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The Keckley Report

Re-thinking Alternative Care Models and Value-based Care

By January 18, 2021March 1st, 2023No Comments

Last Wednesday, the venerable New England Journal of Medicine published “CMS Innovation Center at 10 Years — Progress and Lessons Learned” authored by Brad Smith, the Director of the Center for Medicare and Medicaid Innovation. After 10 years and $20 billion, he concluded that “value-based care will achieve its promise only if the federal government and stakeholders take more aggressive action to prioritize models that can truly achieve savings and improve quality.” In a view shared by many industry observers, the efforts of CMMI have fallen short.


CMMI was created by the Patient Protection and Affordable Care Act (2010) to “test innovative payment and delivery system models that show important promise for maintaining or improving the quality of care in Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), while slowing the rate of growth in program costs”. Its funding came from an appropriation of $10 billion for the years 2011 through 2019 in the ACA, and another $10 billion each decade thereafter. Its operating budget is $1.4 billion this year.

Initially, CMMI focused on the 20 alternative payment models specified in the ACA but has since grown to 54 models including 4 added last year (The Part D Senior Savings model, the Geographic Direct Contracting model, the Direct Contracting Duals model, and the Community Health Access and Rural Transformation (CHART) model). For most of these models, participation has been voluntary, technical changes to benchmarks and risk assessment constant and savings to Medicare negligible if at all.

Smith’s assessment is sobering: “The Center’s models have delivered some positive, tangible results, including 5 that have resulted in substantial financial savings. Several models have also produced significant improvements in quality… But CMMI has fallen short of its goal of transitioning the U.S. health system’s volume-to-value transition…The vast majority of the Center’s models have not saved money, with several on pace to lose billions of dollars. Similarly, the majority of models do not show significant improvements in quality, although no models show a significant decrease in quality. “


Smith’s commentary on CMMI comes at an important juncture for U.S. healthcare. As the Biden administration steps in, and as providers, payers, drug-makers, and others plan beyond the pandemic, the role CMMI plays deserves fresh attention.

There’s no debate that the incentives for providers, especially hospitals and physicians, reward volume over value. Fee-for-service payment means doing unnecessary tests, procedures and patient visits is rewarded unless an egregious pattern of overuse is detected by regulators or insurers. And in the big scheme of things, healthcare is an industry that’s benefitted from widely held myths that resonate with consumers i.e., ‘more care is better care’, ‘all healthcare is local’ and ‘your doctor knows best.’ These fly in the face of evidence to the contrary in most situations. That makes the transition from volume to value even harder.

Beyond provider pushback, CMMI’s lackluster results for improved quality and lower costs from its 54 models have been structurally flawed. Changing the formula for shared risks annually, participation Clearly, changing incentives for hospitals and physicians is key to value-based care, but structural and administrative flaws have plagued the success of the alternative payment models. It explains the constant churn in participation as winners double down losers drop out, and the reality that many costs and outcomes are outside the control of the providers.

Looking ahead, changes to APMs led by CMMI involve three fundamental design principles:

  • Simplicity: CMMI must focus resources on fewer models with standardized, geographically sensitive benchmarks for costs, patient experience, and outcomes…and stick with them!

  • Consumer Engagement: the volume-to-value transition is dependent on the active role consumers play vis a vis technology-enabled self-care and shared financial risks. For many providers and a large segment in society, that’s not the way ‘healthcare’ should be delivered. Example: in Year 4 Nextgen ACO results, savings per beneficiary were $373 dollars in 2019. But the beneficiaries themselves did not participate in those savings directly: should they? (See Industry News “CMMI Report: Next Generation ACO Model” below)

  • Participation: CMMI’s ‘alternative payment models’ have been heavy on upside shared savings and light on provider risk sharing. Mandatory participation seems inevitable for results to be meaningful.

Looking forward, CMMI can play an important role in U.S. healthcare if its focus expands beyond APMs to longer-term systemic changes obvious to healthcare’s outsiders and problematic to its insiders:

  • How to align employer-sponsored health insurance programs and government-sponsored programs (Medicare, Medicaid, CHIP, Veteran’s Health) to optimize results.

  • How to equip consumers to engage directly in their treatment decisions and their cost implications.

  • How to structure, operate and fund medical education and clinical research that’s appropriate to evidence-based, whole-person care and funded independently.

  • How to budget healthcare based on demand that’s engaged, supply that’s necessary and public expectations that are managed. Is a global payment model the better route?

  • How to access private capital to stimulate innovation while protecting against short-term profiteering.

  • And others.

As healthcare operators shift their attention to post-pandemic sustainability and growth, consideration of the system’s future—its structure, funding, and value-proposition—should be on the table. CMMI should lead that discussion.


P.S. The big surprise last week was the admission by HHS Secretary Azar that the stockpile of vaccines purchased from Pfizer and Moderna did not exist. To date, 31 million vaccines have been distributed to states, 7 million have been vaccinated in Tier 1a—less than 30% of what Operation Warp Speed officials promised last month. Maybe it’s time to turn over testing and vaccinations to the 88,000 retail pharmacies: CVS says it can handle 25 million vaccinations per month and others say they’re receptive. It’s timely: this week, 30 million Americans 65+ become eligible for the vaccine in 18 states so perhaps a new strategy should get attention.


Brad Smith “CMS Innovation Center at 10 Years — Progress and Lessons Learned”; January 13, 2021; New England Journal of Medicine

Next Generation ACO Model; CMS


CDC forecast: 477,000 deaths by February 6

Biden: American Rescue Plan

Last Thursday. President-elect Biden has unveiled his American Rescue Plan adding Covid-19 relief and economic recovery. The $1.9 trillion plan includes:

  • $400 billion for coronavirus vaccines, testing and logistics support which includes $20 billion for a national vaccination program, and another $140 billion for testing and other public health investments.

  • $1 trillion in direct relief to families which involves $1,400 payments, to be added to the $600 checks Congress passed last month, for $2,000 in overall relief.

  • $400 billion in aid to communities and businesses including for testing, vaccines, and public health workers.

  • $400 a week in extended federal unemployment insurance through September; rental assistance; emergency paid leave; and funding for reopening schools, among other items.

  • Raising the national minimum wage to $15 per hour, and abolishing the tipped minimum wage and the sub-minimum wage for people with disabilities

  • Increase of ACA subsidies, so that enrollees pay no more than 8.5% of their income for coverage. Subsidies are currently capped at 400% of the federal poverty level, creating an affordability cliff for middle-income Americans.

  • Subsidies for COBRA coverage through the end of September.

“President-elect Biden Announces American Rescue Plan”; January 14,2021; American Benefits Council

“Biden Unveils $1.9T Economic and Healthcare Relief Package”; January 14th, 2021; Washington Post


CMMI Report: Next Generation ACO Model Year Four results

41 organizations participate in the NextGen ACO authorized in Section 3021 of the ACA. Results for performance year 4 were released last Tuesday by the Center for Medicare and Medicaid Innovation (CMMI):

  • 41 organizations participated in Year Four: 35 of the 37 ACOs met benchmarks for shared savings in 2019 (4 were not included in the data set because they deferred financial settlement).

  • The 37 ACOs earned about $461.9 million in shared savings. Medicare saved $204 million after accounting for bonuses.

  • The average quality score for the ACOs was 93.7% out of 100%.

  • Comparing Model Years 1 thru 4, three trends standout:

  • Medicare savings have increased from $37 million in Year One to $462 million in year four, but participation churn makes it difficult to attribute savings to usually attractive market characteristics where savings are more easily achieved or effectiveness of the organization’s medical management strategies and tactics.

  • Only a third of these savings are realized by the Medicare program itself: participating ACOs receive the lion’s share of savings.

  • And individual ‘enrollment’ in NextGen ACOs has dropped from 1.4 million in 50 NextGen ACOs in 2018 (per capita savings of $157.86) to 1.2 million in 2019 in 40 NextGen ACOs (per capita savings of $373.72) so legitimate questions should be the sustainability of savings for enrollees who participate in NextGen ACOs for several years vs. savings achieved by new enrollees.

The National Association of ACOs news release about the CMMI report headlined ”Next Generation ACOs Saved Medicare $559 Million in 2019” argues that NextGen ACOs be a permanent model in Medicare. NextGen ACOs are here to stay, but expansion of enrollment must be a factor in their oversight if significant Medicare savings are to be realized.

Next Generation ACO Model; CMS

Study: Advanced Care Planning Supported by EHR and Nurse Coordination Outperforms Traditional Primary Care Efforts for Vulnerable Seniors

In this randomized effectiveness trial of 759 vulnerable older adults from 8 primary care clinics in North Carolina, a nurse navigator–led pathway plus an integrated health care professional–facing EHR interface resulted in higher rates of Advanced Care Planning (ACP) documentation (42.2% vs 3.7%) vs usual care:

  • ACP billing codes were used more frequently for patients randomized to the nurse navigator–led ACP pathway (25.3% vs 1.3%)).

  • Patients randomized to the nurse navigator–led ACP pathway more frequently designated a surrogate decision maker (64% vs 35%) and completed ACP legal forms (24.3% vs 10.0%).

Gabbard et al “Effectiveness of a Nurse-Led Multidisciplinary Intervention vs Usual Care on Advance Care Planning for Vulnerable Older Adults in an Accountable Care Organization: A Randomized Clinical Trial”; January 11, 2021; JAMA Network

Lilly Drug for Alzheimer’s Shows Promise in Small Clinical Trial

Last Monday, Eli Lilly announced promising results in a clinical trial for its experimental Alzheimer’s drug donanemab. The drug slowed the decline in memory and ability to perform activities of daily living by 32% after 18 months among people who received the therapy compared with those who got a placebo.

Biogen’s Aducanumab and donanemab belong to the same class of antibody drugs that have faltered in testing. Researchers hoped these drugs would stymie Alzheimer’s by targeting the sticky deposits, or plaques, of a protein called amyloid that accumulate in the brains of patients.

Jonathan Rockoff “Lilly Alzheimer’s Drug Helped Patients in Small Trial”; January 11, 2021; Wall Street Journal

Survey: 39% Say They can Afford a $1000 Healthcare Bill

Bankrate surveyed 1,003 Americans about their personal finances from Dec. 8 to 13: findings:

  • 39% of American adults say they can afford a $1,000 surprise bill.

  • 18% said they would put the expense on a credit card and pay it off over time, incurring interest charges and another 18% said they could handle a surprise expense without borrowing, but would have to make room in their budgets by scrimping on other items.

  • 44 % believe their personal finances will improve in 2021.

Jeff Ostrowski “Survey: Fewer than 4 in 10 Americans could pay a surprise $1,000 bill from savings”; January 11, 2021; Bankrate

Study: Price Variation Significant in Comparing Locations of Providers

Researchers analyzed prices (allowed charges) for health services across 20 large core-based statistical areas (MSAs) using IBM’s MarketScan® Commercial Claims and Encounters Database of large employer claims in order to examine the extent to which prices vary for a given service.

  • Knee and hip replacements are common surgical procedures: The average price in the New York metro area ($58,193) is more than double the average price in the Baltimore, MD region ($23,170).

  • In the 20 populated MSAs, the average price of cholesterol tests was three times greater in the highest-price region than in the lowest. The average price for an in-network lipid panel in an outpatient setting allowed by large employer plans in the Oakland, CA area ($30) is 3 times higher than in the Orlando, FL area ($10). In most of the MSAs shown, the average price of a lipid panel in an outpatient setting allowed by large employer plans ranged between $10-15.

  • Lower back MRI performed in a physician office: the average price allowed by large employer plans was 144% higher in Oakland, CA region ($853) than in the Orlando, FL region ($349). These prices include out-of-network providers, but do not include any balance billing incurred by the patient.

Kurani et al “Price Transparency and Variation in U.S. Health Services”; January 13, 2021; Peterson-KFF Health System Tracker