The Future Of Value-Based Care After Repeal And Replace

October 5, 2017
8 minutes
Thomas N. Bulleit
Jessica M. Band

This article by partner Tom Bulleit and associate Jessica Band was published by Law360 on October 4, 2017. 

In light of the skepticism expressed by the now-former U.S. Department of Health and Human Services Secretary Tom Price toward much of the Obama administration’s approach to mandatory bundled payment initiatives, many have wondered whether his resignation might lead to a change in direction. Below we summarize the brief Price administration’s approach to some of these key value-based health care initiatives and speculate on what might be ahead.

As Congressional efforts to undertake fundamental reform to Obamacare repeatedly foundered during Price’s tenure, greater pressure for health care reform shifted to his Department of Health and Human Services to take administrative action. Although the Center for Medicare & Medicaid Innovation (CMMI), the Affordable Care Act’s laboratory for value-based health care initiatives, was never on the repeal and replace chopping block, Price was a prominent critic of some of CMMI’s mandatory value-based health care bundled payment initiatives as a member of Congress. He had, however, spoken less disapprovingly of voluntary and limited-scope pilot programs of this kind during his congressional hearings, and had declined several opportunities to terminate or alter these programs.

However, on Aug. 15, 2017, the Centers for Medicare & Medicaid Services delivered a clear statement on its approach to value-based health care initiatives by releasing a proposed rule that dramatically reshapes certain of these programs. Specifically, the rule, if finalized, would (1) eliminate the episode payments models (EPMs) and cardiac rehabilitation (CR) incentive payment program, and (2) significantly reduce the number of metropolitan statistical areas (MSAs) required to participate in the comprehensive care for joint replacement (CJR) payment model. The proposed rule is anticipated to be effective as of Feb. 1, 2018. Public comments on the rule are due by Oct. 16, 2017.

This action reflects a significant change in course for CMS, de-emphasizing and significantly reducing the mandatory participation in value-based health care initiatives established under the Obama administration. However, the proposed changes do not signal a desire for CMS to ground value-based reimbursement. Indeed, the implementation of other value-based health care initiatives, such as the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA), continue to move forward with few roadblocks. Instead, the message appears to be one of choice over mandate. In a press release, Seema Verma, the CMS administrator said, “Changing the scope of these models allows CMS to test and evaluate improvements in care processes that will improve quality, reduce costs and ease burdens on hospitals. Stakeholders have asked for more input on the design of these models. These changes make this possible and give CMS maximum flexibility to test other episode-based models that will bring about innovation and provide better care for Medicare beneficiaries.”

In the preamble to the proposed rule, CMS offers further explanation for its action, asserting that mandatory participation by hospitals in additional episode payment models at this time is not in the best interest of the agency or the affected providers and that doing so may impede CMS’ ability to engage providers in future voluntary efforts. CMS further stated that, if it decides to test these models at some future date, they would not be implemented through rulemaking but rather through soliciting applications and securing participants’ agreement to participate, consistent with how CMS has implemented other voluntary models in the past. This approach was not surprising given Price’s long-standing advocacy for physicians and, in particular, his articulated concern that bundled payment programs be designed so as not to interfere with their freedom to make the best patient care decisions.

Cancellation of and reduction in mandatory participation in these three programs permits providers to avoid, at least for the near term, preparing themselves for the roll out of such models. However, while the proposed rule takes some wind out of the sails of CMMI’s value-based health care programs, we will certainly continue to see innovation in the marketplace aimed at helping hospitals and other providers become more efficient, particularly those initiatives driven by commercial payors. Health care agencies in the states and the private sector have already begun to experiment with varying ways of incentivizing providers to provide higher-quality, lower-cost care to patients.

The private sector continues to show a strong commitment to value-based care, creating a sizable runway for key initiatives to take off. Indeed, earlier this year, over 120 leading health care industry groups, including hospitals, health care systems and payors penned a letter to President Donald Trump and Vice President Mike Pence urging the administration and Congress not to discontinue or slow the transition to value-based care. “Through private and public sector alignment, the move toward value-based care is succeeding, measurably improving healthcare quality and contributing to historically low costs,” wrote the organizations. “Now is not the time for policymakers to signal a shift away from value-based care, either through action or inaction.” Private sector initiatives have begun to take root, and have led to creative and novel partnership arrangements between health care industry entities. Publicly announced initiatives include:

  • Payment to hospitals by St. Jude Medical of a 45 percent rebate on the net price of cardiac resynchronization therapies if a lead revision is needed within the first year of implantation;
  • United Healthcare’s Spine and Joint Solution initiatives, which involve bundled payment for a defined episode of care for select provider networks;
  • Outcomes-based partnership between Medtronic and Aetna in which a component of Medtronic reimbursement is tied to successfully meeting agreed-upon clinical improvement thresholds for members with type 1 and type 2 diabetes who transition to Medtronic’s personalized insulin pump; and
  • Formation of Stryker Performance Solutions, which offers customizable care standardization advice, profitability management and MACRA reimbursement consultation for physicians — and bundled payment structure and oversight for payors.

During his short tenure, Price did not indicate plans to make changes to other value-based payment models, such as MACRA’s merit-based incentive payment system (MIPS) and advanced alternative payment models (AAPMs), accountable care organizations (ACOs), and the bundled payments for care improvement (BPCI) initiative. Notably, Republican-controlled majorities in both the House and Senate passed MACRA, the broadest push to value-based health care to date. These programs continue to enjoy bipartisan support and will certainly remain in place in some form, particularly given their voluntary nature. Recent indications of the administration’s support for CMMI’s mission include a request for information by CMS on Sept. 20 to collect ideas on the path forward, and, an op-ed in the Wall Street Journal by Verma, in which she referred to CMMI as a “powerful tool” to improve quality and reduce costs.

It is, of course, unclear what the change at the top of HHS might mean for the future of value-based health care at CMMI. Trump lately has shown an inclination to work with Democrats, and his campaign against Obamacare never seemed to touch on CMMI or value-based health care. Accordingly, it is possible that Price’s successor might be someone more favorably inclined towards this kind of experimentation.

Although the degree to which CMMI’s value-based health care programs will soar at CMS has yet to be determined, value-based health definitely has not been grounded, but will continue to fly high.

The table below provides a description of CMMI’s value-based health care programs, along with information about current developments.

Summary of the Current State of VBHC Programs 
 Program Description Start Date Current Developments
Medicare Shared Savings Program (MSSP)

» Shared savings program for Medicare providers, in which health care providers (principally hospitals and physicians) join an accountable care organization (ACO).

» Voluntary

» Each ACO must manage all health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years.

» Four tracks in which gainsharing is available for each track, and two-sided risk-sharing and prospective payments are phased in depending on the track.

Jan. 1, 2012  » No current indication from CMS of intent to take action to alter program.

Bundled Payments for Care Improvement (BPCI) Initiative

» Four possible care models for payment arrangements in which the provider is accountable for financial and performance outcomes for Medicare beneficiaries.

» Voluntary.

April 1, 2013
» CMS expected to expand opportunities for voluntary bundles under the BPCI initiative, which would also allow a provider to qualify as an Advanced Alternative Payment Model under the Medicare Access and CHIP Reauthorization Act of 2015.
Comprehensive Care for Joint Replacement (CJR)

» Episode-based bundle payments for hip and knee joint replacements.

» Mandatory participation for hospitals in 67 specified MSAs.

April 1, 2016

CMS proposed rule would:

» Reduce the number of mandatory geographic areas in the CJR model essentially by one-half, from 67 to 34.

» Allow CJR participants in the 33 remaining MSAs to participate on a voluntary basis.

» Make participation voluntary for all low-volume (fewer than 20 lower-extremity joint replacement episodes in total across 3 historical years of data) and rural hospitals in the 34 MSAs that require mandatory participation in CJR.

» Require that rural hospitals, low-volume hospitals, and hospitals that elect to voluntarily participate in the initiative, submit a participation letter to CMS by Jan. 31, 2018.

Merit-Based Incentive Payment System (MIPS)

Advanced Alternative Payment Models (AAPMs)

» Under MIPS, provider reimbursement will be adjusted (up or down) based on a composite score of performance in four categories: quality, resource use, clinical practice improvement, and meaningful use of electronic health records. Exceptional performers may be eligible for additional payments.

» Under Advanced APMs, certain eligible provider groups receive a lump sum payment (5 percent). In order for the provider group to become eligible for the 5 percent bonus, it must participate in an Advanced APM and must receive a set percent of payments or see a set percentage of patients through the AAPM.

» Both tracks are voluntary.

Jan. 1, 2017 (reporting)
Jan. 1, 2019 (penalties, incentive payments)
» No current indication from CMS of intent to take action to alter program.
Episode Payment Models (EPMs)

» Episode-based bundle payments.

» Designed to incentivize providers to delivery higher quality cardiac and orthopedic care at a lower cost.

» Mandatory participation for hospitals located in select MSAs (98 MSAs for Acute Myocardial Infarction and Coronary Artery Bypass Graft and 67 MSAs for Surgical Hip and Femur Fracture Treatment).

Jan. 1, 2018
» CMS's Aug. 15 proposed rule would cancel the EPMs.
Cardiac Rehabilitation (CR) Incentive Payment Model

» Incentive payment to coordinate cardiac rehabilitation and support beneficiary adherence to a treatment plan to improve cardiovascular fitness.

» Mandatory participation in 90 MSAs.

Jan. 1, 2018
» CMS's Aug. 15 proposed rule would cancel the CR incentive payment model.