The tipping point for value-based pay?

Over the last several years, doctors and other health care professionals – no doubt including many readers of this column – have worked to develop the accountable care organization model from an academic idea into a meaningful presence in the health care marketplace.

In January, the federal government threw its considerable weight squarely behind that effort, for the first time setting clear goals for ramping up the use of ACOs and other alternative payment models in Medicare.

In an editorial in the New England Journal of Medicine, Department of Health and Human Services Secretary Sylvia M. Burwell announced that by the end of 2016, her agency plans to have 30% of all Medicare payments “tied to quality through alternative payment models,” including ACOs, patient-centered medical homes, and bundled payments – and to have 50% of Medicare payments made under alternative payment models by the end of 2018.

Furthermore, even among the payments that remain under the fee-for-service model, the vast majority will be linked to quality and value in some way – 85% by 2016, and 90% by 2018.

Right now, only about 20% of Medicare payments are made through alternative payment models, meaning that HHS’ new goals entail a 50% increase in the quantity of Medicare dollars going to alternative payment models by the end of next year, and a 150% increase by the end of 2018. In 2014, Medicare made $362 billion in fee-for-service payments – a huge number, much of which increasingly will be directed toward ACOs.

“We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement,” Secretary Burwell said in a press release accompanying the announcement.

“Ultimately, this is about improving the health of each person by making the best use of our resources for patient good,” Dr. Douglas E. Henley, CEO of the American Academy of Family Physicians, noted in the same press release. “We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health.”

Of course, setting ambitious goals is not the same thing as meeting them, and many details have yet to be ironed out. Will the administration focus on ACOs or on other alternative payment models such as bundled payments? How will it measure quality? And Medicare, though massive, is only one part of the health industry. To what extent will the rest of the industry join in the federal government’s push toward accountable care?

To help answer these questions, HHS also announced that it is creating the Health Care Payment Learning and Action Network, which “will accelerate the transition to more advanced payment models by fostering collaboration between HHS, private payers, large employers, providers, consumers, and state and federal partners.”

January’s announcement is the strongest signal yet that the federal government has bought into the idea of paying for value, not volume, and that it is willing to invest substantially in the emerging accountable care model.

Mr. Bobbitt is a senior partner and head of the health law group at the Smith Anderson law firm in Raleigh, N.C. Mr. Wilson is an associate at Smith Anderson. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact the authors at bbobbitt@smithlaw.com or gwilson@smithlaw.com, or by phone at 919-821-6612.

Over the last several years, doctors and other health care professionals – no doubt including many readers of this column – have worked to develop the accountable care organization model from an academic idea into a meaningful presence in the health care marketplace.

In January, the federal government threw its considerable weight squarely behind that effort, for the first time setting clear goals for ramping up the use of ACOs and other alternative payment models in Medicare.

In an editorial in the New England Journal of Medicine, Department of Health and Human Services Secretary Sylvia M. Burwell announced that by the end of 2016, her agency plans to have 30% of all Medicare payments “tied to quality through alternative payment models,” including ACOs, patient-centered medical homes, and bundled payments – and to have 50% of Medicare payments made under alternative payment models by the end of 2018.

Furthermore, even among the payments that remain under the fee-for-service model, the vast majority will be linked to quality and value in some way – 85% by 2016, and 90% by 2018.

Right now, only about 20% of Medicare payments are made through alternative payment models, meaning that HHS’ new goals entail a 50% increase in the quantity of Medicare dollars going to alternative payment models by the end of next year, and a 150% increase by the end of 2018. In 2014, Medicare made $362 billion in fee-for-service payments – a huge number, much of which increasingly will be directed toward ACOs.

“We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement,” Secretary Burwell said in a press release accompanying the announcement.

“Ultimately, this is about improving the health of each person by making the best use of our resources for patient good,” Dr. Douglas E. Henley, CEO of the American Academy of Family Physicians, noted in the same press release. “We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health.”

Of course, setting ambitious goals is not the same thing as meeting them, and many details have yet to be ironed out. Will the administration focus on ACOs or on other alternative payment models such as bundled payments? How will it measure quality? And Medicare, though massive, is only one part of the health industry. To what extent will the rest of the industry join in the federal government’s push toward accountable care?

To help answer these questions, HHS also announced that it is creating the Health Care Payment Learning and Action Network, which “will accelerate the transition to more advanced payment models by fostering collaboration between HHS, private payers, large employers, providers, consumers, and state and federal partners.”

January’s announcement is the strongest signal yet that the federal government has bought into the idea of paying for value, not volume, and that it is willing to invest substantially in the emerging accountable care model.

Mr. Bobbitt is a senior partner and head of the health law group at the Smith Anderson law firm in Raleigh, N.C. Mr. Wilson is an associate at Smith Anderson. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact the authors at bbobbitt@smithlaw.com or gwilson@smithlaw.com, or by phone at 919-821-6612.

Over the last several years, doctors and other health care professionals – no doubt including many readers of this column – have worked to develop the accountable care organization model from an academic idea into a meaningful presence in the health care marketplace.

In January, the federal government threw its considerable weight squarely behind that effort, for the first time setting clear goals for ramping up the use of ACOs and other alternative payment models in Medicare.

In an editorial in the New England Journal of Medicine, Department of Health and Human Services Secretary Sylvia M. Burwell announced that by the end of 2016, her agency plans to have 30% of all Medicare payments “tied to quality through alternative payment models,” including ACOs, patient-centered medical homes, and bundled payments – and to have 50% of Medicare payments made under alternative payment models by the end of 2018.

Furthermore, even among the payments that remain under the fee-for-service model, the vast majority will be linked to quality and value in some way – 85% by 2016, and 90% by 2018.

Right now, only about 20% of Medicare payments are made through alternative payment models, meaning that HHS’ new goals entail a 50% increase in the quantity of Medicare dollars going to alternative payment models by the end of next year, and a 150% increase by the end of 2018. In 2014, Medicare made $362 billion in fee-for-service payments – a huge number, much of which increasingly will be directed toward ACOs.

“We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement,” Secretary Burwell said in a press release accompanying the announcement.

“Ultimately, this is about improving the health of each person by making the best use of our resources for patient good,” Dr. Douglas E. Henley, CEO of the American Academy of Family Physicians, noted in the same press release. “We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health.”

Of course, setting ambitious goals is not the same thing as meeting them, and many details have yet to be ironed out. Will the administration focus on ACOs or on other alternative payment models such as bundled payments? How will it measure quality? And Medicare, though massive, is only one part of the health industry. To what extent will the rest of the industry join in the federal government’s push toward accountable care?

To help answer these questions, HHS also announced that it is creating the Health Care Payment Learning and Action Network, which “will accelerate the transition to more advanced payment models by fostering collaboration between HHS, private payers, large employers, providers, consumers, and state and federal partners.”

January’s announcement is the strongest signal yet that the federal government has bought into the idea of paying for value, not volume, and that it is willing to invest substantially in the emerging accountable care model.

Mr. Bobbitt is a senior partner and head of the health law group at the Smith Anderson law firm in Raleigh, N.C. Mr. Wilson is an associate at Smith Anderson. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact the authors at bbobbitt@smithlaw.com or gwilson@smithlaw.com, or by phone at 919-821-6612.