Lazerow: What the 'historic' commitment to accountable care really means

A couple of weeks ago, HHS unveiled ambitious goals for reforming Medicare payments for hospitals and physicians that would make 30% of payments through alternate payment models like ACOs and bundled payments by 2016. Just two days later, a task force of private insurers and providers followed, pledging to move 75% of its contracts into alternate payment models by 2020.

But how far is the U.S. health care system from these goals? And how much work will it take to get there?

The Daily Briefing's Clare Rizer and Juliette Mullin sat down with Advisory Board practice manager Rob Lazerow to get his take on these "historic" announcements and to determine how these actions could impact the health care industry at large.

Question: HHS has referred to its commitment to making 30% of payments through value-based contracts by 2016 and 50% by 2018 as a "historic" pledge. But how significant is the move really?

Rob Lazerow: This is the first time the HHS has set concrete goals for payment transformation, so, yes, it is "historic." Secretary Burwell established clear goalposts for the transition to alternative payment models, such as ACOs and bundled payments. The proposal also seeks to connect almost all remaining fee-for-service payments to pay-for-performance programs to increase accountability for quality and value. (Editor's note: CMS has said it wants 90% of fee-for-service Medicare payments to be tied to quality through pay-for-performance programs by 2018.)

While Secretary Burwell set ambitious goals, she didn't quite get into the tactics and programs CMS will use to drive the industry forward. As a next step, I expect CMS will continue working with providers to refine existing bundled payment and ACO programs, and probably develop some new ones, to make this goal a reality. I can’t wait to hear senior leaders from HHS and CMS provide more details when they join us for the Future of Care Summit on February 18th.

Q: For the provider perspective, is this commitment a step in the right direction? Or is it an alarming goal they're not sure they can meet?   

Lazerow: One of the biggest challenges providers have been grappling with is uncertainty about the ultimate direction of accountable care and the pace of getting there. If hospital and physician leaders perceive they have many years to adopt new payment models, it’s difficult for them to transition away from a business model they already know well.

So, one of the most important implications of the announcement is that providers now have certainty that the industry is moving in the direction of accountable care and population health. This is a critical step forward in motivating providers past any fence-sitting.

How to implement your 2015 population health resolutions

Q: You work with senior-most hospital and health system leaders daily. How do they approach these alternative payment models?

Lazerow: I generally see two schools of thought from hospital and physician leaders. Some organizations are focused on becoming population health managers, so they’re entering into ACO-style models such as shared savings or delegated risk. They might even explore forming their own health plan. But other organizations are more focused on episodic care management, which centers on bundled payments, the idea that you are paid a fixed amount for delivering a comprehensive episode of care.

Secretary Burwell’s announcement reinforces the idea that there are different ways providers can deliver value. So for example, a PCP and surgeon both have a role to play. For providers receiving bundled payments, their incentive is to ensure quality and efficiency within episodes, although they still have the incentive to grow the volume of these episodes. That’s very different from total-cost-management incentives in ACO models. I don't think one model is the stepping stone to the other, and HHS is saying that it understands that both episodic care management and population health management are valuable to patients and providers, alike.

Not just Medicare: A big pledge from commercial players

Q: Switching gears to the commercial health care space. When a task force of private payers and hospitals comes together and says it wants 75% of payments to be value-based by 2020, what kind of shift is that from where we are now?

Lazerow: What's most interesting to me about this task force is that the participating organizations largely have experience with accountable care. They’re already taking steps toward population health, so many of these organizations are continuing work that’s already underway. But with the new announcement, these providers and payers are accelerating the transition. They are saying, "We can’t have a foot in two different boats anymore, so we’re moving away from fee-for-service payments."

The organizations in this task force have a very different perspective than providers who are just starting to adopt accountable payment models. It would be much harder for an organization that just signed it’s first bundled payment or ACO contract to move 75% of payments to alternate payment models by the end of the decade. For an organization starting from both feet in the fee-for-service world, it would be a much bigger transition.

Q: Let's look at the industry more broadly—not just those health systems that already have a foot firmly in the accountable care boat, so to speak. Where is the industry in this transformation to value-based care?

Lazerow: On the whole, the industry is in the middle of a transition period right now. I see organizations at various steps along the transformation path. While some providers have moved the bulk of their business to alternative payment models, the vast majority of organizations are still in a pilot and experimentation phase. But Secretary Burwell’s announcement underscores that the time for piloting is rapidly coming to an end.

Taking a step back, it’s critical to remember that providers need to successfully manage two different transformations—and they have to happen in sync. A provider has to transform its care model and its payment model, and it runs the risk of failure if it goes too far into one without the other.

Right now, I tend to see organizations going farther on care transformation than payment. For instance, hospitals and their partner physicians can decide to build medical homes unilaterally, but if they want to get that risk-based contract they need a buyer to sign it. You need both the buyer and seller for payment transformation.

In the market now, I think you have more sellers of population health management than ready buyers.

Will the shift to 'accountable care' work?

Q: These big announcements from HHS and the private task force last week brought some of the questions about ACOs back in the spotlight. You work with hospitals on the ground; what's the anxiety level there about the future of these programs? Are hospitals wary of getting more invested?

Lazerow: The challenge is that the two big transformations that need to happen—in payments and in care models—are both hard. What CMS is trying to do here is create a scalable national model for population heath management. It raises very real questions about how you establish a spending benchmark and update it each year. Or how to best share savings with providers. CMS recently issued a proposed rule to revise the Medicare Shared Savings Program that addresses some of these issues.

You may have also seen news about some organizations dropping out of Medicare ACO programs. For a lot of organizations we've spoken with, a lot of it comes down to the nitty-gritty about payment model structure. There is still work to do to find a scalable payment methodology.

It also takes time and energy to drive care transformation. We often talk about it in a three-pronged manner:

  • First, organizations need to invest in and deploy the infrastructure and personnel for population health. So we’re talking health coaches, IT systems, and analytics for patient stratification, for example.
  • Second, they need to change the care models to manage high-risk, rising-risk, and low-risk patients effectively. There’s also a network management piece, encouraging referrals to high-quality providers.
  • Lastly, it involves cultural transformation. We can't underestimate how hard it is to change culture, especially when many leaders and frontline providers have spent their entire careers in a fee-for-service world.

There is a lot to becoming a population health manager, both to transform payment and care.

Public v. private: Who is setting the pace of change?

Q: So let's take one last step back to look at the big picture. Medicare says it made "almost no payments to providers through alternative payment models" as recently as 2011. Now it says it makes about 20% of payments through these models. I know the data is less clear in the commercial space. From your perspective, who is setting the pace of change here?

Lazerow: I've seen it go back and forth, almost a jockeying between the public and private sectors to become the lead car and set the pace of change. We’ve seen big news from both CMS and private payers along the way. So think of the rollout of the MSSP cohorts each year, or Blue Cross Blue Shield of Massachusetts’s Alternative Quality Contract, or Blue Cross Blue Shield of Illinois’s ACO contracts.

But ultimately I think this is a more interesting question for pundits than providers. As the two big announcements from Secretary Burwell and the Health Care Transformation Task Force reiterate, payment transformation needs to be a multi-payer effort. If providers are going to escape the “foot in two boats” dilemma, they need both government and private payers to embrace alternative payment models. So regardless of who’s set the pace of change so far, we now see both committing to the destination.

The takeaway: The HHS announcement represents a commitment to payment transformation and sets clear goals for the pace of change. This newfound certainty is important in "motivating providers past any fence-sitting," Lazerow says.

More from Rob on population health:

Why the ACO 'acid test' isn't the survival of MSSP

Tom Cassels, Executive Director

Read my Q&A with the Daily Briefing to see why the acid test isn't whether the ACO program survives, but whether the momentum it's creating for providers to organize and act differently will continue.

Health Care Advisory Board members can also join us at our 2014-2015 national meeting to hear new research on achieving population health ROI.

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