Better Care, Better Value: Leveraging Improvement Tools for a Healthier Healthcare System

The pursuit of a superior, more efficient, and healthier healthcare system is at the forefront of our Administration’s goals. We are dedicated to establishing a system that prioritizes the well-informed, empowered, and active consumer, placing them at the core of their healthcare journey. This vision encompasses delivering enhanced care, optimizing healthcare expenditure, and fostering healthier communities, a robust economy, and ultimately, a healthier nation. Achieving this necessitates innovative approaches to care delivery, provider compensation, and the sharing and application of health information.

Significant strides have been made in reshaping our healthcare system to prioritize the value of care over service volume. This transformation involves strengthening care delivery through enhanced integration and coordination, and improving information accessibility for both consumers and healthcare providers. These advancements have led to tangible results, including reduced unnecessary hospital readmissions, decreased healthcare-associated infections and hospital-acquired conditions, and improvements in both the quality of health outcomes and cost efficiency.

Our ongoing responsibility is to champion this evolution and collaborate with lawmakers, healthcare providers, consumers, and various stakeholders across the country. Together, we can realize a fundamentally transformed healthcare system that benefits every American.

In January 2015, our Administration publicly declared measurable objectives and a clear timeline to shift the Medicare program, and the broader healthcare landscape, towards a payment model that rewards healthcare providers based on the quality, rather than the quantity, of care provided to patients. A significant goal was set: by the end of 2016, 30 percent of traditional fee-for-service Medicare payments would be linked to alternative payment models. These include Accountable Care Organizations (ACOs), advanced primary care medical homes, and bundled payment arrangements. Furthermore, the target was to increase this to 50 percent by the end of 2018. The Department of Health and Human Services (HHS) also aimed to tie 85 percent of all traditional Medicare payments to quality or value by 2016, and 90 percent by 2018, through programs like the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs. This marked a historic moment for the Medicare program, as HHS established explicit targets for alternative payment models and value-based payments for the first time.

Recognizing the critical role of collaboration, we acknowledge the importance of engaging partners who share our commitment to healthcare improvement. Patients, physicians, providers, government bodies, and businesses all have a vested interest in this endeavor. This understanding led to the launch of the Health Care Payment Learning and Action Network, designed to:

• Act as a central platform to facilitate the collective implementation of innovative payment and care delivery models.
• Pinpoint areas of consensus regarding the transition to alternative payment models and establish best practices for data analysis and reporting on these new models.
• Foster collaboration to generate evidence, exchange effective strategies, and overcome existing obstacles.
• Formulate standardized approaches to address key challenges such as beneficiary attribution, financial modeling, benchmarking, quality and performance measurement, risk adjustment, and other relevant discussion points.
• Develop practical implementation guides tailored for payers, purchasers, providers, and consumers.

The response has been remarkable, with over 4,000 individual patients, insurers, providers, states, consumer advocacy groups, employers, and other stakeholders registering to participate in the Health Care Payment Learning and Action Network, and more than 610 organizations formally committing to participation.

Substantial progress is already evident, and ongoing efforts are further accelerating this positive momentum.

Slowing Healthcare Cost Growth: An Improvement Tool for Economic Health

The United States is experiencing a significant and sustained slowdown in the escalation of healthcare costs, marking a historic shift.

• Healthcare prices have increased at the slowest pace in half a century. Data spanning 64 months since March 2010 reveals an average annual increase in healthcare prices of just 1.6 percent, according to price data from the Bureau of Economic Analysis. This is the most moderate rate for any comparable 64-month period since data collection began in 1959. Furthermore, over the most recent 12-month period, healthcare price inflation has slowed even further to 1.1 percent.
• The average premium for employer-sponsored family health coverage saw a modest increase of 4.2 percent in 2015. This is considerably lower than historical averages and continues a trend of unusually slow growth. Medicare spending per beneficiary is projected to rise by only 1 percent in 2015, closely aligning with overall inflation rates. Since 2010, the growth in per-enrollee Medicare spending has largely mirrored economy-wide inflation, a stark contrast to the preceding decade when it outpaced inflation by 3.6 percentage points (even after accounting for the introduction of Medicare Part D).
• The Congressional Budget Office has consistently made downward revisions to its projections for Medicare and Medicaid spending over the past several years. Since August 2010, the CBO has reduced its 2020 spending projections for Medicare and Medicaid by a substantial $175 billion. This reduction represents a 13 percent decrease in anticipated spending and primarily reflects the recent moderation in healthcare expenditure growth.

From 2009 to 2013, actual Medicare spending was considerably lower than initial projections. In fact, Medicare spending was $316 billion less during this five-year period than would have been the case if previous growth trends had persisted.

Improving Health Outcomes and Reducing Adverse Events: Tools for Better Patient Care

Significant improvements in patient safety have been achieved, partly due to initiatives such as the Hospital Readmissions Reduction Program and the Partnership for Patients Initiative. The Partnership for Patients Initiative continues to promote the sharing of best practices and effective solutions aimed at reducing hospital-acquired conditions, readmissions, and overall patient harm across hospitals nationwide. As of 2015, these collective efforts have resulted in an estimated 1.3 million fewer hospital-acquired conditions and 50,000 patient deaths averted, translating to approximately $12 billion in healthcare cost savings. This represents a 17 percent decrease in patient harm nationally over a three-year period.

Launched in 2012, the Hospital Readmissions Reduction Program links Medicare payments to hospitals to their readmission rates for specific conditions. This means hospitals face financial consequences if a higher-than-expected percentage of their patients are readmitted within 30 days of discharge. After remaining stable at 19 percent between 2007 and 2011 and then declining to 18.5 percent in 2012, the Medicare all-cause 30-day readmission rate further decreased to around 17.5 percent in 2013. This represents an 8 percent overall reduction in the readmission rate, equating to an estimated 150,000 fewer hospital readmissions among Medicare beneficiaries between January 2012 and December 2013.

Provider Engagement: A Key Improvement Tool for Healthcare Transformation

The Innovation Center within the Centers for Medicare & Medicaid Services (CMS) plays a crucial role in testing innovative payment and service delivery models. These models are designed to reduce expenditures across Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) while maintaining or enhancing the quality of patient care.

To date, the Innovation Center has engaged over 60,000 healthcare providers in various payment and service delivery models aimed at improving care. These initiatives have positively impacted an estimated 2.5 million Medicare, Medicaid, and CHIP beneficiaries.

Accountable Care Organizations (ACOs): In 2012, Medicare Accountable Care Organizations (ACOs) began participating in the Medicare Shared Savings Program (MSSP) and the Pioneer ACO model. These ACO initiatives incentivize providers to invest in redesigning care delivery systems to achieve higher quality and greater efficiency, all while preserving patients’ freedom to choose their preferred Medicare providers.

As of August 2015, more than 420 ACOs are actively participating in the MSSP and Pioneer ACO programs, collectively serving over 7.8 million beneficiaries. Recent data indicates that Medicare ACOs are consistently improving the quality of care for beneficiaries. ACOs participating in the Shared Savings Program and reporting quality measures in both 2013 and 2014 demonstrated improvements across 27 out of 33 quality measures. Pioneer ACOs showed progress in 28 of 33 quality measures, with an average improvement of 3.6 percent across all quality measures in their third performance year.

Collectively, in performance year 2014, Medicare ACOs participating in the Pioneer and MSSP initiatives generated combined net savings of $411 million. Notably, the data reveals a trend: ACOs with more experience in these programs tend to achieve better performance over time. The savings realized within the Pioneer ACO program, coupled with enhanced care quality, led the independent CMS actuary to conclude that this model has the potential to be effectively scaled across broader Medicare programs. The Pioneer model has directly influenced the development of the new MSSP Track 3, announced earlier in the year.

Empowering Medicare Beneficiaries to Shop for Quality Coverage: An Improvement in Consumer Choice

Medicare Advantage plans are increasingly being held accountable for the quality of coverage they provide, as their payments are now linked to quality ratings. Since these payment reforms were implemented, more seniors have access to a wider selection of higher quality Medicare Advantage plans. Consequently, enrollment in these higher quality plans has also increased.

Currently, approximately 65 percent of Medicare Advantage enrollees are enrolled in plans rated with four or more stars for 2016. This is a significant increase compared to 2009, when only an estimated 17 percent of enrollees were in such highly rated plans.

Below are further specific examples of reforms and investments that are contributing to the development of a healthcare delivery system that better serves all Americans, acting as crucial Better Care Better Value Improvement Tools.

Incentivizing Value: Payment Reforms as Improvement Tools

• Hospitals: Three pivotal programs designed to reward hospitals based on the quality of patient care were launched in 2012, with a fourth initiated in 2014.

  • Hospital Value-Based Purchasing Program: This program directly links a portion of hospitals’ Medicare payments for inpatient acute care to their performance on key quality metrics. These metrics include measures such as the administration of antibiotics before surgery and the effectiveness of doctor-nurse communication with patients. For fiscal year 2015, CMS increased the percentage of base operating DRG payments allocated to fund value-based incentive payments from 1.25 to 1.5 percent for participating hospitals, as mandated by law.
  • Hospital Readmissions Reduction Program: To promote patient safety and enhance care quality, this program reduces Medicare payments to hospitals with excessive readmission rates, effective from October 2012. In fiscal year 2015, the maximum payment reduction under this program increased from 2 to 3 percent of base discharge amounts, as legally required. CMS evaluates hospitals’ readmission penalties using five readmission measures endorsed by the National Quality Forum.
  • Hospital-Acquired Condition Reduction Program: Launched in October 2014, this program reduces Medicare payments to hospitals ranking in the lowest performing quartile regarding hospital-acquired conditions. Performance is assessed based on three quality measures: the Patient Safety Indicator 90 composite, central-line associated bloodstream infections, and catheter-associated urinary tract infections. Additional safety measures, including surgical site infections and methicillin-resistant staph aureus infections, are planned for inclusion in future years.

• Dialysis Facilities: The End-Stage Renal Disease (ESRD) Quality Incentive Program directly ties Medicare payments to the performance of dialysis facilities on quality measures. This initiative aims to improve care and reduce costs for over 503,000 Medicare beneficiaries suffering from end-stage renal disease. Through the Comprehensive ESRD Care initiative, CMS is partnering with healthcare providers and suppliers to assess the effectiveness of a new payment and service delivery model focused on providing patient-centered, high-quality care.

• Testing Payment Models: The Innovation Center is actively involved in testing various innovative payment and service delivery models.

  • Bundled Payments for Care Improvement Initiative: Bundling payments for services received by patients during a single episode of care is a strategy to encourage collaboration among doctors, hospitals, and other healthcare providers. This approach aims to improve care coordination for patients both during their hospital stay and after discharge. Over 2,100 acute care hospitals, skilled nursing facilities, physician group practices, long-term care hospitals, inpatient rehabilitation facilities, and home health agencies have moved from a preparatory phase to a risk-bearing implementation period, assuming financial responsibility for episodes of care. Additionally, 360 organizations have agreements to participate in the Bundled Payments for Care Improvement initiative, with a further 1,755 providers partnering with these organizations.

  • Medicare Advantage Value-Based Insurance Design Model: In September 2015, CMS introduced a model designed to enhance health outcomes and reduce costs by allowing health plans to offer new supplemental benefits specifically tailored to the clinical needs of enrollees. The model focuses on Medicare Advantage enrollees with chronic conditions such as diabetes, congestive heart failure, chronic obstructive pulmonary disease, stroke history, hypertension, coronary artery disease, mood disorders, and combinations thereof.

  • Home Health Value-Based Purchasing Model: In July 2015, CMS proposed a new model to evaluate whether incentivizing better care can improve outcomes in home health service delivery. This model builds upon the successes and lessons learned from other value-based purchasing programs, including the Hospital Value-Based Purchasing Program and the Home Health Pay-for-Performance Demonstration. It represents the first payment model exclusively focused on home health agencies.

  • Comprehensive Care for Joint Replacement Model: In July 2015, CMS proposed a bundled payment and quality measurement model for care episodes related to hip and knee replacements. This model encourages hospitals, physicians, and post-acute care providers to collaborate in improving the quality and coordination of care, from initial hospitalization through recovery. Depending on a hospital’s quality and cost performance during the episode, it may receive additional payment or be required to repay Medicare for a portion of the episode costs. The model aims to ensure beneficiaries receive the coordinated care they need, reducing avoidable hospitalizations and complications.

  • Pioneer Accountable Care Organization Model: Pioneer ACOs are early adopters of coordinated care. They are typically more experienced, possess established care coordination infrastructures, and accept greater performance-based financial risk. These ACOs have demonstrated consistent strong performance and improvement across financial, quality of care, and patient experience metrics. The 20 Pioneer ACOs participating in 2014 (performance year 3) were accountable for 622,265 beneficiaries, a 2 percent increase from 607,945 in 2013 (performance year 2). During this period, these ACOs generated total model savings of $120 million and improved the average performance score for patient and caregiver experience in 5 out of 7 measures compared to Performance Year 2, indicating a continued positive experience for Medicare beneficiaries receiving care from Pioneer ACO providers.

  • Next Generation ACO Model: Building on the experience from the Pioneer ACO Model and the Medicare Shared Savings Program, the Next Generation ACO Model presents a new approach to accountable care. It establishes predictable financial targets, offers providers and beneficiaries greater opportunities to coordinate care, and aims for the highest standards of care quality. This model encourages enhanced coordination and closer relationships between ACO providers and beneficiaries.

  • The ACO Investment Model: This model, a pre-paid shared savings model, builds on the Advance Payment Model. It is designed to test the use of pre-paid shared savings to encourage the formation of new ACOs in rural and underserved areas and to incentivize existing Medicare Shared Savings Program ACOs to transition to arrangements involving greater financial risk.

  • Oncology Care Model: This new multi-payer payment and care delivery model aims to provide enhanced services and better care coordination for cancer care. It is part of ongoing efforts to improve patient care quality and optimize healthcare spending, contributing to healthier communities. The initiative includes 24/7 practitioner access for beneficiaries undergoing treatment and emphasizes coordinated, patient-centered care. It rewards high-value care over volume, encouraging participating practices to improve care and lower costs through episode-based, performance-based payments that incentivize high-quality, coordinated care.

  • Health Care Innovation Awards: Nearly 150 Health Care Innovation Awards were granted in two rounds in 2012 and 2014. These awards were designed to engage a diverse group of innovation partners to identify and test new care delivery and payment models originating from the field. The goal is to achieve better care, improved health outcomes, and reduced costs through enhancements for specific target populations. New workforce development and payment models were identified, and innovators received support to rapidly implement care improvement models through new ventures or the expansion of existing efforts to new patient populations, often in collaboration with public and private sector partners.

Improving Care Delivery: Tools for Better Patient Experience and Safety

• Transforming Clinical Practices: In September 2015, CMS awarded $685 million to 39 national and regional healthcare networks and supporting organizations. This funding aims to provide technical assistance and support to equip over 140,000 clinicians with the necessary tools to improve care quality, enhance patient access to information, and optimize healthcare spending. The Transforming Clinical Practice Initiative is one of the largest federal investments designed to support doctors and other clinicians across all 50 states through collaborative, peer-based learning networks.
• Comprehensive Primary Care Initiative: The Comprehensive Primary Care (CPC) Initiative is a multi-payer partnership involving Medicare, other public and private payers, and primary care practices in four states (Arkansas, Colorado, New Jersey, and Oregon) and three regions (New York’s Capital District and Hudson Valley, Ohio and Kentucky’s Cincinnati-Dayton region, and Oklahoma’s Greater Tulsa region). This initiative tests whether providing population-based care management fees and shared savings opportunities to participating primary care practices can improve care, health outcomes, and lower costs. Participating practices undertake various functions, including care management for high-risk individuals, improving healthcare access, tracking patient experience, coordinating care with hospitals and specialists, and utilizing health information technology to support population health. Initial results suggest that CPC has generated savings in Medicare health expenditures nearly sufficient to offset the care management fees paid by CMS, with hospital admissions decreasing by 2 percent and emergency department visits by 3 percent. These early results should be interpreted cautiously, and further research is ongoing to assess the initiative’s long-term impact on cost and quality of care.
• Multi-Payer Advanced Primary Care Demonstration: CMS is currently testing the Multi-Payer Advanced Primary Care Practice Demonstration, a multi-payer initiative where Medicare partners with Medicaid and private health care payers. Participating practices and support systems receive monthly care management fees from participating payers and additional support, such as data feedback, learning collaboratives, and practice coaching. Over 4,000 providers, 700 practices, and 350,000 Medicare beneficiaries participated in the first year. Unlike the Comprehensive Primary Care Initiative, the five participating states (Maine, Michigan, New York, Rhode Island, and Vermont) manage and administer the initiatives rather than CMS. In its first year, the demonstration generated an estimated $4.2 million in savings. Additionally, the rate of growth in Medicare fee-for-service health care expenditures was reduced in Vermont and Michigan, largely due to reduced growth in inpatient expenditures.
• Partnership for Patients: The Partnership for Patients Initiative invests in sharing best practices and solutions to reduce hospital-acquired conditions, readmissions, and patient harm nationwide. As of September 2015, this initiative has contributed to an estimated 1.3 million fewer hospital-acquired conditions and 50,000 avoided patient deaths, resulting in approximately $12 billion in healthcare cost savings. At its core, the initiative employs a three-pronged strategy: aligning federal programs, collaborating with private and public partners, and providing resources to Hospital Engagement Networks (HENs). HENs work with hospitals and healthcare providers to identify and disseminate best practices and solutions for reducing hospital-acquired conditions and readmissions. In September 2015, CMS awarded $110 million to 17 national, regional, or state hospital associations and health system organizations to serve as the second round of Hospital Engagement Networks, continuing the effort to identify and spread successful solutions for reducing healthcare-acquired conditions.
• The Million Hearts®: Cardiovascular Disease Risk Reduction Model: This randomized-controlled trial aims to address gaps in cardiovascular care by providing targeted incentives for providers to engage in individual cardiovascular disease risk calculation and population-level risk management. Instead of focusing solely on individual risk factors, participating practices will stratify risk across their patient panels to identify Medicare beneficiaries at the highest risk of cardiovascular disease.
• Healthy Infants: The Strong Start for Mothers and Newborns initiative, launched in February 2012, aims to improve birth outcomes through two related strategies. Strategy I tested a nationwide public-private partnership and awareness campaign to promote the adoption of best practices to reduce early elective deliveries before 39 weeks of gestation across all populations. Clinicians in some hospitals participating in this initiative successfully reduced their early elective delivery rates to near zero, resulting in fewer at-risk newborns and fewer admissions to neonatal intensive care units. Strategy II is testing the effectiveness of enhanced prenatal care approaches to reduce preterm births among high-risk women enrolled in Medicaid and CHIP. Enhanced services are being tested in birth center care, group prenatal care, and maternity care home settings. February 2015 marked the start of the initiative’s third year, with programs continuing to provide enhanced prenatal services to Medicaid and CHIP beneficiaries and developing sustainability plans for post-award activities and services. CMS is also collaborating with the Administration for Children and Families (ACF) and the Health Resources and Services Administration (HRSA) to evaluate HRSA’s Maternal, Infant, and Early Childhood Home Visiting Program as a component of Strategy II.
• New Options for Care: The Medicare Care Choices Model empowers beneficiaries, their families, and clinicians by offering greater flexibility in managing life-limiting illnesses. This model allows Medicare beneficiaries who qualify for hospice benefits, and dually eligible beneficiaries who qualify for Medicaid hospice benefits and meet specific eligibility criteria, to elect to receive supportive care services typically provided by hospice while continuing to receive curative treatments. In July 2015, over 140 Medicare-certified hospices were selected to participate in this five-year model, potentially enabling up to 150,000 eligible Medicare and dually eligible beneficiaries to participate.
• Better Care Coordination for Beneficiaries with Multiple Chronic Conditions: The Medicare Physician Fee Schedule for calendar year 2015 now includes a chronic care management service. This separate payment for chronic care management supports physician practices in coordinating care for Medicare beneficiaries with multiple chronic conditions. It improves care delivery by supporting clinicians in care coordination, including outside of regular office visits.
• Medicaid Innovation and Payment Reform: The Medicaid Innovation Accelerator Program builds upon lessons learned and recommendations from state partners to identify specific opportunities for advancing innovation. It develops targeted resources and technical assistance to help states accelerate Medicaid-focused innovations in healthcare transformation. The model supports states’ efforts to expedite new payment and service delivery reforms.
• Providing States with Additional Flexibility and Resources to Enhance Care: The State Innovation Models Initiative aims to assist states in delivering high-quality healthcare, reducing costs, and improving overall health system performance. Through this initiative, over half of the states (34 states and three territories and the District of Columbia), representing nearly two-thirds of the population, are participating in efforts to support comprehensive state-based innovation in health system transformation. These efforts seek new and innovative ways to improve quality and lower costs. Seventeen states are currently implementing comprehensive state-wide health transformation plans (Arkansas, Colorado, Connecticut, Delaware, Idaho, Iowa, Maine, Massachusetts, Michigan, Minnesota, New York, Ohio, Oregon, Rhode Island, Tennessee, Vermont, and Washington).
• Integrating Care for Individuals Enrolled in Medicare and Medicaid: Many of the ten million Medicare-Medicaid enrollees suffer from multiple or severe chronic conditions, with total annual spending for their care around $300 billion. Thirteen states (California, Colorado, Illinois, Massachusetts, Michigan, Minnesota, New York, Ohio, Rhode Island, South Carolina, Texas, Virginia, and Washington) have agreements with CMS to integrate care for these enrollees. The Financial Alignment Initiative provides participating enrollees with access to coordinated services and, in some states, services not previously available, such as dental, vision, and community-based behavioral health services. These demonstrations are designed to provide person-centered, integrated care, streamlining access to services covered by both Medicare and Medicaid.
• Greater Independence for Americans with Disabilities and Long-Term Care Needs: Several policies promote non-institutional long-term care programs to help individuals remain at home and avoid institutionalization:
  • Money Follows the Person Program: This program helps states rebalance their long-term care systems by transitioning Medicaid beneficiaries from institutions to community settings. As of December 2013, over 40,650 individuals with chronic conditions and disabilities have transitioned from institutions back into their communities through this program. The 44 participating states and DC have proposed to transition an additional 25,816 individuals out of institutional settings by 2016.
  • Balancing Incentive Program: Nineteen states participate in the Balancing Incentive Program, which incentivizes states to increase access to non-institutional long-term services and supports, enabling more Medicaid beneficiaries to be served in home and community-based settings.
  • Health Home State Plan Amendments: Sixteen states have approved Health Home State Plan Amendments to integrate and coordinate primary, acute, behavioral health, and long-term services and supports for Medicaid beneficiaries.
  • Promoting Care at Home: The Independence at Home Demonstration assesses whether providing chronically ill beneficiaries with primary care in their homes helps them stay healthier and avoid hospitalization. Fifteen primary care practices are participating in this demonstration.

Improving Information Availability: Tools for Informed Decision-Making

• Electronic Health Records (EHRs): The adoption of electronic health records continues to rise among physicians, hospitals, and other providers serving Medicare and Medicaid beneficiaries. EHRs support advanced clinical processes, enhance patient safety, improve quality measurement, and facilitate care coordination through health information exchange. The proportion of U.S. physicians using EHRs increased from 18 percent to 78 percent between 2001 and 2013, and 94 percent of hospitals now report using certified EHRs. Electronic health records are instrumental in accelerating the adoption of other delivery system reforms by making it easier for hospitals and doctors to coordinate care and achieve quality improvements.

• Access to Cost, Charge, and Quality Data: Cost and charge data for hundreds of services (inpatient, outpatient, and physician services) and quality scores for hundreds of thousands of hospitals, physicians, nursing homes, and other providers are now accessible on the Medicare website. These resources are part of a broader Administration effort to enhance the availability and accessibility of information on quality, utilization, and costs, empowering effective and informed decision-making within the healthcare system.

These multifaceted initiatives represent a comprehensive strategy to achieve better care, deliver better value, and utilize improvement tools effectively across the healthcare spectrum. By focusing on value-based care, enhancing care delivery systems, and promoting information transparency, we are building a healthcare system that is more effective, efficient, and patient-centered, ultimately leading to a healthier America.