Medicare's new payment system for physicians is causing anxiety because of the short stretch of road before their performance is judged for a raise or pay cut. In the long-term, though, Medicare and most everyone else want providers to leave that new system behind. It's value-based training wheels.
The consequences of teetering won't be felt for another two years. And, the way the Medicare Access and CHIP Reauthorization Act is written, the better prizes will go to riders already two-wheeling by then. Or in MACRA-nyms, practices can get out the Merit-based Incentive Payment System (MIPS) and qualify for better rate bumps by having a substantial amount of revenue at risk under a qualifying advanced Alternative Payment System (APM).
But even provider organizations with lots of practice aren't ready for victory laps.
Last week, Modern Healthcare held the third in a series of issue briefings—this one in Houston—on the transition from volume to value. The interest in this topic is intense. Our panelists and many of the attendees have been working hard on this question for years: If they let go of fee-for-service pay, what are the business models that accurately measure and reward the value of services they deliver?
Medicare, state Medicaid programs, private payers, physicians and health systems have been trying to answer this for quite some time, and experiments with balancing payment and outcomes have accelerated under the Affordable Care Act. Many organizations have been doing sort of what my kids did before tearing off on tiny bicycles. They rode a balance bike—a two-wheeler with no pedals—to get a feel for the sensation of falling and righting themselves before mistakes got bloody.
Memorial Hermann Health System in Houston is an interesting case study. The hospital system leads an accountable care organization that has been one of the most successful ACOs in the Medicare Shared Savings Program. In 2015, it generated nearly $90 million in savings for Medicare and gets to divvy up nearly $41 million in bonuses among participants.
That impressive success, though, is still practice. And, like most ACOs in Medicare, Memorial Hermann's has yet to accept financial risk. That's in part because it's much easier to divvy up rewards than parcel out accountability for collective failure. Most of the physicians who participate in Memorial Hermann's ACO aren't employed by the system; they're part of a clinically integrated independent practice association.
Memorial Hermann—according to new CEO Dr. Benjamin Chu, who landed there in June from Kaiser Permanente and was one of our panelists—is working to get where its Houston colleagues at Kelsey-Seybold Clinic have arrived: managing care for patients under capitated rates. The physician-owned group has half its revenue under capitation with its own Medicare Advantage plan and with several private-payer partners, said its chairman, Dr. Tony Lin. No revenue comes from fee-for-service Medicare, so MACRA is irrelevant.
Commercial contracts are also part of the training program. Steve Nelson, UnitedHealthcare's CEO for Medicare and retirement plans, said in Houston that by the end of 2018, the insurer will have $65 billion flowing through value-based arrangements to hospitals and physicians. “There is now, finally, the technology and the appetite to really blur the lines between payers and providers … and across care settings,” Nelson said.
The variety of care settings and the types of patients certain providers treat is a complicating factor. Kelsey-Seybold, for example, has no hospitals and relies on partners to handle acute care.
Even the Mayo Clinic is in new territory. The physician-led health system is studying how to adapt to MACRA, CEO Dr. John Noseworthy said during a visit to our Chicago newsroom last week. Mayo has to make the case to the CMS and private payers alike that ascribing value isn't as simple as we might hope, Noseworthy said. A 300-pound 73-year-old diabetic isn't the same as a routine knee-replacement patient.
But—if the clunky bike metaphor is right—a few years from now, we won't be able to fathom why this was so scary and hard.