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CMMI on Leveraging Lessons in Episode-Based Payments

Blog Post · November 17, 2016

Care delivery transformation is no longer a start-up enterprise. The United States is six years into health care’s evolution under the Affordable Care Act, and on the eve of the Quality Payment Program for Medicare, which may be a good time to pause and consider how best to leverage what we’ve learned to date.

The Centers for Medicare & Medicaid Services (CMS) has invested in a diverse range of tests of payment strategies. These strategies are influencing the entire health system, including the private sector, and have had widespread, bipartisan support. Broadly speaking, they fall into three categories: population-based payment (accountable care organizations and primary care medical homes), episode-based payment models (bundled payments), and other models focused on specific types of providers and/or patients. Now is the ideal time for more payers to engage with these efforts.

We believe that the early results from Medicare in the first two categories should encourage payers that have not yet participated in these efforts to begin the hard work of targeting priority areas, designing and implementing those strategies, and engaging their provider partners to achieve success. We also believe early-adopting payers — including Medicare, Medicaid, and commercial plans — now have an important opportunity to evaluate where and how to leverage their early investments and lessons learned, while continuing to refine ideas and test new ones.

Our nation, as well as individual payers and providers, needs robust alternative payment models (APMs) to help us achieve better health, better care, and smarter spending. And payer alignment is vital to care delivery transformation. Committed providers deserve the predictability that comes with knowing that a variety of payers — from public to private — are also committed to paying for better value. This alignment is not only key to the success of early adopters, but it can also give ambivalent or unconvinced providers confidence that they will have the support necessary to succeed under these models.

The Health Care Payment Learning and Action Network (LAN) was created by the Department of Health and Human Services under Secretary Burwell’s leadership as a public-private partnership to facilitate alignment across stakeholders, and to help build momentum for the health care system’s adoption of effective APMs. This partnership has already proven successful, with the recent announcement that plans and states representing almost 200 million of the nation’s covered lives had 23% of their 2015 health care spending flow through APMs. These partners are well on their way to their programs matching the goals the Obama Administration set for the Medicare program of 30% of spending flowing through APMs by the end of 2016; a goal the Administration met 11 months early.

The work of the LAN is even more important now in the era of the Quality Payment Program, which implements the bipartisan Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and promotes participation in APMs.

Achieving Alignment Across Payers

Medicare has already joined with many private payers and Medicaid programs in publishing consensus recommendations on approaches to the design of population-based payments, such as ACO initiatives that build upon the Medicare Shared Savings Program and Pioneer ACO Model, and early private-sector initiatives, including the Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract, all of which have demonstrated early positive results. And we engage with other payers through a variety of mechanisms — not only the LAN, but also through the State Innovation Models Initiative and other models.

This payer alignment is also key to the success of episode-based payment models. The highly technical nature of how payers define episodes, set target prices, and select quality metrics can drive how providers might approach their own data analytics, changes to workflows, staffing, and business arrangements. Given this complexity, it is important for the LAN to continue developing consensus recommendations and for other payers to engage with CMS on the design of episode payment models.

Truly meaningful payer alignment would touch on both the design and implementation of episode-based payments. Defining discrete units of accountability like a care episode, details of risk adjustment, episode definitions, and the timing of different payers’ data reports can make a real difference in how effectively providers can plan and act. With these considerations in mind, payers should leverage the recent report on early evaluation results of Medicare’s bundles on lower extremity joint replacement, as well as the LAN paper on joint replacement episodes.

The growing array of APMs means more opportunities for providers and payers to transform their care delivery and improve quality and value for their patients. Payers should seize every opportunity to minimize mixed signals to providers and to help focus their care improvement efforts. Alignment across new payment strategies like ACOs and PCMHs has begun, and there is opportunity for alignment with episode-based payment to accelerate care delivery transformation across public and private sectors. We look forward to working with health care stakeholders to continue to align on critical aspects of these new APMs, so that — together — we can all achieve better care, better health, and smarter spending at a much faster rate for our entire nation.


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