Care Redesign
Relentless Reinvention

Progress and Path Forward on Delivery System Reform

Article · February 5, 2017

Nearly 2 years ago, U.S. Department of Health and Human Services (HHS) Secretary Sylvia M. Burwell outlined a three-part vision to move health care to a more coordinated, person-centered system grounded in value-based payment. The HHS delivery system reform effort aimed to 1) realign incentives to pay for better patient outcomes and higher value, 2) advance care models that emphasize coordination and prevention, and 3) leverage health care data, including electronic health records and information on cost and quality of care, to improve patient care.

Since that time, the public and private sectors have made marked progress on this vision, setting and achieving goals for payment reform and establishing momentum for delivery system reform. The basic goals of delivery system reform — to promote quality and value in our health care system — remain at the core of bipartisan efforts in health care, and it is therefore essential that such efforts continue.

Realigning Incentives to Pay for Better Care

In January 2015, HHS announced new goals for moving Medicare away from paying for quantity of services and instead paying for quality, patient-centered care through alternative payment models: 1) 85% of all Medicare fee-for-service payment would be tied to quality or value by the end of 2016, and 90% by the end of 2018; and 2) 30% of Medicare payments would be tied to quality or value through alternative payment models by the end of 2016, and 50% by the end of 2018.

The Secretary also called for the entire health system to set similar goals. To that end, HHS launched the Health Care Payment Learning and Action Network, a public-private partnership focused on alternative payment model adoption. Today, more than 6,500 individuals — from leading providers, businesses, states, payers, and consumer groups — have signed on, including over 130 organizations that set their own individual goals.

Created by the Affordable Care Act to test new payment and service delivery models, the Center for Medicare and Medicaid Innovation (Innovation Center) has piloted over 20 new payment models since 2010. Through accountable care organizations, medical homes, and bundled payments, HHS met the ambitious 2016 Medicare payment goals 11 months ahead of schedule, with 30% of Medicare payments in alternative payment models and 85% tied to quality or value as of January 1, 2016. Preliminary estimates from the Learning and Action Network indicate commercial payers and states are not far behind, with 25% of health care spending in alternative payment models as of January 2016.

These percentages are likely to grow as models are scaled. Models can be expanded more permanently in Medicare, through rulemaking, if they are found to meet one of three scenarios: better quality, lower cost (best scenario); better quality, same cost; or same quality, lower cost. Two models have satisfied the criteria for expansion so far: the Pioneer Accountable Care Organization and the Diabetes Prevention Program. These programs have demonstrated that they can improve patient outcomes and reduce costs to Medicare, making it imperative that they continue.

Importantly, there is bipartisan support in Congress for institutionalizing payment reform. In April 2015, Congress passed legislation modernizing how Medicare pays physicians and clinicians by creating two paths rewarding value: 1) in the Merit-Based Incentive Payment System (MIPS), clinicians are rewarded for high performance in four areas: quality, resource use, advancing care information, and clinical improvement activities; 2) in advanced alternative payment models, clinicians can be exempted from the MIPS program and instead receive a 5% lump sum bonus. The first rule for this program was finalized in October 2016 as part of the MACRA final rule (passed with bipartisan support) and received praise from Congress and health care stakeholders.

Advancing New Care Models That Support Coordination and Prevention

Equally important to payment reform are new innovations in care delivery. Partnership for Patients, a public-private partnership started in 2010, created a platform for hospitals to share best practices for patient care and safety. From 2010 to 2015, incidents of patient harm such as infections, falls, and traumas in hospitals fell 21% nationally, resulting in an estimated 3.1 million fewer hospital-acquired conditions and infections, 125,000 fewer patients dying in hospitals, and nearly $28 billion in cost savings. The Transforming Clinical Practice Initiative builds on this success, awarding $680 million to health care transformation networks to invest in peer-to-peer, evidence-based support and enabling over 140,000 clinicians to improve how they care for patients.

The Centers for Medicare & Medicaid Services (CMS) has prioritized several primary care and prevention payment models that hold promise for advancing value-based care in the future. Earlier this year, CMS announced the Multi-Payer Advanced Primary Care medical home model, which could reach 20 regions across the nation, including more than 20,000 clinicians and 25 million patients. In March 2016, a Diabetes Prevention Program (DPP) model run by the YMCA became the first preventive service model to meet CMS’ criteria for expansion in Medicare. By providing weekly counseling sessions on weight control and diabetes prevention, DPP reduced bodyweight by 5% and saved an estimated $2,650 per enrollee. The expanded model is set to begin in 2018 and aims to make services available for all Medicare beneficiaries, an important step toward achieving the goals of better care with smarter spending.

Leveraging Health Care Data to Improve Care

Progress in digitizing the health care experience of Americans is a fundamental enabler for improved care at lower cost. The HHS Office of the National Coordinator for Health IT (ONC) has focused on achieving widespread electronic health record (EHR) adoption and interoperability. By 2015, 96% of hospitals and 74% of physicians were using certified EHRs, and 82% of hospitals were able to exchange clinical data with outside providers, marking continued year-over-year progress. Last spring, major health information technology vendors — including Epic, Cerner, and other leaders, and altogether representing 90% of the hospital EHR market and health systems in 46 states — committed to supporting consumer access to their data, avoiding blocking of health information, and moving off of proprietary and onto federally recognized, national standards so that technologies can share health data securely and seamlessly. And the recent bipartisan 21st Century Cures legislation further provides ONC with the authority to require interoperability.

Finally, the federal government is increasing access to cost and quality of care information. Medicare Compare websites enable patients and caregivers to compare physicians, hospitals, nursing homes, home health agencies, dialysis facilities, and health and drug plans. HHS and AARP recently announced awardees from a challenge to encourage health care organizations, designers, and technology companies to design a medical bill that is easier for patients to understand.

The Path Forward for Delivery System Reform

Much of the work to date has been based on empiricism: developing models, learning what works, and scaling successes. Not all models will work; some will require improvement and iteration. Participants will enter and exit. Over time, however, this empirical, learning approach will yield results for patients and providers, leading to a smarter, more effective health system in which they can thrive. It is essential for this empiric approach to continue to meet the nonpartisan goals of better care, smarter spending, and healthier people.


The views expressed in this article are those of the authors and do not necessarily represent the views or policies of the U.S. Department of Health and Human Services or Centers for Medicare and Medicaid Services.

This article originally appeared in NEJM Catalyst on January 18, 2017.

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