HHS just hit a big value-based payment milestone. Here's what happens next.

The administration announced the goal last year

Read the Advisory Board's take on this story.

The Obama administration on Thursday announced that it has reached its initial goal to tie a larger percentage of Medicare payments to alternative payment models (APMs).

HHS's goals

HHS early last year announced it would seek to make 30 percent of Medicare payments for hospitals and physicians through APMs such as ACOs and bundled payments by the end of 2016, and to make 50 percent of Medicare payments through APMs by the end of 2018.

According to the Wall Street Journal, HHS was already making about 20 percent of Medicare payments through APMs when the department announced its goal.

Admin reaches goal early

CMS CMO Patrick Conway says the administration reached its 2016 goal nearly a year ahead of its target date. He notes, "We actually think we set an ambitious, stretch goal for the end of 2016," adding, "We even internally questioned whether we could reach the goal or not."

"We are excited about the progress that has been made in reaching the goal ahead of schedule," he says

Conway attributes the administration's success in part to increased participation in its various ACO programs.

According to Conway, about $117 billion of an estimated $380 billion in Medicare fee-for-service payments went to participants in value-based models as of January. CMS' Office of the Actuary has reviewed and signed off on the agency's estimates.

Conway said the amount of value-based payments now made through Medicare has increased from "virtually zero" dollars in 2011 (Ferris, The Hill, 3/3; Radnofsky, Wall Street Journal, 3/3; Young, CQ HealthBeat, 3/3 [subscription required]).

The Advisory Board's take

Rob Lazerow, Health Care Advisory Board

Thursday's announcement confirms that the transition to value-based payment models is well underway. 2015 was a landmark year in this transformation. After Secretary Sylvia Mathews Burwell announced the ambitious timeline for the transition to APMs in January 2015, CMS continued to refine existing APM programs and introduce new ones, including both Track 3 of the Medicare Shared Savings Program and the Next Generation ACO Model. These programs offer providers more options for staging their transition to risk.

Moving forward, we expect the percentage of payments made through APMs will continue to grow. On April 1, the new Comprehensive Care for Joint Replacement Model will launch, introducing mandatory bundled payments for hip and knee replacements at nearly 800 hospitals across 67 markets.

Your questions about Comprehensive Care for Joint Replacement—answered

Later this year, providers will likely have a second opportunity to apply for the Next Generation ACO Model, which currently features the highest levels of risk and reward in any of the Medicare ACO programs. And similar to last year, CMS could introduce new programs to further accelerate APM adoption before the presidential election ushers in a new administration.

Looking further out, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)—the bipartisan legislation that replaced the much-maligned Sustainable Growth Rate formula—is designed to encourage physicians to participate in APM models. While we await HHS's rulemaking to implement MACRA, the program should provide another boost to APM participation rates.

As providers actively participate in or consider Medicare's risk-based payment programs, they can't ignore the private sector. Organizations in some states, such as hospitals operating under Maryland's All-Payer Model, enjoy consistent incentives from their payers. In many other markets, however, providers face competing—potentially even conflicting—demands from public and private payers. As participation in CMS's APM programs grows, providers must actively manage this tension between the public and private sectors, ultimately converting integrated care delivery into a product that appeals to both markets.

Managing this tension is the key theme of the Health Care Advisory Board's National Meeting Series, "Proving Our Value," and we invite you to join us for one of the remaining dates to hear our latest research and guidance. As always, please feel free to call or email if there is anything we can do to be helpful.

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