Medicare starts to overhaul the way it pays providers, rewarding them for quality, penalizing them for shortcomings

By Molly Burchett
Kentucky Health News

The Obama administration on Monday set a timeline for historic changes in how it pays doctors, hospitals and other health providers under Medicare, shifting away from the program’s traditional fee-for-service model and towards a model that rewards care quality.

Rather than give the usual yearly fee increases to Medicare doctors for every procedure or service, the Department of Health and Human Services will tie 30 percent of traditional, fee-for-service payments to models like “accountable care organizations,” which base payments (and penalties) on patients’ health outcomes. The goal is for half of all Medicare payments to be handled this way by 2018, reports Jason Millman of The Washington Post.

“Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health-care dollars more wisely,” said HHS Secretary Sylvia Burwell. “We believe these goals can drive transformative change, help us manage and track progress and create accountability for measurable improvement.”

Medicare is the country’s largest payer for health-care services, so these payment changes will affect doctors’ offices and hospitals across the country. Many experts have viewed this broader shift to rewarding care quality as long overdue, but it’s still uncertain how well the approach will work.

“We still know very little about how best to design and implement [value-based payment] programs to achieve stated goals and what constitutes a successful program,” concluded a 2014 Rand Corp. study funded by HHS, Millman reports.

Some health-care professionals said Medicare is just aligning with what is already working in the private sector by moving away from fee-for-service, reports Alex Wayne of Bloomberg Businessweek.  “The private sector is further ahead than Medicare right now,” said Justine Handelman, vice president for legislative and regulatory policy at the Blue Cross and Blue Shield Association.

Since Medicare is already limiting payments as part of the 2010 health-reform law, the government must “ensure that only reforms proven to be efficient and effective are put in place,” Chip Kahn, CEO of the Federation of American Hospitals, told Wayne. “Further cuts would undermine our ability to invest in delivery system innovations needed to continue this trend.”

The announcement marks the first time that goals have been set to fundamentally change the way Medicare pays for health care, giving providers incentives to reduce unnecessary services.

Dr. Douglas Henley, CEO of the American Academy of Family Physicianstold CNBC: “We’re all partners in this effort focused on a shared goal. Ultimately, this is about improving the health of each person by making the best use of our resources for patient good. We’re on board, and we’re committed to changing how we pay for and deliver care to achieve better health.”

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