Jan 16, 2024 - Health

Health industry reignites debate over mandatory payment experiments

Illustration of a stethoscope with a heart as the bell.

Illustration: Aïda Amer/Axios

The health care industry is again grappling with how aggressively to push providers into payment arrangements that hold them financially accountable for delivering better and more efficient care after the debate was largely put on hold during the pandemic.

The big picture: A central question surrounding the long-running movement toward value-based care has been how quickly and broadly to require providers to participate in fixed-payment arrangements and other alternative models.

  • Soon after taking office, the Biden administration offered hints about its interest in mandatory payment models, but it's only recently begun taking concrete steps toward testing them out.
  • A new mandatory model is still at least two years away, and the Medicare official overseeing the effort said she's confident the industry is ready. The industry itself, however, still sounds ambivalent about the idea.
  • "We think the health system is ready for this type of model and expecting us to go in that direction," Liz Fowler, director of Medicare's innovation lab, told Axios.

Context: Since the Center for Medicare and Medicaid Innovation was created by the Affordable Care Act in 2010, it's been tasked with moving Medicare away from paying for each service. The goal instead is to provide more efficient, better-coordinated care that both improves Medicare's finances and the health of enrollees.

  • Key to this strategy are care delivery experiments that reward or penalize hospitals, doctors and other providers based on spending and quality targets.
  • The CMS Innovation Center can require that providers join these payment experiments, but of the 50-plus demonstrations it's run, only two have been mandatory amid resistance from health care providers — and some policymakers — who say they shouldn't be forced into unproven models.
  • Some other proposals for mandatory models have been delayed or pulled, including one that would bundle payments for cardiac care and another that would do the same for radiation oncology.
  • Mandating participation too quickly could hurt providers, especially those with fewer resources, before they adjust to delivering accountable care. But continuing to rely on voluntary participation can undercut the savings these payment models are supposed to generate.
  • Rather than save money, the Innovation Center actually increased federal spending by $5 billion in its first decade, congressional budget researchers reported this fall. Part of the reason, they said, was the programs' largely voluntary nature, which meant providers could join models more likely to make them money — and drop out if losses mounted.

State of play: The Biden administration announced in 2022 it will implement a mandatory payment experiment and requested feedback on the design last summer.

  • The experiment would pay providers a set price for all the services a patient receives during a defined episode of care. It would be geared toward specialists and build off earlier CMS tests of bundling payment for specific periods of care.
  • However, it would start no earlier than 2026.
  • "It's a marathon and not a sprint," Fowler said, adding that COVID has made it difficult to implement a mandatory model any earlier.
  • "We know there's going to be some voices that are expressing concern about moving too far too fast. But we are committed to making sure that we're as responsible with stakeholder feedback as possible," Fowler said.

What they're saying: In comments to the Innovation Center last summer, some providers acknowledged that mandatory models are coming but preached flexibility.

  • "We understand that CMS wants to develop a mandatory model with the goal of increasing provider participation in value-based care. With that in mind, CMS should carefully design a model that provides different levels of risk and options for participation," health system AdventHealth wrote to officials in August.
  • But the American Hospital Association encouraged CMS to keep payment models voluntary.
  • Mandatory participation in the model "may require more financial risk than [some providers] can bear," AHA wrote to officials.

The bottom line: Any larger shift to mandatory models is still likely a ways off, and Fowler said her office is being deliberate about how it's approaching them.

  • "We really want to focus the models and focus the results and the outcomes on patients," she added. "There's not a reason to do this unless we thought that there was a benefit to patients."
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