the youngest Baby Boomers will be Medicare-eligible—and explore the changing demographics, health care needs, medical technology costs, and financial resources available to beneficiaries. The panels focused on modernizing Medicare's infrastructure, benefit design, marketplace competition, and payment mechanisms. The event also included the release of five policy papers from featured panelists.

Please note that presentation slides from USC's Dana Goldman will not be available for download. For more information on findings from his presentation download the working paper available on this page or watch the event video.

Video

• Challenges and opportunities facing Medicare in 2030
• Eligibility, benefit design, and financial support
• Could improving choice and competition in Medicare Advantage be the future of Medicare?
• Improving provider payment in Medicare

Audio

• Strengthening Medicare for 2030

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• Burtless Slides
• 20150605_medicare_2030_transcript