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The Keckley Report

The Value in Health Care Act: What does it Mean?

By July 27, 2020March 1st, 2023No Comments

Friday, the Value in Health Care Act of 2020 was introduced by U.S. Representatives Peter Welch, Suzan DelBene, and Darin LaHood. Its focus is the Medicare Shared Savings Program (MSSP) aka Accountable Care Organizations (ACO)—one of several alternative payment models introduced in the Affordable Care Act.


Medicare, the federal health insurance program, serves 53 million seniors as well as 8 million with various disabilities. Last year, it accounted for $782 billion, or 21% of total healthcare expenditures. growing faster (+6.4%) than all other funding sources: Medicaid (+3.0%), private health insurance (+5.8%) and consumer out of pocket (+2.8%). As 10,000 Boomers enroll daily and medical inflation spikes costs for specialty care and prescription drugs, the long-term sustainability of the program is in jeopardy.

Reducing Medicare spending has been a persistent theme in healthcare circles for decades. In the past two decades, two major changes were made by policymakers attempting to rein it in:

  • Medicare Part C: Authorization of managed Medicare plans aka Medicare Advantage (MA) featuring pre-payment to providers with wide latitude to coordinate care for seniors who voluntarily enroll so long as patient quality is not compromised. (Current status: 22 million/41% of seniors).

  • Alternative Payment Models: The other major focus has been alternative payment models (APM), like the Medicare Shared Savings Program, Bundled Payments and Patient Centered Medical Home. In essence, they incentivize providers to coordinate care for enrollees using bonuses tied to the savings they produce from projected Medicare fee for service reimbursement calculated for each region. (Per CMS, 11.2 million seniors are currently served through APM arrangements with their providers).

Neither approach has been without flaws:

  • MA plans appear to attract healthier enrollees leaving sicker and more costly enrollees in the fee-for-service population while benefiting plan sponsors financially.

  • Accountable Care Organizations/MSSP have not produced the savings many including CMS had hoped. Issues about regional benchmarks, quality measures and attribution and upside savings potential have dogged the program for 7 years. And research has shown key elements of care, like behavioral health, have not been appropriately integrated in care coordination to the extent appropriate.

  • And many Medicare enrollees simply don’t care about Medicare costs. Many purchase supplemental insurance so their out of pocket costs are covered and incentives to reduce unnecessary use of hospitals, specialists, prescription drugs et al inconsequential.


As proposed legislation goes, The Value in Health Care Act is short and sweet: 11 pages. Essentially, it recommends changes in calculations of how Medicare savings are measured and how much physicians, hospitals and their business partners get to keep as Qualified Providers in an approved Accountable Care Organization. It’s straightforward: the 13 sponsoring organizations are simply asking for changes to MSSP that will increase their likelihood of reducing Medicare spending so they can share in the upside.  

The timing of the bill is curious. Most Members of Congress are heads-down in their re-election bids. The pandemic prompted CMS to suspend quality reporting and the application process for new ACO’s due to the “uncontrollable circumstances so data about the current effectiveness of ACO’s is unavailable. And in 15 weeks, voters will elect the members of the 117th Congress and their Executive Branch leaders setting in motion possible changes to Medicare funding in 2021 and after that could impact ACO’s directly.

Proponents of the Medicare Shared Savings Program encourage ACO participants to stay the course and lawmakers to make it easier for providers to share in savings realized by Medicare. They’re accustomed to tweaks to technical requirements and constant churn among participants believing in the end shared savings via ACO’s is the optimal path forward.

Others think the entire Medicare program needs fresh strategies to insure its sustainability, especially post-Covid with unprecedented levels of federal debt and economic recovery uncertain. Their questions are…

  • Can Medicare be simplified? The four parts—Part A: Hospitals, Part B: Professional Services, Part C: Medicare Advantage and Part D: Prescription Drugs–are complicated, expensive, and disconnected.

  • Should enrollees share directly in savings? In ACOs, shared savings end up in the pockets of providers: patients receive no direct financial value.

  • Is global capitation of clinically integrated provider groups a better way to achieve Medicare savings and organize care better? Is this “Medicare Advantage for All”?

  • Should Medicare take the lead in integrating public health and traditional delivery at the federal and local levels?

  • Should funding for Medicare be through taxes rather than employer contributions and enrollee premiums?

  • Is there benefit to lowering the age of eligibility to reduce long-term costs resulting from delayed care?

  • And other questions.

The Value in Health Care Act is supported by 13 provider organizations: American Academy of Family Physicians, American College of Physicians, American Hospital Association, American Medical Association, America’s Essential Hospitals, America’s Physician Groups, AMGA, Association of American Medical Colleges, Federation of American Hospitals, Health Care Transformation Task Force, Medical Group Management Association, National Association of ACOs, and Premier. It affirms that alternative payment models, like MSSP, should be expanded to reduce Medicare spending long-term without compromising quality. Others think this is incrementalism—a luxury few can afford as our society grapples with a different “new normal”.

Will the impact of this bill be technical changes to the current rules that govern ACO activity or might it prompt a vigorous debate about the long-term future of Medicare? Stay tuned.


P.S. This is a big week for healthcare: Congress will grapple with a new relief package to extend unemployment benefits that expire Friday. Several states will announce changes to Covid-precautions as the more than 4 million Americans have tested positive for the coronavirus and the death toll is growing at more than 1,000 per day. Tuesday, the President will meet with drug company executives on the heels of four Executive Orders advancing drug prices. And by Saturday, Vice President Biden’s pick for his running mate will be known and President Trump has announced he will release his administration’s proposed healthcare agenda.


“The Value in Health Care Act of 2020” July 24, 2020;

“Medicare Shared Savings Program: CMS Flexibilities to Fight COVID-19” CMS April 30, 2020;

“The Interim Final Rules and waivers” CMS April 27, 2020;

Verma “Number Of ACOs Taking Downside Risk Doubles Under ‘Pathways To Success ‘Health Affairs January 10, 2020

Keckley “The Meaning of “Value” in Health Care” The Healthcare Blog December 3, 2015

Amol S. Navathe the et al “Alternative Payment Models—Victims of Their Own Success?” JAMA. June 22, 2020;324(3):237-238. doi:10.1001/jama.2020.4133

Carlo et al “Association of Alternative Payment and Delivery Models With Outcomes for Mental Health and Substance Use Disorders: A Systematic Review” JAMA Netw Open. July 23, 2020;3(7): e207401. doi:10.1001/jamanetworkopen.2020.7401


CDC Issues Back to School Re-Opening Guidance

Last Thursday, the CDC issued guidance for school re-opening advising local officials that the physical, cognitive, and emotional risks for children who lack congregate settings for education are greater than the risks from Covid exposure. The announcement reversed the CDC’s earlier guidance while continuing to couch it recommendation around social distancing, masking, and infection controls. Notably, the CDC announcement said middle and high school age children are at higher risk than school-age children under 10.

“The Importance of Reopening America’s Schools this Fall” CDC July 23, 2020;

Kaufman Hall: Hospital Margins Expected to be -3% in 2Q, Relief Funds Mitigated Larger Losses

According to Kaufman Hall, a hospital finance consultancy, pre-pandemic margins for hospitals were 3.5%.  They predict median margins will drop to –3% in the second quarter of 2020 noting those margins would have been –15% without CARES Act funding. “Our forecast shows that, without further government support, margins could sink to –7% in the second half of 2020.”

“The Effect of COVID-19 on Hospital Financial Health” Kaufman Hall July 2020;

Poll: Majority Concerned about Premature School Re-Opening

According to the AP-NORC Center Poll of 1057 adults surveyed between July 16-20:

  • 46% of Americans believe schools need major modifications to deal with the coronavirus pandemic, and another 31% think they shouldn’t reopen for in-person learning at all 8% say their local K-12 schools should open for in-person instruction as usual and 14% think schools can reopen with minor adjustments.

  • Parents of school-age children are as reticent as other Americans about sending children back to the classroom.

  • Self-declared Republicans (37% of sample) are more positive about reopening schools than Democrats (48% of sample).

  • Note: In this poll, party and political philosophy breakdowns are key:

  • Party alignment: Democrat NET 48% (Strong Democrat 15, Moderate Democrat 20, Lean Democrat 12) Independent/None –Don’t lean 15%, Republican NET 37% (Lean Republican 9, Moderate Republican 16, Strong Republican 13)

  • Political Philosophy: Liberal NET 23 (Very liberal 11, Somewhat liberal 12) Moderate 44, Conservative NET 30 (Somewhat conservative 16, Very conservative 14) DK/Skipped 3

“Concerns about School Reopenings Loom Large” AP-NORC Center for Public Affairs Research July 22, 2020

Parents Experiencing Stress, Anxiety Resulting from Pandemic

The objective of this national survey of parents with children under 18 conducted by Vanderbilt researchers was to determine how the pandemic and mitigation efforts affected the physical and emotional wellbeing of parents and children in the US through early June 2020. Highlights

  • Since March 2020, 27% of parents reported worsening mental health for themselves and 14% reported worsening behavioral health for their children.

  • The proportion of families with moderate or severe food insecurity increased from 6% before March 2020 to 8% after, employer-sponsored insurance coverage of children decreased from 63% to 60%, and 24% of parents reported a loss of regular childcare.

  • Worsening mental health for parents occurred alongside worsening behavioral health for children in nearly 1 in 10 families, among whom 48% reported loss of regular childcare, 16% reported change in insurance status, and 11% reported worsening food security.

Patrick et al “Well-being of Parents and Children During the COVID-19 Pandemic: A National Survey” Pediatrics July 24, 2020 10.1542/peds.2020-016824

College Student Covid Testing May Cost up to $920 per Semester

Yales researchers modeled testing for a hypothetical college with an enrollment of 5000 students using tests of varying frequency (daily weekly), sensitivity (70%-99%), specificity (98%-99.7%), and cost ($10-$50/test). Key finding: Across all scenarios, test frequency exerts more influence on outcomes than test sensitivity. Cost-effectiveness analysis selects screening every {2, 1, 7} days with a 70% sensitive test as the preferred strategy for Rt = {2.5, 3.5, 1.5}, implying a screening cost of {$470, $920, $120} per student per semester. Conclusion: “Rapid, inexpensive and frequently conducted screening (even if only 70% sensitive) would be cost-effective and produce a modest number of COVID-19 infections. While the optimal screening frequency hinges on the success of behavioral interventions to reduce the base severity of transmission (Rt), this could permit the safe return of student to campus.”

Paltiel et al “COVID-19 screening strategies that permit the safe re-opening of college campuses” medRxiv July 6, 2020;



BLS: Consumer Out of Pocket Spending for Healthcare +6% in Last 12 Months

According to the latest Consumer Price Index for All Urban Consumers (CPI-U) released July 14 by the Bureau of Labor Statistics that examined spending in the last 12 months:

  • Consumer spending for medical services represents 7.3% of consumer spending—the 3rd highest category behind housing (34%) and food (14%).

  • Spending for healthcare increased 6%, primarily the result of hospital expenditures.

Consumer Price Index June 2020 Bureau of Labor Statistics July 14, 2020;

Trump Issues Executive Order Targeting Drug Prices

Friday, the President issued four executive orders advancing drug price containment:

  • 340B Discounts: A requirement that federally qualified health centers (FQHCs) pass 340B discounts on insulin and EpiPens directly to patients. (HHS’ Health Resources and Services Administration found drugs purchased under the program totaled $16 billion or 3.6% of all drugs in 2016).

  • Drug Importation: Allowance for states, wholesalers, and pharmacies to import FDA-approved drugs from Canada and other countries where the drug price is significantly lower.

  • Rebates: A requirement that drug rebates be dispensed to patients instead of insurers and PBMs.

  • Reference Pricing: A requirement that Medicare to purchase drugs at the same price paid by other economically advanced countries.

Implementation and timeline details are not available.

“Presidential Executive Orders” The White House July 24, 2020;

CMS Health Insurer Risk Adjustment Report Released

Risk adjustment transfers totaled $10.8 billion in 2019 vs. $10.4 billion in 2018, according to the Centers for Medicare & Medicaid Services report released July 17. In 2019, transfers accounted for about 7% of premiums, as was the case in 2018.

The transfer was split evenly between payments made to some of the 561 participating insurers and payments to CMS to maintain budget neutrality. The individual market accounted for the largest share of transfers, or about $7.98 billion.

The risk adjustment program, recently upheld in court proceedings, allocates funds from insurers who take on larger numbers of low-risk enrollees to those who take on higher numbers of high-risk enrollees on the ACA’s exchanges.

“Interim Summary Report on Permanent Risk Adjustment Transfers for the 2019 Benefit Year” July 17, 2020;

Keckley “The Meaning of “Value” in Health Care” The Healthcare Blog December 3, 2015

High Deductible Plans not Associated with Suboptimal Outcomes

Researchers studied 156 962 individuals with cardiovascular disease risk factors who experienced mandated enrollment in health insurance plans with high deductibles but relatively low medication costs for the period 2003 to 2014. Members with high-deductible health plans did not have detectable increases in major adverse cardiovascular events compared with 1 467 758 members with low-deductible health plans.

Conclusion: Among patients with cardiovascular disease risk factors in this study, enrollment in typical high-deductible health plans was not associated with increased risk of major adverse cardiovascular events during 4 follow-up years.

Wharam et al “Association Between Switching to a High-Deductible Health Plan and Major Cardiovascular Outcomes” JAMA Netw Open. July 24, 2020;

HCA reports 38% Increase in Q2 Profits
Last Wednesday, HCA Healthcare announced its second quarter 2020 earnings were up 38% to $1.088 for the quarter. $590M of earnings came from CARES Act relief funding—part of the chain’s $1.4 billion in total relief funding. distributed as part of $1.4B in total CARES Act funding. HCA has also received $4.4B in advance Medicare payments. Key measures:

  • same-facility admissions were down 12.8% compared to the second quarter of last year

  • inpatient surgeries down 15.7%,

  • hospital outpatient surgeries down 27%

  • ambulatory surgeries down 40 %.

  • Loss of non-emergent procedures and tests resulted in a 12.2% reduction in revenue and 10.5% reduction in expenses

  • Cash on hand increased 90.86% and net profit margin increased 57%

HCA stock closed at 125.51 Friday, down from its 52-week high of $151.97 pre-covid high (February 19, 2020) but up from its 52-week low of $58.38 (March 18, 2020).

HCA Healthcare July 22, 2020;

“HCA profit up 38% to $1.1 billion during toughest quarter of pandemic” Modern Healthcare July 22, 2020;

Alternative Payment Models do not Improve Access to Mental Health / Substance Abuse

Researchers examined 27 peer reviewed studies that address the impact of how alternative payment models impact patient access to mental health and substance abuse programs. Key finding: Some specific APMs (e.g., pay-for-performance) have been associated with improved MH/SUD outcomes, while others (e.g., APMs with shared savings) have not; broadly, clinical outcome data are lacking in evaluations of APMs.

Carlo et al “Association of Alternative Payment and Delivery Models With Outcomes for Mental Health and Substance Use Disorders: A Systematic Review” JAMA Netw Open. July 23, 2020;3(7): e207401. doi:10.1001/jamanetworkopen.2020.7401;