Remarks by Administrator Seema Verma at the National Association of Accountable Care Organizations (NAACOS) Spring 2019 Conference
(As prepared for delivery – April 25, 2019)
Good morning and thank you for the opportunity to speak today. I want to start by thanking Clif Gaus for inviting me to be here – and for his partnership.
There’s not a day that goes by where health care isn’t in the news. There are many issues, but it’s clear that Americans are tired of the high costs of healthcare, and often times the system is complex and difficult to navigate. Reorienting our healthcare system around value is an urgent priority because of the unsustainable trajectory of our nation’s healthcare spending. By 2027, American businesses, families, and the federal government will be spending nearly one in five dollars on health care. If you look at it another way – roughly twenty cents of every dollar in our pockets will go to health care.
The Affordable Care Act was supposed to address this problem, but the rate of growth in healthcare spending has barely changed since the ACA was implemented – we’re still on the same unsustainable path. However, while Obamacare has failed to control costs, and increased premiums nationwide, some are calling for an even greater role for the government in healthcare, under the auspices of “Medicare for All.”
Proponents of Medicare for All call for a government takeover of healthcare not because the last experiment with government intervention—ObamaCare—worked, but because it failed. I believe giving the government complete control of the entire system will eviscerate innovation and undermine what is working in our system. Don’t get me wrong – I’m not here to protect the status quo. I believe reforms are urgently needed in healthcare, as the system isn’t sustainable. But instead of doubling down on government control, we need to understand and address the drivers of healthcare spending. Having the government just pay for everything is not a solution and will just lead to higher taxes. Instead, we must focus on keeping what works, and fixing what doesn’t. Our Administration is rolling up our sleeves to do the hard work of addressing these issues, and our key focus is payment reform that aligns financial incentives to lower costs while ensuring high quality and improving the patient experience. We are working to move to a value-based system.
Value-based care means upending the current paradigm, and in my view it’s not happening fast enough. It means tracking and rewarding improvements in quality, instead of paying for services regardless of outcomes. It means holding clinicians accountable for cost and quality, and then providing the flexibility they need to innovate. It means getting unnecessary government regulations out of the way, so clinicians have more time to spend with their patients and so they can provide efficient, innovative, and coordinated care without bureaucratic requirements getting in the way. It means coordinating a patient’s care across the system, instead of having patients feel like they have to navigate through a maze of fragmentation to get the care they need.
To advance the value-based transformation, we are tackling the barriers to value including outdated regulations, the lack of interoperability, and misaligned financial incentives.
One example of outdated regulations is the set of regulations related to the Stark Law. When it was enacted 30 years ago, the Stark Law addressed real issues regarding the potential for financial incentives to inappropriately influence how physicians make decisions.
In a fee-for-service system, it is important to safeguard against these kinds of conflicts of interest that can increase healthcare costs. But in a system in which providers take accountability for total costs, and providers have incentives to control volume, there isn’t nearly as much of a risk of inappropriate or over-utilization. When payment is for outcomes, and not for services, providers need more flexibility to make referrals. However, the safeguards put in place under the Stark Law limit providers’ ability to make referrals or coordinate care in innovative ways. Therefore, we are undergoing a top-to-bottom review of Stark Law regulations to ensure that they are encouraging, rather than hindering, the move to value.
Our work to modernize regulations spans the entire agency, and it includes our efforts under the Patients over Paperwork and Meaningful Measures initiatives. As part of these efforts, we are asking providers for input on CMS requirements that are unnecessary, duplicative, or overly burdensome, and we are updating our regulations in response. We are also combing through and pruning our quality measure sets, so that clinicians can focus on a smaller set of more impactful measures – last year we reduced measures by 20%.
Developing new coordinated care arrangements will require both flexibility in financial arrangements as well as the free and secure flow of healthcare information. Technology, and the sharing of data, underpin the entire move to innovative payment mechanisms. Without effective, open data sharing, providers cannot keep patients healthy. Without data to track patient progress or understand quality, payers cannot tie payment to outcomes. This is why we are advancing interoperability and patient control of healthcare data as key enablers of value-based care.
To move to a value-based system, CMS is correcting misaligned financial incentives that have been in place for decades and creating new innovative payment models for providers. But as I’ve learned in my time at CMS, these models are complex to develop.
And perhaps the greatest challenge is the challenge of adoption. Today, only 10 percent of clinicians are participating in Advanced APMs and taking on significant levels of risk – no wonder frustration continues. The value-based transformation is not moving quickly enough, and there are several reasons behind this issue.
One is complexity – it’s hard enough for providers to understand CMS’s patchwork of regulations, but to have to learn an entirely different model of care can be even harder. Another reason for slow adoption is the difficulty of obtaining data. Providers in value-based models need to know in real time how their patients are doing and where they should be targeting their efforts, but unless they can quickly obtain data on claims and quality from CMS and other payors and providers, they will not know how to succeed in a value-based paradigm. Providers also need data on the front end to help them understand how they’re doing before committing to a model.
A final reason behind slow adoption is the limited number of models available. A risk-based model designed for a large hospital system will not work for a smaller physician practice for example, but we have not offered enough models to accommodate all provider types. A one-size-fits-all approach won’t work. We must understand that there is variation among providers – risk isn’t for everyone, and risk doesn’t always mean value. As I have said before, the road to value must have as many lanes as possible. And as providers take on more risk, we can reward them with more waivers of current regulations.
To encourage adoption, CMS is promoting multi-payer alignment. Adoption will increase when providers don’t have different models for different payers. We want to work with private sector groups to synchronize our models with those in private plans where possible. We want to support the ability for state Medicaid agencies to align their programs with successful models. We are developing resources for states to make it easier for them to leverage the work of the Innovation Center, and going forward all new payment models will include support for Medicaid adoption where appropriate to help drive alignment.
In addition to the challenge of adoption, another barrier on the path to value is the challenge of setting financial benchmarks and targets. CMS is striving to set consistent and fair benchmarks. We factor in a number of important questions, including: How do we create a level playing field so that provider performance is fairly evaluated? How do we factor in risk adjustment, so there is not an incentive to cherry-pick healthy patients and so we can strengthen the incentive to take on the most complex patients? And finally, how do we reward good performers without creating a race to the bottom, where your benchmark always gets harder as your performance improves?
A final challenge is how to empower patients in the move to value. Patients are better able than we are in Washington and Baltimore to define what value means. Patients have a right to know information on cost and quality for their providers, and they need this data in order to make informed decisions and compare their options. When providers have to compete for business and attract patients, there is a strong incentive to improve efficiency. Our road to value must include engaging patients to choose high-value providers, because if CMS alone is dictating what value means, the effort is meaningless.
STRATEGY TO OVERCOME BARRIERS
The challenges in the move to value are significant, but CMS is thinking outside-the-box to develop solutions for each one. On our road to value, the most significant work that we are doing is launching new payment models.
As you know, in December we launched our overhaul of Medicare’s ACO program known as “Pathways to Success.” And just this week we announced five new payment model options. The options are part of the CMS Primary Cares Initiative; they build on lessons learned from previous models and will transform primary care. The initiative offers providers five options under two paths: Primary Care First and Direct Contracting.
The Primary Care First payment model tests paying practices through a simplified total monthly payment plus flat fees, which allow clinicians to focus on caring for patients rather than tracking their revenue cycle. The Primary Care First path also includes an option that provides higher payments to practices that specialize in care for high-need patients, including those with complex chronic needs.
While the Primary Care First models are focused on individual primary care practice sites, the Direct Contracting options aim to engage a wider range of organizations that have experience taking on risk and that serve larger patient populations. Participants will receive a fixed monthly payment that can range from a portion of anticipated primary care costs to the total cost of care – therefore, participants can bear full risk or share risk with CMS. While we currently offer the BASIC and ENHANCED track within Pathways to Success as well as the Next Generation ACO program, the Direct Contracting model represents the next phase of payment innovation for ACOs. We encourage ACOs to apply for the model, and other organizations such as Medicare Advantage plans and Medicaid Managed Care Organizations may be interested as well.
And just yesterday, we released new guidance inviting states to partner with CMS to better serve the 12 million Americans who are dually eligible for Medicare and Medicaid. We spend over $300 billion per year on the care for these individuals, yet we still do not achieve acceptable health outcomes. Fewer than 1 in 10 dually eligible individuals is enrolled in any type of program that integrates their Medicare and Medicaid coverage. The result: Fragmented care, misaligned financial incentives, and lots of administrative red type.
Building on prior progress, our new guidance outlines three opportunities for states to consider. The first is a capitated financial alignment model, where states partner with a health plan to assume responsibility for the full array of a beneficiary’s Medicare and Medicaid services under a fixed total budget. The second is a managed fee-for-service model, where states can share in Medicare savings by better coordinating care. Finally, we are opening the door for states to propose novel approaches for CMS consideration. This could include strategies that take advantage of the new payment options under the CMS Primary Cares initiative.
We will have more to announce soon as we continue our work developing new value-based payment models that will help us further hone in on areas of high cost and high medical need – including for seriously ill patients, such as those with end-stage renal disease. We are continuing to work on our model for oncology care, and we want to offer options for radiation oncology providers. We will also be developing new models for rural care, as roughly one in six Americans live in a rural area, and statistically, residents of rural communities tend to have worse health status than those living in urban areas. And while we are excited about models for primary care, we also need more models for specialty physicians and surgeons.
And while we are developing new models, we are making several global changes to drive greater adoption. One is revamping our technical assistance strategy. Our new strategy includes pre-announcement technical assistance which focuses on educating potential model applicants about new options, so CMS is providing support even before a model is up and running. And we are issuing “toolkits” that share learnings from successful participants in our models. You’ll be hearing from the CMS team directly later today, and I encourage you to bring them any questions you may have.
A final set of changes I would like to highlight that will drive adoption is our effort to modernize our processes for data sharing. To reduce reporting burden for clinicians, we are encouraging the transmission of data via APIs wherever possible, while ensuring the privacy and security of patient data.
For ACOs specifically, we have developed an API that allows providers to send data directly from their EHR system to CMS’s web interface. I am pleased to say that there were 104 ACOs, or about 16% of all ACOs in Medicare, using the API to submit quality reporting data for 2018. And we will be testing and rolling out a new monthly claims line API this summer that will allow ACOs to more easily receive monthly Part A, Part B, and even Part D claims data. That way providers can track their beneficiaries’ healthcare utilization and spending at a granular level, and then modify a patient’s care plan in response.
Through efforts such as these, we can increase participation in value-based care, so that you don’t have to be a large system with extensive resources to be able to understand and participate in the move to value.
Going back to the challenge of setting fair benchmarks and metrics, we are taking a number of actions. To use Pathways to Success and CMS Primary Cares as two examples, in these programs we are consistently incorporating regional spending factors in establishing benchmarks, providing a more accurate point of comparison for evaluating performance. Our changes to the benchmarking process promote greater alignment with Medicare Advantage.
Benchmarking and measuring performance fairly will also require leveraging technology in ways we have not done previously. For example, CMS recently launched the Artificial Intelligence (AI) Health Outcomes Challenge to encourage the development of new solutions that can predict health outcomes. The AI challenge engages with innovators from all sectors to identify new ways to predict unplanned admissions for Medicare beneficiaries. Our learnings from efforts like the AI challenge will then be incorporated across models, so model participants can use it as a tool to lower costs and improve quality.
Finally, moving to patient engagement, we have been taking creative approaches to incorporate a patient focus in all new payment models. Beneficiaries need to be partners in seeking high-value providers. For example, the Pathways to Success program allows ACOs to reward beneficiaries with new incentive payments for taking steps to achieve good health. And the overhaul of our VBID model for Medicare Advantage plans that was announced earlier this year bolsters the rewards and incentives programs that plans can offer, by permitting higher-value individual rewards.
Although there is much work still to be done on the move to value, we are seeing many signs of progress. To take one example, we are seeing strong interest in our Pathways to Success program for ACOs. While concerns were raised that we would see providers drop out of the program under the new parameters, providers are committed to pursuing value.
90% of eligible ACOs with agreements that would have ended on December 31st last year elected to extend their agreement period. And 85% of those ACOs applied to join Pathways to Success. We are offering a second application cycle this summer to provide ACOs with another opportunity to join the redesigned program.
What’s also encouraging from the ACO enrollment data is that more organizations are moving to take on risk. 38% of applicants for Pathways to Success have applied for risk levels that would make them eligible for Advanced APM status. Compare that to the fact that only 19% of ACOs are in two-sided risk arrangements today, and only 10% of clinicians overall are in Advanced APMs. This is real progress.
We are deeply invested in the ACO program, and to the value-based transformation overall. I am excited to see the models we are rolling out.
Looking forward, you can expect that some of the models we have under development will be mandatory. One reason for mandatory models is that selection effects can be significant in voluntary models. Selection effects happen when only the providers who would benefit financially from a model choose to participate, thereby reducing the amount of savings that the model can generate. Requiring participation also helps us understand the impact of our models on a variety of provider types, so the data resulting from the model will be more broadly representative.
This Administration is upending the old way of doing things – for the betterment of patient health, and our country’s economic health. Our entire agency is fully committed to driving value. We recognize that healthcare spending is on an unsustainable trajectory – earlier this week, the Medicare Trustees reminded us that the trust fund for hospital spending will run out in just seven years.
Our nation has to decide between two paths – either we can work together to support a competitive, free-market healthcare system, or we will open ourselves up to increased government intervention and control as costs skyrocket. The first path is the better way, and I appreciate all the hard work you all are doing to make that path possible.
You are leading the way to value-based care – you are the pioneers who are taking a risk and embarking on a new model of care delivery. Groups like yourselves are setting an example for the entire health care system, as you are showing how to succeed under a value-based system. I admire your commitment to providing better value to patients. Thank you for your efforts and your partnership; it’s been a pleasure to be with you today, and I look forward to continuing to work together.