Historic Announcement: HHS Sets Clear Goals and Timeline for Shifting Medicare Reimbursements from Volume to Value

For the first time in the history of the Medicare program, the Department of Health and Human Services ("HHS") has set explicit goals for increasing alternative payment models and value-based payments. The historic change was announced by HHS Secretary Sylvia M. Burwell on Monday, January 26. To help achieve the goals, Secretary Burwell said that HHS intends to focus its energies on reform in three interdependent ways, including:

1. Improving the way providers are paid by creating an environment in which hospitals, physicians, and other providers are rewarded for delivering high-quality health care and have the resources and flexibility they need to do so.

HHS has adopted a framework that categorizes health care payments according to how providers receive payment to provide care:

a. Category 1 - fee-for-service with no link of payment to quality

b. Category 2 - fee-for-service with a link of payment to quality

c. Category 3 - alternative payment models built on fee-for-service architecture

d. Category 4 - population-based payment

2. Improving and innovating the way care is delivered by putting in place policies to encourage greater integration within practice sites, greater coordination among providers, and greater attention to population health; and

3. Accelerating the availability of information to guide decision-making by advancing interoperability and alignment of health information technology standards and practices.

In addition, HHS' specific goals include a three-year time line for tying 85% of all Medicare fee-for-service payments to quality or value (categories 2-4 above) by 2016, and 90% by 2018, as well as tying 30% (currently, 20%) of Medicare payments to quality or value through alternative payment models (categories 3 and 4) by the end of 2016, and 50% of payments by the end of 2018.

To help streamline the way providers are paid and to accomplish its objectives, HHS established the Health Care Payment Learning and Action Network ("Network"). Through the Network, HHS will work in concert with the private, public and non-profit sectors, including private payers, large employers, providers, consumers and state and federal agencies to align similar work being done across sectors, accelerate the transition to more advanced payment models, and encourage broad adoption of payment reforms. Specifically, the Network will:

  • Serve as a convening body to facilitate joint implementation and expansion of new models of payment and care delivery;
  • Identify areas of agreement around movement toward alternative payment models and define how best to report on these new payment models;
  • Collaborate to generate evidence, share approaches and remove barriers;
  • Develop common approaches to core issues such as beneficiary attribution, financial models, benchmarking and risk adjustment; and
  • Create implementation guides for payers and purchasers.

PLDO will be watching this issue closely as we guide our clients through understanding, strategizing and implementing changes to meet these new goals in a meaningful way. If you have questions about these changes, the ACA or the Medicare program, please call Attorney Jillian Jagling at 401.824.5100 or email jjagling@pldolaw.com. We welcome your comments, questions and suggestions.

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