Medicare Wants To Pay For Outcomes

Andrew Sullivan —  Jan 27 2015 @ 11:25am

Sarah Kliff puts a favorable spin on the news:

The Obama administration announced Monday a sweeping new plan that will directly affect thousands of hospitals and doctors across the country. The federal government now plans to pay Medicare doctors more if they help patients get healthier — and less if their patients just stay sick. This would be done by tying 85 percent of all Medicare payments to outcomes by the end of 2016 — rising to 90 percent by 2018.

The idea is to move away from the broken and expensive “fee-for-service” system, which pays doctors a flat amount for every surgery and physical they perform — even if they do nothing to actually help a patient.

Orszag is excited:

To be sure, more needs to be done: The targets have to be hit. And that will require action. Today’s announcement provided no details about the specific steps ahead. Will Medicare move more toward bundled payments for specific episodes of care, or toward accountable-care organizations, through which hospitals and other providers receive one payment for all the care a patient needs during a year? Such details are crucial.

The first step in any worthy project, though, is to set clear goals. We desperately needed them for payment reform. With today’s announcement, the administration has raised the odds that the era of slower growth in health costs will continue.

Suderman is skeptical:

This isn’t a plan. It’s a plan to develop a plan (or plans) in hopes of meeting a not-very-well-defined target.

Fine. The administration will eventually try to do something. And whatever that something is, it will likely be a bigger version of a program that has already been tried before. Medicare has tried out lots of experiments in alternative payment systems, attempting to influence provider behavior and health outcomes through bonuses, bundled payments, penalties, and various pay-for-performance measures.

And what we know from these experiments is that even in optimal conditions, it’s very, very hard to make them work.

Jason Millman admits that “it’s still uncertain how well these payment approaches work”:

“We still know very little about how best to design and implement [value-based payment] programs to achieve stated goals and what constitutes a successful program,” concluded a 2014 Rand Corporation study funded by HHS. The report, which reviewed pay-for-performance models implemented over the past decade, said improvements were “typically modest” and often hard to evaluate.

Sam Baker provides more background:

Some of the models HHS wants to expand were part of the Affordable Care Act, including Accountable Care Organizations. Networks of hospitals and doctors pull together into a single ACO, with the goal of tightly coordinating care for each patient. ACOs are billed based on their outcomes, rather than allowing each member to bill Medicare separately. Medicare even penalizes some ACOs if they don’t meet certain quality standards or savings targets.

ACOs have had mixed results: Although they’ve shown an improvement in quality, several providers have dropped out of the program, and Medicare hasn’t saved as much money as many advocates had hoped.

And John O’Shea recommends that, “before blindly pushing Medicare doctors and other medical professionals out of fee for service and over the cliff, the Obama administration should be sure they have a safe place to land”:

[M]edical professionals have found that ACOs are exceedingly difficult to implement. Research by the Medical Group Management Association found implementing and/or optimizing an accountable care organization was one of the top five challenges for members, with 60.2 percent of respondents to one survey saying implementing ACOs was one of the biggest challenges, making it the fifth most challenging issue overall. In fact, of 44 issues facing medical practices, the top challenge for Medical Group Management Association members was preparing for new reimbursement models that include greater financial risk for practices.