HHS: As of January 2016, 30 Percent of Medicare Payments Now Tied to Quality, Goal Reached Ahead of Schedule

March 7, 2016
The U.S. Department of Health and Human Services (HHS) announced Thursday that an estimated 30 percent of Medicare payments are now tied to quality or value through alternative payment models, well ahead of the goal set to hit that target by the end of 2016.

The U.S. Department of Health and Human Services (HHS) announced Thursday that an estimated 30 percent of Medicare payments are now tied to quality or value through alternative payment models, well ahead of the goal set to hit that target by the end of 2016.

In January 2015, HHS announced a plan to tie 30 percent of traditional fee-for-service, Medicare payments to quality or value through alternative payment models such as accountable care organizations (ACOs) and bundled payments by 2016. By 2018, 90 percent of payments will reflect value-based care (VBC) and other alternative models such as hospital readmissions.

In a press release posted on its website, HHS said that with the January 2016 announcement of 121 new ACOs as well as greater provider participation in other models, HHS has achieved that 30 percent goal well ahead of schedule.

The estimates were evaluated by the independent Centers for Medicare & Medicaid Services (CMS) Office of the Actuary and found to be “sound and reasonable,” the HHS press release stated.

In an actuarial analysis, John Shatto, director, Medicare & Medicaid Cost Estimates Group, Office of the Actuary, wrote that the Center for Medicare & Medicaid Innovation (CMMI) estimated that more than 30 percent of Medicare fee-for-service (FFS) payments were attributed to alternative payment models (APMs) as of January 2016.

CMS estimated progress toward the goal by multiplying the number of Medicare beneficiaries in alternative payment models (net any overlap or attrition) by the expected cost of their care and compared that figure to projected Medicare fee for service spending. As of January 2016, CMS estimates that roughly $117 billion out of a projected $380 billion Medicare fee-for-service payments are tied to alternative payment models.

According to the actuarial analysis, the programs included in the calculation are as follows: the Medicare Shared Savings Program (MSSP), the Pioneer Accountable Care Organization (ACO) Program, the Next Generation ACO Program, the Bundled Payments for Care Initiative (BPCI; models 2, 3, and 4), the Comprehensive Primary Care Model, the Medicare Advanced Primary Care Program, the End-Stage Renal Disease (ESRD) Prospective Payment System, the Comprehensive ESRD Care Model, the Maryland All-Payer Model, and the Medicare Care Choices Model.

HHS officials credited tools provided by the Affordable Care Act as having an impact on reaching the milestone. In particular, HHS highlighted tools established by the Affordable Care Act such as the Medicare Shared Savings Program and the Center for Medicare and Medicaid Innovation. Examples of alternative payment models include accountable care organizations (ACOs), advanced primary care medical homes and new models that bundle payments for episodes of care.

There are currently 477 Medicare ACOs participating in the Shared Savings Program and the Pioneer ACO Model combined, according to HHS. In 2014, these programs generated a total net savings of $411 million.  ACOs represent about three quarters of progress toward the goal announced today, HHS officials said, while noting that these gains will continue to increase over the course of the year, with the start of the Comprehensive Care for Joint Replacement model and the Oncology Care Model in 2016.

“Improving the quality and affordability of care for all Americans has always been a pillar of the Affordable Care Act, alongside expanding access to health care,” HHS Secretary Sylvia M. Burwell said in a statement. “The law gives us the tools to put patients at the center of their care, improve quality and help make care more affordable over the long term.”

“We reached this goal in partnership with the thousands of providers who collaborated with us in innovation,” Dr. Patrick Conway, Deputy Administrator for Innovation & Quality and CMS Chief Medical Officer, said in a statement. “It’s in our common interest – as patients, providers, businesses, health plans, taxpayers - to build a health care delivery system that delivers better care; spends health care dollars more wisely; and makes individuals and communities healthier.”

HHS officials noted that before the Affordable Care Act, Medicare “paid essentially $0 through alternative payment models.”

In the actuarial analysis, Shatto further broke down the methodology. “To determine the number of beneficiaries in each of these programs, the Center for Medicare & Medicaid Innovation (CMMI) started with the latest estimates from 2015 and trended to 2016 based on the number of participants. For example, MSSP had roughly 7 million attributed beneficiaries in 2015. Based on that number of ACOs expected to join in 2016 less those expected to drop out of the program, the number of attributed beneficiaries is estimated to grow to about 7.7 million, Per capita costs were estimated by applying a projected trend factor supplied by the Office of the Actuary to the actual amount from 2015.”

Shatto also wrote that for the BPCI models, only the costs for the episode of care were included.

“For the non-ACO models, the estimates were reduced by 22 percent to account for the possible overlap with the ACO models. This percentage was derived by determining the share of Medicare fee-for-service (FFS) payments in ACOs. Due to data limitations, it was not possible to determine the exact degree of overlap, and the actual figure may be greater than 22 percent. In addition, there is likely some small overlap between the other non-ACO models.”

The estimates were also adjusted, Shatto wrote, by a small amount to account for attrition in the number of participants in these models during the year. The estimate for each of the models was based on the historical drop-out rates. While this adjustment is reasonable, it is unnecessary since the goal was to estimate the percentage of Medicare fee-for-service (FFS) payments attributed to alternative payment models (APMs) at the beginning of the year, he wrote.

He also stated that using this methodology, CMMI estimated that more than 30 percent of Medicare FFS payments were attributed to APMs. “We have identified two small concerns related to the estimate: reducing the number of participants by an assumed attrition in 2016 would bias the estimate downward, while this outcome would be offset by the potentially greater degree of overlap that would bias the estimate upward. Because the potential estimate biases are small and offsetting, and because a small reduction would still yield an estimate greater than 30 percent, it is reasonable to assume that more than 30 percent of Medicare FFS payments were attributed to APMs as of January 2016,” Shatto wrote.

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