Delivery System Reform: Do the House and Senate Bills Deliver?

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In addition to expanding health care coverage, a clear goal of the current reform efforts is to overhaul the delivery system in ways that will improve quality and efficiency while reducing costs – in the vernacular of the moment, seeking to “bend the cost curve” over the long haul. While particulars differ, both the House and Senate bills introduce a variety of new mechanisms and incentives geared toward achieving these goals. Many of these measures seek to foster the integration of components of the delivery system, coordinate patient care, and align payment incentives to improve quality.

• Accountable Care Organizations. The driving principle of Accountable Care Organizations, or (ACOs), is to make providers collectively responsible for quality, cost, and resource use for particular patient populations. ACOs would align incentives by tying payments to quality and allowing participating providers—including physicians and possibly hospitals and other providers—to share in any cost savings that result from their efforts. ACOs would need to have in place legal structures that would allow them to distribute shared savings among their providers. Both the House and Senate bills establish ACO pilot programs under Medicare and Medicaid, although the Senate’s Medicaid ACO program is limited to pediatric ACOs.
  
  
• Hospital Readmission Policies. Preventable hospital readmissions are a significant source of excess health care costs: in fact, one study has found that unplanned readmissions cost Medicare $17.4 billion between 2003 and 2004. Both the House and Senate bills would seek to reduce “excess readmissions” for certain specified conditions by reducing Medicare hospital payments—for all admissions, not just for the specified conditions – for hospitals with high readmission rates. The House bill would also provide some funding to hospitals with high disproportionate share populations for transitional care services and other assistance to address patient noncompliance issues.
  
  
• Bundling Payments for Acute and Post-Acute Care. Payment bundling, as conceived under the House and Senate bills, would provide for a single payment for acute and post-acute care to enhance incentives for more efficient, coordinated care. Neither of the two bills provides for the immediate establishment of a specific bundled payment program in Medicare; instead, they establish Medicare (and, in the Senate, Medicaid) pilot programs to test the approach. In addition, the House bill would require the Centers for Medicare and Medicaid Services (CMS) to devise a plan establishing bundled payments for Medicare no more than three years after enactment of the bill, although additional Congressional authorization would be required before such payment is mandated program-wide.
  
  
• Medical Homes. The patient-centered medical home model seeks to improve continuity of care by making a patient’s primary care physician responsible for coordinating the overall care and wellness of a patient. Both bills contain provisions supporting the formation of patient-oriented medical homes. The House bill establishes Medicare and Medicaid pilot programs, while the Senate would create a new “health home” option for states under Medicaid. Under either bill, medical homes would likely be tested under the new Payment Innovation Center (see below). The Senate bill also establishes a grant program to support community-based, interdisciplinary “health teams” that would be required to support patient-centered medical homes, and creates a “Primary Care Extension Program” that would, in part, assist primary care providers in implementing this model.
  
  
• Value-Based Purchasing Programs. In adopting value-based purchasing mechanisms, payors and purchasers of health care attach payment incentives to attainment of specified quality or cost targets. The Senate bill includes a plan for gradual implementation of value-based purchasing in Medicare, beginning in 2013 with hospitals. The bill would subsequently add a value-based payment modifier to the physician fee schedule, while requiring the Secretary to develop a plan that, subject to the approval of Congress, would extend value-based purchasing to skilled nursing facilities and home health agencies. By contrast, the House bill delegates to the Institute of Medicine (IOM) the task of studying and making recommendations on the implementation of a quality- and cost-based “value index” for adjustment of Medicare payments on a regional or provider-level basis. The IOM recommendations would then be considered by Congress on a fast-track basis.
  
  
• Community-Based Collaborative Care Networks. While most proposed delivery system reforms focus on Medicare or Medicaid beneficiaries, the community-based collaborative care network model is specifically targeted to encourage the formation of networks to increase effective access for medically underserved and low-income populations. The House bill would establish a program to fund the creation of Community-Based Collaborative Care Networks (CCNs) and would require CCNs to be included in the bundled payments described above.
  
  
• Innovation Center. Both the House and Senate bills would establish a Payment Innovation Center at CMS, which would have broad authority to test and evaluate pilot programs designed to foster patient—centered care, improve quality and reduce costs – including models not currently foreseen. The Center would then be able to expand successful programs or terminate those that do not work, without the need for additional legislation.

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