If Fee-for-Service is a Problem, What's the Solution?
by P. Demko; http://www.modernhealthcare.com; 2/25/15

The fee-for-service payment model for healthcare treatment could be withering, but there's little incriminating evidence that alternative payment models such as accountable care organizations will give you better care at the cheaper cost, experts agreed in a forum Wednesday convened through the Federal Trade Commission.

Chapin White, a senior policy researcher at the RAND Corp., pointed to the historic slowdown in Medicare costs among the most important trends in healthcare spending. But younger crowd pointed out that the spending reductions are already achieved largely through rate cuts to providers in lieu of widespread adoption of risk-based payment systems. “ACOs are actually tinkering for the edges in the big picture of Medicare spending,” White said.

The original crop of 32 Medicare ACOs–known as Pioneers–have achieved mixed success in terms of holding down costs and boosting quality. The CMS announced a year ago that Pioneer ACOs lowered Medicare spending by $817 million through the first two numerous years of operations. But 13 from the original 32 ACOs have dropped out with the program after struggling to keep down costs and facing the prospect of paying back money to the federal government.

The Medicare Shared Savings Program—a broader test of accountable care launched in 2012 under the Affordable Care Act—added 89 additional participants in January. There are now over 400 ACOs in this program providing coverage to roughly 7.2 million Medicare beneficiaries.

Last month, the CMS announced an objective to have 1 / 2 of fee-for-service Medicare paid under contracts with incentives to deal with quality minimizing costs. ACOs are simply one emerging form of such value-based payment models. Patient Centered Medical Homes and bundled payments are two other approaches meant to avoid rewarding providers for quantity of care instead of quality.

Kristen Miranda, second in command for strategic partnerships and innovation at Blue Shield California, said the changing payment landscape is causing some strange bedfellows. In particular, she cited the not-for-profit insurer's partnership with competitor Anthem Blue Cross to file for the $80 million California Integrated Data Exchange as proof of unique collaborations directed at creating a better healthcare system.

“These are incredibly wild and exciting times,” Miranda said. She argued the traditional tools insurers manipulate for holding down costs—driving tough bargains with providers and limiting networks—aren't sufficient anymore. “What neither of the approaches does is to essentially get underneath the hood about what's driving healthcare costs,” Miranda said.

A couple of participants inside forum cited the requirement to make a alteration of Medicare payments it doesn't depend on overhauling reimbursement models. They argued that paying doctors more for services provided at hospitals compared to they get paid for exactly the same care delivered within an office is driving up costs and driving consolidation. “The site- of-service differential has got to go,” said Simeon Schwartz, CEO of New York's WESTMED Medical Group.

Michael Chernew, a healthcare policy expert at Harvard Medical School, cited another change that's assisting to spur payment innovations: your dream over Medicare's sustainable growth-rate formula for paying doctors. The current patch for your SGR formula expires on the end of March, teeing up another fight within the issue on Capitol Hill, and lawmakers should be careful that the rates lawmakers adopt aren't so generous that providers have little incentive to look at alternative models.

White noticed that there are already movements out of the fee-for-service system within the past, but they eventually stalled out. That means it's to soon to tell whether the actual movement toward value-based payments will lead to permanent changes towards the healthcare financing system. “They appeared as if they were heading towards the sky,” White said of previous efforts, "and they collapsed.”




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