HHS Sets Goals to Move Medicare’s Fee-for-Service Model Away From Quantity to Quality


January 26, 2015—The US Department of Health and Human Services announced that Secretary Sylvia M. Burwell has outlined measurable goals and a timeline to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients. Secretary Burwell presented these goals in a meeting with 24 representatives for consumers, insurers, providers, and businesses.

Also on January 26, Secretary Burwell published a “Perspective” article titled, “Setting Value-Based Payment Goals—HHS Efforts to Improve US Health Care” online in the New England Journal of Medicine.

This is the first time that HHS has set explicit goals for alternative payment models and value-based payments for the Medicare program, noted the announcement.

According to the announcement, the HHS has set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements, by the end of 2016, and tying 50% of payments to these models by the end of 2018. 

HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016, and 90% by 2018 through programs such as the Hospital Value-Based Purchasing and the Hospital Readmissions Reduction Programs. 

To make these goals scalable beyond Medicare, Secretary Burwell also announced the creation of a Health Care Payment Learning and Action Network, through which HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs. HHS will intensify its work with states and private payers to support the adoption of alternative payments models through their own aligned work, sometimes exceeding the goals set for Medicare. The Network will hold its first meeting in March 2015, and more details will be announced in the near future.

In the HHS press release, Secretary Burwell commented, “Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely, and results in healthier people. 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. We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.” 

HHS stated that the Affordable Care Act created a number of new payment models that move the needle even further toward rewarding quality. These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care. In these alternative payment models, health care providers are accountable for the quality and cost of the care they deliver to patients. Providers have a financial incentive to coordinate care for their patients—who are therefore less likely to have duplicative or unnecessary x-rays, screenings, and tests. In addition, through the widespread use of health information technology, the health care data needed to track these efforts are now available.

In 2011, Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20% of Medicare payments. The goals just announced represent a 50% increase by 2016. Medicare fee-for-service payments were $362 billion in 2014.

The US Centers of Medicare & Medicaid Services (CMS) issued three Fact Sheets in support of the new initiative. The first is titled “Better Care. Smarter Spending. Healthier People: Why It Matters” and is available on the CMS website here. The second CMS Fact Sheet addresses the goals and the Learning and Action Network titled. It is titled “Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume” and is available online here. The third Fact Sheet, “Better Care, Smarter Spending, Healthier People: Improving Our Health Care Delivery System,” is available here.


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