Federal Secretary of Health and Human Services Sylvia Matthews Burwell announced plans on Monday to transition Medicare towards quality-based payments from the current fee-for-service model, which promotes quantity of care and accounted for $362 billion in Medicare spending last year. The Administration is projecting that 30% of all Medicare spending will be in alternative programs by 2016, up from 20% currently, and will increase to half of all spending by 2018 by linking 90% of all fee-for-service payments to quality metrics by 2018. The program is dubbed “Better, Smarter, Healthier” and focuses on three primary initiatives: payment incentives, care delivery and information sharing.

The alternative payment models will primarily be focused on Accountable Care Organizations (ACOs) and bundled payments. The program seeks to increase the use of bundled payments, which combines payments across providers for care delivered to a patient across multiple settings to better encourage coordination of care among all actors. Incentives also focus on ACOs, which likewise encourage coordinated care. Medicare’s Pioneer ACO and Medicare Shared Savings Program (MSSP) ACOs have generated $417 billion in savings since 2012 amongst 424 organizations. Last December, the Administration announced that the ACO program would be given additional time to develop its savings models. Participants in the MSSP will have an additional three years in the one-sided performance risk model, which shields participants from risk and was originally set to end this year. Only 29 of the 330 ACOs in the MSSP have achieved savings thus far. The program will also look at restructuring payments, which hospitals have already been doing through programs like the Hospital Value-Based Purchasing Program, which ties Medicare payments for inpatient acute care to their performance on quality measures, and the Hospital Readmissions Reduction Program, which reduces Medicare payments to hospitals with excess readmissions.

The care delivery reforms will encourage greater teamwork, integration and coordination among providers and a stronger focus on population health. This includes the comprehensive primary care initiative, the multi-payer advanced primary care initiative, partnership for patients, better coordination of care for beneficiaries with multiple chronic conditions, integrating care for individuals enrolled in Medicare and Medicaid, and greater independence for Americans with disabilities and long-term care needs. The initiative also calls for greater emphasis on Patient Centered Medical Homes, which seek to integrate the care delivery from multiple doctors by having care coordinators oversee a patient’s care.
Information sharing seeks to take health information technology, transparency and spreading of scientific advancements to the next level. This includes increasing the adoption of Electronic Health Records (EHRs), which have increased from 18% to 78% between 2001 and 2013 among physicians, and are now used in 94% of hospitals. EHRs are not as common in nursing homes and with other providers and interoperability of EHRs continues to be an issue among many providers in the healthcare system. The information sharing goal also includes increasing access to cost, charge and quality data, which are now available online for hundreds of thousands of hospitals, physicians, nursing homes and other providers.

In addition to Medicare, some private insurers also announced this week that they would be moving towards a quality-based payment system. The Health Care Transformation Task Force is an alliance of 28 major health systems, insurers and employers, including Ascension Health, Boston’s Partners HealthCare, Aetna and Health Care Service Corporation, which as the fourth largest insurer in the country operates Blue Cross Blue Shield plans in five states. The task force has a goal of shifting 75% of their business to quality-based care from fee-for-service by January 2020. It plans to accomplish this by improving the ACO model, developing a common bundled payment framework, and improving care for high-cost patients such as those with multiple chronic conditions and end-of-life care. The announcement by the task force also follows an announcement by UnitedHealth Group earlier this month that said it would shift 20% of its care to value-based payments this year.