This paper describes six cost containment policies or initiatives included in the Affordable Care Act (ACA) that target how health care is delivered and the growth of health care costs. A summary of the implementation occurring in Michigan is also provided.
The policies or initiatives explored in depth here are:
- Accountable Care Organizations
- Hospital-Acquired Conditions
- Value-Based Purchasing
- Hospital Readmission Reductions Program
- Center for Medicare and Medicaid Innovation
- Program Integrity
- Medicare Shared Savings Program (MSSP) The MSSP is Medicare’s basic ACO model.2 In this model, participating ACOs receive Medicare fee-for-service payments and can share in savings realized through better coordination of care. ACOs are responsible for quality of care as measured by 33 cost and quality goals related to patient and caregiver experience, care coordination, patient safety, preventive health, and at-risk populations,3 as well as for cost relative to a benchmark patient population.4 ACOs must achieve target savings of at least 2 percent in order to share in the savings.5,6 MSSP participants may elect to transition to sharing in both savings and risks.7
- Advance Payment Model The Advance Payment Model is a supplementary incentive program for select MSSP participants, such as small and rural providers, who may require additional resources to establish an ACO. Advance payments are received through a combination of upfront and monthly disbursements and invested in care coordination infrastructure projects described in the ACO’s application. The advance payments are repaid with the shared savings produced by the ACO. ACOs that do not achieve enough savings to repay CMS at the end of a performance period have future payments offset until the shortfall is paid in its entirety.8
- Pioneer ACO Model Pioneer ACOs, designed for rapid implementation by providers experienced in coordinating care, can benefit from higher levels of shared savings compared to the MSSP, but also face risks, or “downside payments,” if saving are not achieved.9
Implementation. Over 360 Medicare ACOs formed from March of 2010 to January 2014, serving about 5.3 million beneficiaries.10 The majority of the ACOs (341)11,12 participate in the MSSP; among these, 35 are enrolled in the Advance Payment program. In January 2014, preliminary outcome data was released for 114 MSSP ACOs that began participating in 2012. CMS reported that 29 ACOs reduced spending enough to achieve shared savings, generating more than $126 million in savings.13
In 2012, 32 provider organizations began participating in the Pioneer ACO model. In July 2013, CMS reported that each ACO performed well on the reported quality measures during the first year and 13 had reduced costs enough to achieve shared savings. Together, the 32 ACO generated $87.6 million in gross savings.14 CMS also reported that nine ACOs decided to leave the Pioneer ACO program after one year. Seven ACOs departing the program joined the MSSP, while two left the Medicare ACO initiatives entirely. When examined separately by an independent firm, the first year performance of the remaining 23 Pioneer ACOs generated $147 million in gross savings.15
Implementation. Although the ACA does not mandate states to report HACs, the legislation provides a strong incentive for states to establish reporting systems. As of May 2012, 27 states and the District of Columbia had enacted legislation to establish adverse event reporting systems.20 Current federal initiatives (including mandatory federal HAC reporting since 2011 for certain infections) have bolstered HAC reporting activities at the state level. Nevertheless, no federal standards cover state reporting systems, and there is still significant variability among such reporting systems.21
Value-based purchasing (VBP) enables purchasers of health care to hold providers accountable for both cost and quality. VBP aims to align incentives between purchasers and providers to reduce inappropriate care and identify and reward the best-performing providers.22 The ACA requires reporting of quality measures and/or VBP across nearly all providers, building on existing quality reporting requirements and demonstration projects.
Hospitals (ACA §3001)
Description of Policy. Since the mid-2000s, Congress has explored how to implement value-based purchasing in hospitals.23 Building on this work and existing quality reporting requirements, the ACA enacted a budget-neutral VBP program for hospitals. This program withholds Medicare reimbursement to hospitals—increasing from 1 percent in 2013 to 2 percent by 2017—and redistributes this aggregate withheld amount to hospitals based on performance achievement and improvement. Performance is evaluated using clinical processes of care, patient experience, and mortality outcome measures (see Figure 1). Beginning in FY 2015, a measure of efficiency—Medicare spending per beneficiary—will be incorporated into performance assessment. Measures and hospitals for which the reporting data is below a minimum threshold will be excluded from VBP.24,25
Figure 1: Quality Measures Used in Calculation of Value-Based Purchasing Bonuses & Penalties
|Process of Care Measures—FY 2013 and Beyond|
|Percentage of heart attack patients given medication to avert blood clots within 30 minutes of arrival at the hospital.||Percentage of surgical patients that received the correct kind of antibiotic.|
|Percentage of heart attack patients given percutaneous coronary interventions within 90 minutes of arrival.||Percentage of patients who had their antibiotics stopped within 24 hours of surgery.|
|Percentage of heart failure patients given instructions upon discharge about how to take care of themselves.||Percentage of heart surgery patients who had their blood sugar kept under control after an operation.|
|Percentage of pneumonia patients who had a blood culture taken before they were given antibiotics.||Percentage of heart surgery patients already taking beta blockers who were given a beta blocker just before and after surgery.|
|Percentage of pneumonia patients that received the correct kind of antibiotics.||Percentage of surgery patients who received an appropriate treatment to prevent blood clots.|
|Percentage of patients that received an antibiotic within an hour of surgery.||Percentage of surgery patients who received anti-blood clot treatment within 24 hours before to 24 hours after the operation.|
|Process of Care Measures—FY 2014 and Beyond|
|Percentage of patients with postoperative urinary catheter removal on postoperative day 1 or 2.|
|Patient Experience of Care Measures—FY 2013 and Beyond|
|How well nurses communicated with patients.||How well caregivers explained medication to patients before giving it to them.|
|How well doctors communicated with patients.||How clean and quiet the hospital room and hall were.|
|How responsive hospital staff were to patients' needs.||How often caregivers explained to patients how to take care of themselves after discharge.|
|How well caregivers managed patients' pain.||How the hospital stay rated overall.|
|Mortality Outcome Measures—FY 2014 and Beyond|
|Acute myocardial infarction 30-day mortality rate.||Heart failure 30-day mortality rate.|
|Pneumonia 30-day mortality rate.|
Implementation. In November 2013, CMS announced the bonuses and penalties that individual hospitals will receive during FY 2014.26 This is the second year CMS will withhold and redistribute millions to hospitals based on quality measure performance.27 Hospital VBP payment incentives for FY 2014 range from +0.88 percent to –1.14 percent, with almost half (45 percent) of participating hospitals receiving bonuses. The average bonus is 0.24 percent, while the average penalty is 0.26 percent (up from 0.21 percent in FY 2013).28
Physicians (ACA §3002, 3007)
Description of Policy. Since at least 2000, Congress has explored financial incentives for physicians to improve quality and efficiency of care through various demonstration and reporting systems, including the Physician Group Practice Demonstration (“PGP demo”)29 and the Physician Quality Reporting System (PQRS). CMS currently uses data from the PQRS to populate the Physician Compare website where physicians and patients can view quality performance by individual physicians or group practices. CMS also provides feedback reports to physicians on their quality and resource use relative to other physicians. The ACA built on PQRS and the PGP demo to enact the budget-neutral Physician Feedback/Value-Based Payment Modifier Program. These programs require physicians to report quality measures to CMS or face financial penalties, and link physician payment to performance on quality and cost measures through a value-based payment modifier.
Implementation. Physicians who do not report quality measures will face a payment penalty of 1.5 percent in 2015, increasing to 2 percent in 2016.30 CMS will also implement a value-based payment modifier in 2015, beginning with large physician groups (100 or more eligible professionals) that are not ACOs, and expanding to all physicians and groups by 2017. To do so, CMS will calculate quality and cost composite scores and organize physicians into tiers, based on performance relative to the national mean. Quality measures include clinical care, patient experience and safety, care coordination, efficiency, and population health; cost measures include total costs and costs for beneficiaries with specific conditions.31 High-quality, low-cost physicians will receive bonuses, while low-quality, high-cost physicians will be penalized up to 1 percent.
Description of Policy. In June 2007, a Congressional advisory panel described the extent to which inpatient hospital admissions were resulting in readmissions, estimating that over 13 percent of readmissions within 30 days were potentially preventable, and were costing the Medicare program $12 billion annually.32 Based on this finding, Congress enacted the Hospital Readmissions Reduction Program in the ACA. As of 2013, hospitals face a penalty of up to 1 percent of payments for excess readmissions for acute myocardial infarction, heart failure, and pneumonia. CMS defines “excess” readmissions as readmissions that surpass a hospital’s expected readmission rate: the national mean readmission rate, adjusted for demographic and severity factors of the hospitals’ patients.33 CMS measures hospitals’ rate of readmissions and compare it to a national average to calculate a risk-adjusted excess readmissions ratio. The penalty amount increases gradually to a maximum of 3 percent in 2015, and the conditions on which a hospital’s excess readmissions are calculated will be expanded as well.
Implementation. In FY 2013, penalties for excess readmissions were approximately $280 million, distributed across 2,217 hospitals and ranging from 0.01 percent to –1 percent (see Figure 2). This included over 300 hospitals that lost the maximum 1 percent of payment.34 Penalties for the second year of the program, FY 2014, total $227 million among 2,225 hospitals. A little less than half of the penalized hospitals will have their penalties increased from FY 2013, with 18 losing the increased maximum penalty of 2 percent of payment.35
Figure 2: FY 2013 Hospital Readmission Reductions Program Results
In the FY 2014 Inpatient Prospective Payment System (IPPS) Final Rule, CMS included an algorithm to account for planned readmissions for acute myocardial infarction, heart failure, and pneumonia.36 In FY 2015, CMS will expand the applicable conditions to include patients admitted for congestive obstructive disease (COPD) and elective hip or knee replacement.37
- Accountable Care: Projects aimed at providing incentives to providers to improve the quality and efficiency of care delivered to patients
- Bundled Payment for Care Improvement Initiative: Models that are based on the concept of bundling all services related to a single illness or course of treatment into a single payment to encourage care coordination and more efficient use of services
- Primary Care Transformation: Demonstration projects based on the Patient Centered Medical Home (PCMH), a model of care designed to strengthen the primary care system
- Initiatives focused on the Medicaid and CHIP population: Initiatives that test new care delivery models and reimbursement methods to increase quality and reducing costs for care delivered to Medicaid and CHIP beneficiaries
- Initiatives focused on the Medicare-Medicaid enrollees: Initiatives that are designed to better coordinate and enhance the quality of care delivered to beneficiaries who are enrolled in both Medicare and Medicaid
- Initiatives to speed the adoption of best practices: Programs that disseminate information on evidence-based clinical practices
- Initiatives to accelerate the development and testing of new payment and service delivery models: Initiatives that encourage providers and states to develop, test, and implement systems that improve performance and benefit patients
Implementation. While the CMMI continues to introduce new initiatives, many of its early demonstration projects will reach their expected end dates in 2014. The ACA requires the CMMI to conduct an evaluation of each new model tested. The CMMI has established a Rapid Cycle Evaluation Group to regularly and frequently evaluate each model.39 As of April 2014, the CMMI has released nearly 20 reports on programs and demonstrations.
The ACA also targets high-risk services (such as home health services and durable medical equipment) by requiring that referring providers are enrolled in Medicare, giving CMS new authority to revoke enrollment if the provider fails to maintain adequate access to documentation of their practice, and requiring face-to-face visits before providers refer for these services. The ACA took steps to enhance civil monetary penalties, where applicable, and expands Recovery Audit Contractor (RAC) authority to help identify and collect over-payments across Medicare and Medicaid. Finally, the ACA invests $350 million in new resources to bolster anti-fraud activity.
Implementation. Many program integrity provisions in the ACA have been implemented, in part due to strict timelines or expedited regulatory processes mandated by the law. For instance, in 2011, CMS implemented an automated provider screening program that sorts providers into different risk levels based on historically high incidences of fraud, and incorporates new data such as loss of a medical license and Social Security death information. This system is also developing individual risk scores for fraudulent activity for individual providers.41 RAC authority was extended to the Medicaid program beginning on January 1, 2012. CMS also created the Center for Program Integrity in 2010 to better coordinate fraud, waste, and abuse efforts. All together, these activities are aimed at helping CMS to move from “paying-and-chasing” fraudulent health care claims to a “prevention and detection” model.42
An example of CMS’ preventative approach is the agency’s temporary blocks on new provider enrollments and supplier applications for home health agencies and medical device suppliers in areas with disproportionally high utilization and questionable billing practices to Medicare, Medicaid, and Children’s Health Insurance (CHIP) programs. The most recent moratorium for home health agencies began July 2013 in Chicago, Illinois, and Miami, Florida, and expanded in January 2014 to include four more metropolitan areas (Fort Lauderdale, Florida; Detroit, Michigan; Dallas, Texas; and Houston, Texas). It is expected to last until July 2014.43
As for claims already paid, CMS reported record-breaking recoveries in recent years. From FY 2009 to FY 2013, the federal government recovered $19.2 billion. This was an increase from the $9.4 billion recovered during the previous five-year time period.44
Figure 3: Implementation of ACA Cost Containment Policies and Initiatives in Michigan
|Policy/Initiative||Number of Participants||Participants and Description|
|Medicare Shared Savings Program||17 ACOs||The following ACOs, some of which cross state lines, are part of the Medicare Shared Savings Program and serve patients in Michigan:
|Pioneer Accountable Care Organizations||2 ACOs||The following two ACOs in Michigan are participating in the Pioneer ACO model:
The University of Michigan (Ann Arbor, MI) also participated in the Pioneer ACO model; however, its participation ended in July 2013 and moved to the MSSP.
|Hospital Value-Based Purchasing||88 Hospitals||Michigan fared slightly better than the national average in 2014, with bonuses received by 49 percent of eligible hospitals; 48 percent of hospitals in the state faced a 0.27% penalty, on average. Nationwide, Oaklawn Hospital of Marshall, Michigan improved the most from FY 2013, moving from a 0.26 percent penalty to a 0.65 percent bonus in FY 2014.|
|Hospital Readmission Reductions Program||95 Hospitals||Of the applicable Michigan hospitals in FY 2014, almost 58 percent face a penalty of 0.39%, on average, up from the average penalty of 0.24% in FY 2013. The national average for FY 2013 penalties was 0.38%.|
Sources: Center for Medicare and Medicaid Innovation; J. Rau. November 14, 2013. Nearly 1,500 Hospitals Penalized Under Medicare Program Rating Quality. Kaiser Health News. http://www.kaiserhealthnews.org/stories/2013/november/14/value-based-purchasing-medicare.aspx.