Alternative payment models in healthcare are a must
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As Congress and the Trump Administration move full-steam ahead on their health policy agenda, much remains uncertain. However, one trend that seems likely to continue is the transition toward value-based care, including the movement toward alternative payment models (APMs).

APMs are one of few broadly supported ideas for moving healthcare forward. Started under the Bush Administration, APMs are designed to move away from the perverse incentives inherent in the current fee-for-service system and toward patient-centered healthcare.

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Designed in the 1960s, the Medicare fee-for-service system created a healthcare payment model organized around healthcare providers rather than patients, rewarding the volume rather than the value of services, and focusing on sickness rather than preventative care. APM models like accountable care organizations (ACOs), patient centered medical homes and bundled payments align reimbursement around the patient, focusing on coordinated, team-based care and improved outcomes.

With increasing evidence and momentum building, APMs are the clear antidote to today’s cost and quality conundrum in healthcare. They hold the promise to bend the healthcare cost curve which creates a sustainable, long-term future for Medicare and more affordable private coverage.

Today, there are more than 850 public and private accountable care organizations (ACOs) nationwide. Although we don’t have full results on the private sector ACOs, those that work with Medicare beneficiaries (about half of all ACOs nationwide) have improved quality in 84 percent of all indicators and achieved $1.29 billion in Medicare savings since 2012. Similarly, studies show that bundled payments hold great promise in improving patient outcomes and reducing costs. For example, when testing a Medicare heart bypass surgery demonstration, the model cut costs by 10 percent while improving care and lowering mortality rates.

These are positive developments, but major impediments continue to undermine this work as a result of flawed design and execution in the current healthcare law. To start, effective payment reforms need a 360-degree view to support patients across the continuum, incenting collaboration among primary, hospital and post-acute care so that all caregivers who touch a patient are rewarded for working together and achieving the best outcomes.

Policy improvements are needed to better motivate providers to participate in alternative payment models; change how Medicare accounts for patient risk; improve access to Medicare claims data so that clinicians can better manage a patient’s care; provide relief from antiquated fraud and abuse laws that impede collaboration and teamwork; and streamline operations that detract from patient care.

Second, policy should continue to fund evidence-based demonstrations of new APMs so that providers, payers and patients can learn how they work in the real-world and improve and scale these models to work effectively in clinical settings. It’s also imperative to test a variety of incentive structures so that we learn what attracts provider participation, and how those incentives affect patient care. As the evidence evolves and more models are introduced, providers will ultimately have more choices and opt to tailor what works best for their practices and patients.

Most importantly, for these reforms to succeed, we need improved quality measures that are transparent and meaningful to the public – particularly, measures that more accurately reflect patient-reported outcomes and experience. Today, measures assessing the success of APMs by both public and private payers are far too disparate, with hundreds of different measures included in the overlapping program models. As we move forward, we need a consistent set of measures across all public and private programs, and they need to assess performance in a way that is meaningful and actionable by consumers.

As we debate the future of healthcare policy, APMs should remain intact. They will help bend the healthcare cost curve, making Medicare more sustainable and private coverage less costly. Providers across the country have already made significant investments to implement these models, and they are garnering returns, particularly for patients. Now is not the time to walk away from these investments. Instead, we need a productive dialogue on how to make APMs work better for patients and providers to continue generating the outcomes necessary for a sustainable future.

Mike Leavitt was a as a three-time elected governor of Utah. He also served in the Cabinet of President George W. Bush (2005-2009) as Administrator of the Environmental Protection Agency and Secretary of Health and Human Services. He is the founder and chairman of Leavitt Partners where he helps clients navigate the future as they transition to new and better models of care.


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