Blog Post

'Change is coming': 4 takeaways on the HHS secretary's vision for our industry

March 22, 2018

    "Change is possible, change is necessary, and change is coming."

    Who could have predicted that the new HHS secretary for a Republican administration would end a speech to industry leaders with a proclamation so redolent of the Obama years? Yet that is exactly what Alex Azar did earlier this month in comments to the Federation of American Hospitals—an organization which represents investor-owned health systems including HCA, Tenet, and LifePoint.

    Azar outlined three familiar priorities for the transformation he seeks to foment: 1) consumer control over their health information; 2) price transparency; and 3) value-oriented payment reform within Medicare and Medicaid. He also articulated a fourth, newer priority: reducing the regulatory burden in order to hasten the pace of innovation.

    Azar's comments on value-based care were particularly forceful. He said:

    “There is no turning back to an unsustainable system that pays for procedures rather than value. In fact, the only option is to charge forward—for HHS to take bolder action, and for providers and payers to join with us. This administration and this President are not interested in incremental steps. We are unafraid of disrupting existing arrangements simply because they’re backed by powerful special interests.”

    With HHS's cancelation of several mandatory bundled payment programs last year (prior to when Azar took the helm), there was some doubt as to how the Trump administration would address the move to value-based care. But with his comments, Azar appeared to leave little doubt that there is momentum behind a value-based transformation in health care, one driven by reinvigorated federal scrutiny of health care markets and responsive to the massive buying power of Medicare and Medicaid.

    Value is always—to a degree, at least—in the eye of the beholder, so in the absence of any concrete regulatory proposals only time will tell where Azar's vision will lead. With that caveat, Azar's message is worthy of close attention. Here are our four top takeaways.

    1. The value-based care transformation will be a market-based transformation

    Advisory Board has long contended that a value-based health care system is not in conflict with a market-based one, provided that there is a level playing field and information can flow freely. Azar agrees. The moves he outlined will facilitate a real and responsive health care market, one that both identifies and rewards value. It is also clear that the HHS chief envisions a future health care landscape similar to the current one, i.e. with private third-party payers, private hospitals, pharmaceutical companies, and so on. In this sense, the value-based transformation is an evolution of our current system, not a revolution.

    2. Proactive industry-led change will be welcomed

    Regarding health data access and price transparency, Azar exhorted the industry to address these issues on its own. But the appeal comes with a clear warning: if transparency doesn't improve, Azar noted, "We have plenty of levers to pull that would help drive that change." Facing this prospect, it makes sense for providers who are already going down this path to persevere and even accelerate their efforts.

    3. Be prepared for a renewed emphasis on total cost downside-risk payment models

    Unlike his predecessor Tom Price, Azar appears to relish the power of the CMS Innovation Center to significantly advance change. In singling out "lackluster" ACO results, Azar pointedly noted that success has been limited by the scarce uptake of downside risk models. If Azar expects to increase their popularity, he may have to revisit their incentive structure. Given Azar's remarks in his confirmation hearings, mandatory models may not be out of the question.

    4. Details are scarce but don't expect HHS's energy to flag

    Given the lack of detail in Azar's speech, some might be inclined to minimize his remarks. This would be a potentially dangerous misreading. The idea of a value-based health care system is not the province of only one political party, as Azar reminds us. Many commentators were concerned that his long-standing industry ties would disincline Azar from meddling with the status quo in health care. But those very ties place him in a uniquely powerful position to effect change, should he choose to do so. Providers would be wise not to bet against it.


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