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March 6, 2018

HHS secretary tells hospitals: Price transparency is coming—and we'll use 'powerful incentives' to make it happen

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    HHS Secretary Alex Azar on Monday told a group of hospital executives that the Trump administration is committed to transitioning the U.S. health system toward value-based payments, promising that "change is coming" to the health care industry.

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    Azar made the comments at the Federation of American Hospital's (FAH) 2018 Public Policy Conference
    & Business Exposition.

    Azar calls for accelerated shift to value-based payment models

    Azar in his remarks said the shift toward value-based payments began more than a decade ago, but today, "value-based payment is still far from reaching its potential." In regards to the current fee-for-service model, he said, "We have been on a journey to replace that equation with a new one—paying for outcomes and wellness—but that transition needs to accelerate dramatically."

    Azar 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."

    Azar in his remarks outlined four priority areas through which HHS intends to foster the transition toward value-based payments:

    • Experimenting with payment models in Medicare and Medicaid that aim "to drive value and quality";
    • Granting U.S. consumers more access to health information through interoperable and accessible health technology;
    • Promoting transparency among providers, payers, pharmaceutical companies, and pharmacies on prices and quality; and
    • Reducing regulatory burdens that hinder the transition toward value-based payments, such as reporting requirements.

    According to Politico's "Pulse," Azar's priorities resemble those of former President Barack Obama's administration during the Obama's last years in office.

    Comments on Medicare and Medicaid payment models

    Azar in his remarks said, "If we're serious about transforming our health system toward paying for value, Medicare and Medicaid will play a key role," adding, "Only Medicare and Medicaid have the heft, the market concentration, to drive this kind of change, to be a first mover."

    Azar said HHS already has "a range of tools for using these programs to pay for value," such as CMS' Center for Medicare and Medicaid Innovation and MACRA. Going forward, he said HHS "want[s] to look at bold measures that will fundamentally reorient how Medicare and Medicaid pay for care and create a true competitive playing field where value is rewarded handsomely."

    He said HHS "will be transparent and collaborative as [it] experiment[s]" with new payment models, taking into account that "aggressive models have not always worked out, so appropriate guardrails will always be essential."

    HHS also will "bear in mind whether new burdens created by models or the scale they require for viability may be driving consolidation in the health care market," Azar said, adding, "As a matter of principle, we want to move to a system where we can be agnostic about ownership structures, a system that will allow independent providers to group together to drive innovation, quality, and competition."

    Comments on Health IT and interoperability

    Azar in his remarks said hospitals might lack the resources to disseminate information to consumers, and said HHS will work with the health care industry to "open up avenues" between patient and providers.

    Comments on price and quality transparency

    Regarding transparency on health care prices and quality, Azar said, "If we're talking about trying to drive not just better outcomes, but lower costs, we also have to do a better job of informing patients about those costs," which is where HHS' emphasis on price transparency comes into focus.

    Azar said, "I believe you ought to have the right to know what a health care service will cost … before you get that service. This is a pretty simple principle. We'll work with you to make it happen—and lay out more powerful incentives if it doesn't."


    Michael Leavitt, a former Republican governor of Utah who served as HHS secretary under former President George W. Bush's administration, said Azar's "remarks, given at the FAH Conference, are likely [HHS'] most important statement on health care issued during this administration." Leavitt continued, "I highly encourage health care leaders to listen intently to his full remarks: The transition [toward] value is moving forward; if you aren't already preparing for it, it is time to get on-board" (Baker, "Vitals," Axios, 3/6; Dickson, Modern Healthcare, 3/5; Hellmann, The Hill, 3/5; Clason, CQ News, 3/5 [subscription required]; Frieden, MedPage Today, 3/5; Diamond, "Pulse," Politico, 3/6; Azar remarks, 3/5).

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