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The Keckley Report

Special Edition: “HHS Doubles Down on Provider-Sponsored Risk”

By February 2, 2015March 1st, 2023One Comment

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article.

In the last week, the Department of Health and Human Services (HHS) and the administration charted a course of oversight of the healthcare system that’s daunting in scope. They’re doubling down on the shift from volume to value by expanding projects that reward doing right things over more things and accelerating the use of information technology to hardwire these changes into a system of coordinated care wherein providers are at risk for costs and clinical results.

There were three big announcements from DC last week:

Last Monday, January 26, HHS announced performance goals and timelines for the transition of Medicare payments from volume to value and a public-private partnership to encourage employers, health insurers, physicians and hospitals to adopt similar goals. Their primary focus is expansion of programs that enable Medicare payments to shift from fee for service (FFS) to value via accountable care organizations (Medicare Shared Savings Program), bundled payments (Bundled Payment for Care Improvement Initiative), primary care medical homes, and the value-based purchasing programs included in the Affordable Care Act.

In its announcement, HHS noted that 20%of Medicare’s $417 million fee-for-service payments in 2014 were made through alternative payment models like these.  Medicare’s new goal is to increase value-based payment models to 30% by 2016 and 50% by 2018. In addition, it also proposed that by 2016, 85% (vs. 80% today) of all Medicare FFS payments have a component that is based upon quality or efficiency of care increasing to 95% by 2018. In a New England Journal of Medicine editorial, HHS Secretary Sylvia Burwell wrote: “We are dedicated to using incentives for higher-value care, fostering greater integration and coordination of care and attention to population health, and providing access to information that can enable clinicians and patients to make better-informed choices. We believe that, by working in partnership across the public and private sectors, we can accelerate these improvements and integrate them into the fabric of the U.S. health system.”

Then later last week, two other announcements came from HHS that sync up with its aim of accelerating provider-sponsored risk through the use of information technologies:

Thursday, the CMS Center for Medicare and Medicaid Innovation announced it intends to shorten the meaningful-use reporting period to 90 days in 2015 helping providers avoid financial penalties. “These changes reflect the Department of Health and Human Services’ commitment to creating a health information technology infrastructure that elevates patient-centered care, improves health outcomes and supports the providers who care for patients. We continuously strive to work in partnership with providers to improve affordability, access, and quality.”

Then Friday, HHS’ Office of the National Coordinator for Health Information Technology (ONC) released “Connecting Health and Care for the Nation: A Shared Nationwide Interoperability Roadmap Version 1.0”– a proposal to deliver better care through the secure exchange and use of interoperable electronic health information to support (1) improving the way providers are paid, (2) improving and innovating in care delivery, and (3) sharing information more broadly to providers, consumers, and others to support better decisions while maintaining privacy.

What do the announcements mean?

HHS is doubling down on provider-sponsored risk. The federal government plays a powerful role as payer and overseer of the Medicare and Medicaid programs. With health costs expected to increase at 6% annually for the next decade (per the CBO) and as enrollment in these programs increase, policymakers in CMS, HHS and the administration are committed to a fundamental change in how the system operates to protect its solvency. Changing incentives from volume to value by encouraging providers to assume financial and clinical risk is central to its strategy. Via the Affordable Care Act and other legislation, programs that accelerate provider participation in risk bearing relationships with Medicare and Medicaid are significant already: HHS intends to accelerate these efforts with a goal of replacing volume-based incentives with value based results. (See Exhibit A for current Provider sponsored risk arrangements funded by CMS/HHS Initiatives by Medicare/Medicaid).

HHS is betting on employers and insurers to join in. The success of this effort is dependent on employers and health insurers to align with Medicare’s approach to shifting risk to providers. Employers pay the lion’s share of the Medicare program’s shortfall thru higher premiums and higher costs from doctors, hospitals and drug manufacturers whose products and services are marked up. Employers and health insurers believe changing incentives is necessary and some are even more aggressive than Medicare using narrow networks, carve outs, reference pricing and other strategies to bend the cost curve and shift risk to providers. Notable among the 25 organizations represented at the HHS announcement were major employers like (Verizon, Caesars, Boeing) and health plans (Anthem, Aetna, Humana, United) to reinforce the government’s strategy to accelerate the implementation of provider sponsored risk. HHS is counting on the employers and insurers to support its strategy.

HHS is eliminating provider excuses. These announcements address three common complaints cited by clinicians as reasons to avoid jumping into provider sponsored risk:

  • Old excuse: “Most of my income comes from fee for service payments through insurers, Medicare and Medicaid. Why change?”
    New reality: “HHS and private payers will do away with FFS incentives. Most of my income will come through negotiated risk sharing arrangements with insurers, employers, Medicaid and Medicare. It’s the only way I will see patients in the future.”
  • Old excuse: “These programs are only about reducing costs. The suits don’t care anything about quality.”
    New reality: “To qualify for shared savings and to participate in risk based relationships with payers, achieving and maintaining measurable results based on valid and reliable measures of quality and safety benchmarks is required. In most cases, quality and safety are better in provider-sponsored risk models because care is coordinated and quality is measured. So improving quality and reducing costs are not polar opposites: they are achievable simultaneously.”
  • Old excuse: “These health information technologies are expensive and don’t help me do my job better.”
    New reality: “To participate in risk sharing arrangements that allow me to ply my trade, use of an interoperable health information system that provides me data about my patient’s care across the continuum is table stakes. It’s a necessary investment I don’t like.”

The HHS’ orchestrated announcements were no surprise: collectively, they send a clear message to providers that the new normal is substantially different than the past. So what does it mean for them?

For physicians, hospitals, allied health professionals, post-acute providers, pharmacists and others in the health delivery sectors of our system, these announcements should be taken seriously. Most operate in two worlds today:  the old world centers on decisions made by physicians on behalf of their patients, supported by a wide ranging cast of players that operate facilities and provide staffing to carry out their recommendations. Payments are based on utilization (volume)—doing more means doing better financially for everyone in the delivery food chain. The majority of patient interactions, revenues, and profits in today’s economics are derived through this old world model.

While operating in an old world setting, a few have tip-toed into the new world wherein incentives for both improved quality and reduced cost are born by teams of providers. Carefully and cautiously, new world efforts have been couched as experiments to test the waters of provider sponsored risk.

These announcements, and the likelihood that employers and insurers will piggyback HHS’ efforts, suggest testing the waters of risk must be replaced with boat building and swimming lessons. The four major programs at the heart of HHS’ strategy– accountable care organizations (Medicare Shared Savings Program), bundled payments (Bundled Payment for Care Improvement Initiative), primary care medical homes, and the value-based purchasing programs — share common features:

  • Clinical integration: Providers—doctors, hospitals, post-acute facilities, allied health professionals– must work together in clinically integrated teams to qualify for participation in these programs.
  • Investment: Investments by providers in health information technologies and operating costs to implement team-based care management are necessary to participate.
  • Upside and downside financial risk: Potential savings are shared among participants only if specific quality thresholds are achieved.
  • Self-governance: Decisions about governance, operating budgets, policies and procedures, how savings (bonus pools) are distributed and losses recouped from participating providers are made by the entity’s board operating in compliance with Medicare’s specifications.
  • Physician leadership: Managing health is about accurate diagnosis and treatment, blending traditional and alternative methods, and engaging individuals as persons, not patients who are confident to share in the decisions about their own health. The most valuable player in these transformative efforts is the physician leader who sees provider-sponsored risk as an opportunity. But narrowing the provider participants to those that can manage care and cost in the new world is a delicate task, and managing clinical and financial data to drive decisions time consuming and intense.

In some markets, provider sponsored risk will exceed HHS’ goals: employers, community leaders, and insurers might insist that providers exit the old world sooner rather than later.

In some markets, providers might double down themselves, expanding direct contracts with local employers, or sponsoring their own health plans to align their organization’s incentives to improve health and reduce costs.

In some markets, physicians and hospitals might bet the shift to provider sponsored risk is a passing fad and maintain business as usual.

Time will tell. But one thing’s for sure: at the federal level, HHS is doubling down on the shift from volume to value. It is betting on provider-sponsored risk, eliminating excuses and using its muscle to get private payers to join the campaign.


Sources: Sylvia M. Burwell, Setting Value-Based Payment Goals — HHS Efforts to Improve U.S. Health Care,” The New England Journal of Medicine, January 26, 2015; “2014 Innovation Center Report to Congress,” Center for Medicare and Medicaid Innovation, Centers for Medicare & Medicaid Services, December 2014; Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value,” U.S. Department of Health & Human Services,  January 26, 2015; “HHS proposes path to improve health technology and transform care,” U.S. Department of Health & Human Services, January 30, 2015; “Connecting Health and Care for the Nation: A Shared Nationwide Interoperability Roadmap Version 1.0,” The Office of the National Coordinator for Health Information Technology, January 2015 (the public comment period for the draft Roadmap closes April 3, 2015; the public comment period for the Standards Advisory closes May 1, 2015); Patrick Conway, “CMS intends to modify requirements for Meaningful Use,” The CMS Blog, January 29, 2015

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

© 2015 Navigant Consulting, Inc.

One Comment

  • Kenneth Croen says:

    FFS has been a cost driving model because in healthcare, consumers and providers did not care about costs. Now that consumers have risk (high deductibles), they care about costs. Price transparency is beginning to emerge. Patients will soon have access to prices and will select providers based on this. Quality reporting will need to follow. One really cannot shop for "value" unless they know about price and quality.

    Just as importantly, risk sharing models have inherent problems:
    1. Patients are not committed to the mission of the ACO and can go where they choose for care. This puts ACO on the hook for specialized care costs that may bankrupt them
    2. Decisions about covered services will be made by the ACO, not by the patient, which is contrary to the goals of a transparent world of true "patient centered care"
    3. ACO providers may have to think about ways to save money for the ACO during every encounter. A bonus payment for such savings is a conflict of interest for providers. Making decisions about cost saving without open dialogue with patients is a sure way to damage the doctor-patient relationship and add to liability risk
    4. The most motivated medical centers have been at the forefront of ACO development. After a 5 year pilot and 2 years in practice, their total savings for Medicare is only about 1%. What will happen when other practices are forced into this model. There is little reason to be enthusiastic.