As delivery models evolve, providers will take on more risk, Blum says

The Affordable Care Act is driving major changes to the healthcare delivery system for Medicare. Jonathan Blum, the principal deputy administrator for the CMS, is primarily responsible for executing the payment and care delivery reforms in the legislation. In an interview with Modern Healthcare Editor Merrill Goozner, he reveals the agency's views on the evolution of new delivery models, the future of payment reform, the ongoing consolidation among providers and what's behind the slow growth in healthcare spending. The following is an edited excerpt:

Modern Healthcare: The results are now in from the first year's ACO experience. What did you learn and where do you think the program will go from here?

Jonathan Blum: Just about all participants are performing better on the various quality measures. The so-called Pioneers demonstrated very modest cost growth. If we can continue these trends both in terms of quality improvements but also in very modest cost growth on a per beneficiary basis, this program has tremendous promise for the fee-for-service Medicare program.

We know that beneficiaries have not chosen to opt out of the data-sharing requirements. That tells us that beneficiaries understand that the ACO model is one that can lead to better care outcomes. Overall, we are very pleased with the program to date.

MH: If organizations move toward an accountable care model, how will the CMS ensure they remain financially viable?

Blum: Those organizations that thrive will be ones that can better manage the handoffs between hospital care and post-hospital care. There is tremendous variation throughout the country in terms of quality and the total cost for a given episode of care.

If you were to map out the 30-day total cost for a given DRG episode for the hospital, the post-acute, the inpatient and the physician spend, the variation is tremendous. There's no rhyme or reason to the variation. Organizations that can better manage that post-acute care; that build better networks; that can incorporate the principle that when patients do better, the facilities do better—to us, that's the long-term vision of the hospital healthcare delivery system.

MH: A lot of systems around the country are integrating by buying physician practices and other hospitals. Do you see antitrust enforcement conflicting with those goals?

Blum: Medicare pays the same fee schedule across the country for a DRG or a physician service, so we're less concerned regarding consolidation. … Our strategy has been and will continue to be to work very closely with the antitrust agencies. … We want to encourage consolidation that leads to better care coordination, better integration, (while) being mindful that we also have the right checks and balances so (consolidation) doesn't undermine price competition for private payers.

MH: Skeptics say the payment reforms are mere pilot projects. Do the pilots fall away at some point and you move to either universal bundled payments or a capitated system?

Blum: For now, we are pursuing the strategy of creating multiple payment models to be attractive to different entities across the country. We know that not every physician practice, for example, is ready to become a risk-bearing ACO. So we want to have other kinds of care models. … We want organizations to gain experience and then move on to taking greater shares of overall financial risk.

MH: You're expanding the value-based purchasing program's rewards and penalties to new indications. As time goes on, do you foresee expanding this to more indications?

Blum: Absolutely. I think it will continue to add more cost measures and to add more outcome measures. I think it's fair to say that the current mix of measures is more balanced toward process measures. The agency over time wants to increase the number of outcome metrics, care coordination metrics, cost measures and beneficiary satisfaction measures. ... These value-based purchasing systems will adapt and change over time. We've also indicated that we will be adding more conditions to our hospital readmission measures.

MH: There are concerns some hospitals may be gaming the 30-day readmission penalties program by putting people in observation.

Blum: We have studied that question very carefully and tried to untangle why we are seeing such a dramatic decrease in overall hospital readmissions. Are we seeing growth in observation services over the past year that might indicate some degree of gaming? The short answer is we're not seeing a correlation. We're not seeing the fall in hospital readmissions being associated with longer stays in the nursing home or more stays being provided through the observation setting. Our conclusion right now is the decline in hospital readmissions is a true decline without shifts to other care settings.

MH: What accounts for the three straight years plus of moderate growth in healthcare costs?

Blum: I can speak best to the Medicare experience. We have seen in the last couple of years virtually flat per capita cost growth. And so while CMS can't impact the number of Medicare beneficiaries coming into the system—we add about 10,000 new beneficiaries to the program each business day—we can impact and pay very close attention to the changes in per capita costs year-to-year.

We've decomposed that per capita cost measure by the various parts of the Medicare program: inpatient services and post-acute care; physician outpatient; the managed-care side of Medicare; and the outpatient drug benefit. And when you decompose the overall spending growth by its various components, it really tells a story that the reason that the Medicare cost growth has been virtually flat is due to care improvement.

Follow Merrill Goozner on Twitter: @MHgoozner