A New Alphabet Soup of Payment Models, Medicare Programs Drives Providers to Focus on Population Health

For providers, changes in payment models are now driving a much stronger emphasis on population health. Under the traditional fee-for-service model, providers don’t have a financial incentive to think about the health of a given population or community; they are simply paid for every test or procedure performed on each individual. But under new payment models such as accountable care organizations (ACOs) with shared savings, providers’ ability to improve the health of a population is directly tied to financial reward—and, in cases when they fail, a financial penalty. Some new payment models also help pay for care coordination and other much-needed services.

All of this recent change is being driven by the 800-pound gorilla in healthcare, Medicare. The Medicare program has put a huge new emphasis on value-based payment models. In January of this year, Health & Human Services Secretary Sylvia Burwell announced that by 2018, 50 percent of traditional Medicare payments will be tied to quality or value, via alternative payment models like ACOs and bundled payment arrangements.

The Medicare Access and CHIP Reauthorization Act (MACRA) recently passed by Congress makes dramatic changes in how Medicare pays providers. By 2019,Medicare providers must choose between participating in an alternative payment mechanism (APM) or in the Merit-Based Incentive Payment System (MIPS). Providers who receive a significant percentage of their income through APMs can opt out of MIPS and receive annual bonus payments of 5 percent. Those who participate in MIPS will be scored based on quality measures, with their scores reported publicly. High-scoring providers will earn financial rewards, while low-scoring providers will be subject to payment reductions. Given a choice between these two paths, there is an enormous incentive to move to APMs to avoid being publicly “graded” and possibly penalized.

As Medicare goes, so goes the rest of the healthcare system, and we are seeing a dramatic shift toward more value-based payment in the commercial sector as well. As much as 40 percent of payments to providers from commercial health plans are now tied to value, according to Catalyst for Payment Reform’s 2014 Scorecard on Commercial Payment Reform. Across the board, most providers understand the new payment models have the potential to help them deliver better care by actually paying for care coordination. And many recognize that better population health management can lead to greater income as well. Still, some providers are concerned about how all of this will affect their autonomy. However, the alternative—greater cuts in the Medicare fee schedule—is even less palatable.

Already, we have seen some provider groups embracing change; there are impressive pockets of excellence across the country. My home state, California, is no stranger to new payment models—capitation was born here. But our organization has expanded focus beyond California, and we have many members in other states doing groundbreaking work. For example, New West Physicians in Colorado has done a remarkable job improving population health with their ACOs and special attention to chronic care management in the Medicare population.

As we continue to change how providers are paid, I am optimistic we will have a triple win—for patients, providers and policymakers alike. Even in a healthcare system traditionally plagued by unsafe care, waste and inefficiency, the right payment models can lead to better population health, along with financial gains for providers and higher-value care all around.

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Don Crane is President and CEO of CAPG, the nation’s only professional association that exclusively represents capitated, coordinated care organizations, and is a leading voice promoting the interests of physicians practicing accountable care across the nation. CAPG consists of over 190 multispecialty medical groups and IPAs that provide medical care to over 16 million patients across 39 states, the District of Columbia, and Puerto Rico.

 Mr. Crane is in the forefront of California and national public policy advocacy on behalf of accountable care organizations across the country as they make the journey from volume to value and move into risk based alternative payment models.  

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