Transition to Value-Based Reimbursement: Past, Present & President Trump

For the past eight years, the legislative debates over, politics surrounding, and implementation of The Patient Protection and Affordable Care Act (aka Obamacare) largely defined the federal government’s health care policy agenda, while the law itself fundamentally changed the direction of the health care industry.

Perhaps most notably in terms of impact, the law expanded access to health insurance for millions of Americans through the individual and employer mandates, Medicaid expansion, and healthcare insurance exchanges. However, perhaps most critically for health care providers, the law also sought to reduce the cost of care by accelerating the transition to value-based reimbursement models. Like many other elements of the law, this transition started slowly, then accelerated sharply in recent years as the result of actions by the Obama Administration, a bipartisan Congress, and the private sector.

In January 2015, President Obama’s Department of Health and Human Services (HHS) established the first ever framework and goals for transitioning Medicare payments from volume to value-based reimbursement. Ultimately, those goals focused on linking 90% of Medicare fee-for-service payments to quality and shifting 50% of Medicare payments into alternative payment models (APMs) by 2018. Joined in setting these goals by several prominent commercial payers and health systems, these goals were also significant because of Medicare’s prominent role as the nation’s largest payer and the fact that 0% of Medicare payments were value-based in 2011.

Following the establishment of these goals by the Obama Administration in January 2015, in April 2015 the U.S. Congress passed The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) into law with the voting support of over 90% of lawmakers in both political parties. More than a decade in the making, MACRA repealed the flawed sustainable growth rate formula that had determined Medicare FFS payment rates since the 1990s and replaced it with two new value-based payment systems for Medicare physicians: the Merit Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs.) Taken together, MACRA’s MIPS and APM payment tracks further linked Medicare payments to value while incentivizing physicians to join advanced APMS, including primary care transformation models, accountable care organizations, and bundled payment models.

Following a lengthy proposed regulation and extensive public comment period, in late 2016 Obama’s CMS released a 2,000 page final regulation to implement MACRA, with a scheduled start date of January 1, 2017 for the initial MIPS and APM reporting periods. Meanwhile, Obama’s CMS announced the largest ever multi-payer primary care transformation model with the CPC Plus program and launched the first ever mandatory Medicare bundled payment program with the Comprehensive Care for Joint Replacement (CJR) model. Taken together, these actions amounted to a huge push towards value by the Obama Administration in its final year in power.

Now with President Trump in office and the Republican Congress working towards their goal of “repealing and replacing” Obamacare and reducing the burden of federal regulations, confusion and a sense of uncertainty have spread across the industry regarding the future of many Obamacare initiatives, including the transition to value-based reimbursement. For many, this confusion only increased when the House GOP recently failed to pass its initial Obamacare repeal bill, The American Health Care Act (AHCA).

For health care providers, one thing that is certain - the transition to value-based reimbursement will continue. Indeed, consider that amidst all the uncertainty surrounding Obamacare, there have yet to be any serious discussions about making fundamental changes to MACRA. Why not? Because despite its flaws and limitations, MACRA was a bipartisan effort more than a decade in the making that represents the unsustainability of the fee-for-service payment system. And while new HHS Secretary Dr. Tom Price and CMS Administrator Seema Verma are sure to make some tweaks to MACRA’s regulations and have already delayed an expansion of Medicare’s mandatory bundled program, Secretary Price, Administrator Verma, House Speaker Paul Ryan, and most other Republicans support the goal of trying to lower the cost of care by paying for value.

Furthermore, MACRA is just one component of the industry’s shift towards value, which is being driven by both government and market forces. Beyond MACRA, the federal government under President Trump will continue to restrict entitlement spending on Medicare and Medicaid, while employers and consumers will continue to increase their demands for higher quality, more cost-effective health care through commercial payments.

As such, providers should continue to prepare for a future of declining fee-for-service reimbursement paired with increasing risk/reward for value-based reimbursement. To succeed in that future world, technology infrastructures should focus on optimizing fee-for-service revenue streams while enabling healthcare organizations to coordinate care and measure, analyze, and report the cost and quality metrics that will drive reimbursement under value-based payment models.

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