At APG, a Robust Discussion of the Federal Regulatory Barriers to Provider Innovation

April 14, 2019
During the opening keynote session of the APG Annual Conference last week, APG’s Don Crane analyzed the current policy and payment landscape, and moderated a discussion with HHS’s Eric Hargan and member executives

During the opening keynote session of the APG Annual Conference 2019, held in San Diego last week, and sponsored by America’s Physician Groups, APG president and CEO Don Crane opened the session on Friday morning, April 12, with some broad remarks on the current policy and operational landscape facing the leaders of multispecialty physician groups and integrated health systems involved in value-based contracting, and then welcomed a panel of discussants. Including Eric Hargan, Deputy Secretary of Health and Human Services, to share their perspectives on that landscape.

“Starting at 40,000 feet,” Crane told the assembled audience of well over 1,000 that “I’m of the view that we are in a tectonic shift here in the United States, moving from an acute-care healthcare system to a chronic care system, as the result of the disease burden. In the late 1800s, the disease burden consisted largely of epidemic diseases—partly as the result of poor hygiene and public health, etc.—as well as acute injuries. Everything is different now. The epidemic diseases have largely disappeared, and now we’re dealing with chronic diseases, which are by definition chronic.” That shift is upending the needs that consumers, payers, and purchasers have, from providers. Meanwhile, the foundations of the inpatient hospital-based healthcare delivery system are being shaken, he noted. “Moody’s just reported that hospital margins are at their lowest point in ten years. This is not a happy fact; but it’s symptomatic of the move out of acute-care hospitals. Second, the move towards primary care. It should come as no surprise that our administration is about to launch a primary care revitalization. On April 22, Adam Boehler [deputy administrator for innovation and quality at the Department of Health and Human Services, and administrator of the Center for Medicare & Medicaid Innovation, or CMMI] is going to talk about the revitalization of primary care in the United States. I submit those two items as evidence of the shift,” he announced.

Meanwhile, Crane noted that, at the same time that healthcare inflation in the U.S. is continuing apace, with the Medicare actuaries predicting that overall U.S. healthcare spending will reach 20 percent in a few years, “2018 marked the third year in a row that life expectancy in the US has decreased—at the same time that costs are rising. That’s not true in any of the developed countries. And the last time that life expectancy in the U.S. declined was during World War II. This is a highly concerning statistic, and suggests that we’re really hitting the wall around quality issues.”

On a practical level, the cost cliff facing U.S. healthcare means that “I say this half-facetiously, but there will be no more pay raises in Medicare,” Crane said. “We know that MACRA”—the Medicare Access and CHIP Reauthorization Act—"which passed in 2015, really gave birth to the value movement. And the headline is that it eliminated the despised SGR [sustainable growth rate]. From 2020 to 2025, pay raises will go up 0 percent, and after that, less than 1 percent in perpetuity, in the Medicare fee schedule. And as goes Medicare, so goes the market. And the CFOs in the room, who all know this, recognize that this is a de facto pay cut, as operating costs increase. So the tension’s building,” he said, “and the policy objective of driving people into APMs is moving forward.”

Indeed, Crane noted that, while, “Last fall, when the Medicare fee schedule came out, there was concern around what it might do to APMs [alternative payment models] and MIPS [the Merit-based Incentive Payment System], to our surprise and delight, they actually strengthened MIPS. Two months later, out comes the ACO rule; and there again, we see an administration doubling down on ACOs [accountable care organizations] by accelerating the rate at which ACOs needed to move towards downside risk. So far from lifting the foot off the pedal, it’s on harder” on the part of senior HHS and CMS (Centers for Medicare & Medicaid Services) officials, he said. “And just a few days ago, in a conference up the coast, Adam Boehler said his objective was to blow up fee-for-service.”

After analyzing the chances of a repeal of the Affordable Care Act (ACA), which he diagnosed as small, Crane said, “The next item worth mentioning is new APMs. I think people are familiar with our level of frustration with the MSSP program,” he said, referring to CMS’s Medicare Shared Savings Program, “which we see as good but not great. “It has a fee-for-service payment platform, open network format, and retrospective attribution—all the elements to make it difficult to succeed. But within just a few weeks, the Innovation Center is about to release a bunch of new models. We already know about the RFI [request for information] on direct provider contracting. We’re hearing little rumors about direct care primary care models. We think these new APMs will be necessary, to put new wind in the sales of the value movement. And the first tranche may happen in a matter of weeks.”

And, as those discussions move forward between CMS and providers, Crane said, “A few years ago, we created a so-called third option, creating a hybrid, capitated group model, point-of-service benefit design that would straddle traditional Medicare and Medicare Advantage. It’s a huge lift, and won’t be adopted as is. But we do think it will inform HHS and CMS, and that’s important. And we’ve urged on CMMI a new professional risk model. We asked ourselves, what around the US is actually working? And wouldn’t it be great to imitate that? What model is extant that’s actually working? That we have done. Professional risk, coupled with risk pools and risk-sharing on institutional and on Part D drugs. We’ve submitted that to CMMI. So we’ve been hard at work pushing new models. Also, our Risk Devolution Task Force—which involves benchmarking coupled with performance improvement,” will be another important area of focus for the association, he emphasized.

After Crane had shared his analyses and predictions with the audience, he brought HHS Deputy Secretary Eric Hargan onstage, and Hargan delivered brief remarks, before the two of them sat down with two member group executives: Stacey Hrountas, the CEO of the San Diego-based Sharp Rees-Stealy Medical Group, and Niyum Gandhi, executive vice president and chief population health officer at the Mount Sinai Health System in New York City.

First, in his prepared remarks, Hargan said that “The President understands how broken our healthcare system is, and he’s given us a charge to move healthcare to better quality and lower cost. Everyone here agrees that we need to move our payment systems from volume to value. I’ve been working on improving HIT, payment innovation, working with private health investors, and finally, regulation. In my previous tour of duty at HHS under Pres. Bush, I served as Deputy Counsel for Regulation, and finally, Chief Regulatory Officer,” he noted. Hargan went on to say that “I get frustrated that reform of regulations is often viewed as a giveaway to the healthcare sector; I actually see it as the opposite: that regulatory reform is often a challenge to existing actors; new players, solutions, can emerge. Now, innovation is at the center of all of our regulatory reform efforts at HHS, and innovation and coordinated care are at the core of our reform efforts,” he emphasized. Last summer, I launched an initiative around regulatory reform. It’s a sprint, within the government context; we’re intent on gathering the information we need, and moving tor rulemaking as quickly as possible.”

Hargan said he wanted to focus primarily on four areas in this “sprint” towards regulatory reform: the Stark law, the federal Anti-Kickback Statute, HIPAA (the Health Insurance Portability and Accountability Act of 1996), and CFR 42 Part 2, the federal regulations around disclosure of substance abuse disorder records, the substance of which has proven challenging to provider organizations working to help patients with substance abuse issues.  “We’re focused on looking at how regulations are [frustrating] providers, and on improving them,” Hargan assured the audience. All of this will be involved in the “regulatory sprint” he focused on. And he noted that the healthcare world has changed dramatically in nearly 30 years. “When enacted in 1989, the Stark law rightfully addressed the concern around inappropriate motives; the law was passed with good intentions,” he said. “We don’’ want people referred to services based on trying to make more money. But today, our healthcare system, thanks to so many of you in this room, is moving away from what it looked like in 1989, when you had a purely fee-for-service-based [payment] system. Now in a system where we’re paying for value, where a provider is paying for some outcomes, we don’t have nearly as much fear over who’s getting paid what for what services, as the government tis paying for outcomes. If we pay for volume and procedures, we get a whole lot of volume and procedures. got 375 comments, 3,500 pages, on revising the Stark Law,” he added. “These comments were very thoughtful and very interesting comments. This was a reassuring sign that we’re exploring a place where there’s pent-up desire” for innovative change, he said, adding that “We’re going to be moving ahead with rulemaking on both the Stark Law and anti-kickback statute. And those will have to be paired.”

Hargan went on to note that, “Last summer, our OIC [Office of the Inspector General] issued an RFI [request for information. In a system where we need to pay for value, we have to give providers freedom to innovate, and so we have to look at what the antikickback statue is saying and not saying. For example, how can we ask a patient to adhere to appointments if we’re not thinking of providing them with transportation? Or providing patients with health-enhancing technologies, such as heart monitors and other technologies. We have to overhaul these rules. We believe we can provide a platform” for change, he said. “We all dream of all world where American HC is accessible, high-quality, affordable. But we’re not there yet. We want HC to function with the same levels of competition and choice that we have in other areas. 2019 will be a key year, and this year will be full of action. We have a president who is committed to bold action and bold reforms and who’s not afraid of action or ideas. We in HHS are committed to moving forward,” he underscored.”

Then, during the panel discussion, APG’s Crane asked Hargan, “What does value mean?” “We want to open up space,” Hargan said, for innovation in healthcare. “We’re kind of putting the pedal to the metal on a lot of these things. I’m hoping with the sprint, to build out a platform and lay out the tracks for what it should be, and provide some openness for people to innovate without being directive. The Secretary has mandated goals for the department,” he said, referencing HHS Secretary Alex Azar, “and Adam [Boehler, of CMMI] is working on some of these innovative models.”

“I’d like to thank you for that,” Hrountas said. “At Sharp Rees Stealy, 70 percent of the medical group’s revenue is capitated. But that’s not true on the other side of the house”—meaning the hospital side of Sharp HealthCare. “So I applaud you for that”—working to eliminate barriers to collaboration across the continuum of care.

“I was talking with Adam about this,” Hargan said, “and we were talking about regulatory reform versus models. And we said, we’re going to have to do this anyway. Fortunately, the regulators are totally on board, and the Inspector General and CMS. They’re ready for all lot of these reforms.”

“What’s your perspective on Medicare Advantage?” Crane asked. “Do you have a different perspective on how we might leverage off of it to turbocharge APMs? “Yes, MA in some ways is a model,” Hargan responded. “We’ve stood out a lot of extra flexibility to try to continuously build those, particularly when you find that the private sector has built out models to manage care. So I think we’ll see a lot more. And because I work primarily inside the department, I don’t know what’s been announced always. But there’s more coming.”

“So, an unfair question. We sent you a copy of our Third Option. Can you comment?” Crane asked. “We’ve reached out to you on primary care models,” Hargan responded. “The idea is not to say whether it’s provider risk-based or full-risk based… jointly with somebody else… We want to stand up way more risk, and to allow both for small and large groups—that we provide ways for all groups, small or large, to enter into more of a risk-based system, and provide a simple set of measures to mark against… We have an issue with measurement, generally. There are a lot of ways you have to count. And so we’re aiming for simpler measures, but things that matter to our system—risk-adjusted hospitalizations, things like that, that will be relatively easy to measure.”

“Niyum, how does this sound to you?” Crane asked Mt. Sinai’s Gandhi. “I really applaud you for taking on the regulatory challenges that we face,” Gandhi told Hargan. “We’ve learned a lot that we can do in some programs that we can’t do in others. That’s where we run into beneficiary inducement issues. There are some waivers in some areas and not others. We have a lot more flexibility in commercial [managed care] And we have 14 different risk contracts. So the further you’re able to go, the better.  I would imagine HHS has learned a lot. We need that platform to be able to continue to innovate.”

“We can’t lament that we’ve failed to move to value-based, when in some cases, we’ve prevented it,” Hargan said, promising that his intention and that of the other senior officials at HHS and CMS, is to eliminate the barriers to coordinated care that saves money and improves patient outcomes. He cited the example of restrictions—both perceived and real—on providers paying directly for the transportation costs of patients they care for, and more, assuring the audience that federal healthcare officials want to remove such barriers. “And when it comes to the social determinants of health,” he said, “if people want to pay for nutrition and other things—as long as the outcomes are achieved on behalf of patients… These are the kinds of things that we’re skating towards. Some things are at a riper stage than others. But it can allow a lot of flexibility. And it all rests, obviously, on developing a robust set of outcomes that don’t recreate the micromanagement. It would be easy to reimpose the micromanagement, in the guise of outcomes management. So it will be a balance to maintain.”

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