Setting Quality Metrics for Value-Based Pay - Part One

Government and commercial insurers are transforming payment models from fee-for-service (FFS) to arrangements that include incentives for quality, outcomes, improved patient satisfaction, and reduced cost. In the FFS environment, hospitals, physicians, and other providers have been subjected to insignificant financial risk relative to the risk borne by payers; however, with time, transformed payment arrangements have encouraged, if not required, more providers to assume downside risk. Why? One reason is to hold providers accountable for the cost and quality of care. The table below by The Commonwealth Fund summarizes this need by showing where the United States ranks relative to other industrialized nations in health outcomes and risk factors:

Select Population Health Outcomes and Risk Factors

^a Source: OECD Health Data 2015.

^b Includes: hypertension or high blood pressure, heart disease, diabetes, lung problems, mental health problems, cancer,  and joint pain/arthritis. Source: Commonwealth Fund International Health Policy Survey of Older Adults, 2014.

^c DEN, FR, NETH, NOR, SWE, and SWIZ based on self-reported data; all other countries based on measured data.

^d 2012.   

^e 2011.

The quality dilemma is exacerbated by high costs, with the U.S. ranking highest among these countries in per capita healthcare spending and total health expenditures as a percent of GDP.

The solutions to increasing quality, improving outcomes, and lowering costs are not easy, and holding facilities and providers accountable for such measures is only part of the equation. Medicare, for example, has changed the way it pays hospitals for services. The Hospital Readmissions Reduction Program, Value-Based Purchasing Program, and Hospital-Acquired Condition Reduction Program, all brought about by the Affordable Care Act (ACA), have changed how hospitals are held accountable for high quality services. The ACA and other legislation also created other innovative models that aim to achieve better care for patients, better health for communities, and lower costs through improvement of the healthcare system. Many of these offer a sharing of payer savings with providers, but several also include downside risk if quality and savings targets are not achieved.

April 2015 saw the passage of the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA), with CMS’ release of its Proposed Rule on MACRA in May 2016. MACRA ended the Sustainable Growth Rate (SGR) formula for determining Medicare payments for physicians’ and other healthcare providers’ services, began a new means for rewarding healthcare providers for better care, and combined existing quality reporting programs into a single system. These proposed changes, which CMS calls the Quality Payment Program (QPP), replace the former Medicare PQRS, VM, and Meaningful Use (MU) reporting programs with a of two paths linking quality to physician payments: the Merit-Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models.

The transition from FFS to a value-based payment system represents one of the greatest financial challenges facing hospitals and health systems, not only because of hospital reimbursement changes, but also because of the implications for physician arrangements subject to the changes brought about by MACRA. Approximately 19 out of 20 MACRA-affected providers will fall under the MIPS system, meaning physicians, group practices, and hospitals employing physicians must begin now to plan for the MIPS measurement period beginning January 1, 2017. This includes taking critical action steps today, such as:

Hospitals and physicians can benefit by partnering with an organization with experienced health care financial analysts who can help in interpreting the reimbursement implications of MACRA and assist in evaluating quality measures and cost outliers, studying physician compensation plan impact, and optimizing quality reporting.

Next up: Part Two, Evaluating MACRA Metrics and Physician Impact. 

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