Will New Healthcare Policy Impact Value-Based Healthcare?

March 15, 2017

Daniel OrensteinGeneral Counsel

Is Value-Based Healthcare Here to Stay? Looking for Answers in New Policies

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health policy

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• Definition of Value-Based Care (VBC)

• Federal government VBC programs

• Government influence on the progression of VBC

• Health Care Reform Part II (Republican-style)

• Evidence on continued government support for VBC

• Trends to follow• Bipartisanship vs. Polarization• Market-based innovation• Consumer-directed payment reforms

• Q&A - Discussion

Agenda


VBC describes payment programs and care models which are designed to shift payment from the volume of procedures (FFS) to the outcomes or results of the healthcare services,

With the goal of achieving the highest quality healthcare at a lower systemic cost.

Defining Value-Based Care


• Medicare Access and CHIP Reauthorization Act (MACRA)• Merit-based Incentive Payment System (MIPS)• Advanced Alternative Payment Models (APM)

• Medicare Shared Savings Program• Medicare ACOs, established by the Affordable Care Act (ACA)

• Bundled payment programs, and other demonstration programs, conducted by the CMS Innovation Center (CMMI)

Federal Government VBC programs have helped set the course for the healthcare industry


HHS has stated it wants to shift the Medicare program to have 50% of its payments for healthcare items and services comprised of value based payments by 2018.--Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume, CMS, Jan. 26, 2015, available at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html

The federal government (HHS) has set an aggressive goal for VBC

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html


VBC has made progress as measured by the number of hospitals participating

A recent Washington Post-Philips survey shows that about a third of responding hospitals and health systems were participating in voluntary value-based payment models.

Northeast

Midwest

South

West

12%

17%

19%

15%

45%

38%

22%

26%

43%

45%

59%

60%

Under consideration Yes No

Source:http://www.washingtonpost.com/sf/brand-connect/philips/transforming-healthcare/?origin=13_us_en_wpvbc_philipsnatwitter____nabcd_paid


What is the average percentage of revenue attributable to value-based payment among hospitals and health systems? 156 respondents

1- 7% --16%

2- 12% -- 22%

3- 14% -- 25%

3- 22% -- 27%

4- 38% -- 10%

Poll Question #1


However, as measured by percentage of a hospitals’ total payments that are value-based today, VBC is just coming out of the gate

“Despite the Department of Health and Human Services’s (HHS) goal of shifting 50 percent of Medicare payments from fee-for service to value-based payment models that emphasize quality and outcomes by 2018, the respondents said that only 14 percent of their payments were currently tied to value, as defined by CMS, and an even smaller 6.7 percent of their revenue was actually at risk.”


14.1%

6.7%

Payment tied to value

Revenue at risk under VBP


• Federal requirements, or mandates, play a significant role in adoption of value-based payment programs• 36% federal requirements, 6% commercial payors, 4% state laws

• Competitive considerations are also a significant factor. Health systems do not want to be left behind or left out of consideration for value based payor contracts• 37% voluntary, 9% competitive considerations

Hospitals’ motivations for participating in VBC might not be “purely” to pay for quality/outcomes and reduce cost



• Republicans are finding themselves boxed in by the popular provisions of the ACA• Subsidies to purchase health insurance (22M more people covered)• No denial of coverage for individuals with pre-existing conditions• Coverage for children up to age 26

• “Repeal and replace,” “repeal and delay,” “modify without repeal”• These are just some of the top level designations, with many policy ideas

still being floated and evaluated for restructuring healthcare coverage• Some of these policy solutions may affect the progress of VBC, but we

don’t yet know which ones will make it into legislation

Healthcare Reform Part II (Republican-style) is still in the early innings


• The Bill (released March 6, 2017) should be characterized as a “partial” ACA repeal and replacement.

• The Bill retains many features of the ACA, for example:• Coverage for pre-existing conditions• Coverage for children up to age 26 on parents’ plan• No annual or lifetime caps

• The most significant changes are rolling back the Medicaid expansion and replacing the ACA credits to purchase health insurance and cost sharing with tax credits tied to age.

• Doesn’t clearly address cost control, payment methods within health plans. Medicare ACOs, CMMI, MACRA are not affected.

House proposed ACA replacement Bill deals with coverage rather than payment reform


Bipartisan Cooperation on Health Policy


Senate

92392

Bipartisanship is reflected in the MACRA vote tally

Congress

8

YesNo

37


What percentage of Congress voted in favor of the 21st Century Cures Act? 160 respondents

1- 51% -- 24%

2- 67% -- 20%

3- 74% -- 16%

4- 88% -- 20%

5- 94% -- 20%

Poll Question #2


Senate

94392

… as well as the 21st Century Cures Act vote tally

Congress

5

YesNo

26


Federal healthcare policy issues that polarize vs. those that enjoy bipartisan supportIssue Polarizing or

BipartisanExplanation

Healthcare coverage design

Polarizing Federal coverage involves questions that invoke party ideology about whether, and to what extent, the federal government should be involved in an industry that operates largely in private markets, as well as the scope of federal entitlements.

Reimbursement methods

Mixed To the extent that reimbursement reflects cost control efforts, there is bipartisan support. However, some efforts at cost control, such as allocating appropriate resources to end of life care, have been viewed as ethically questionable “rationing” by conservatives.

Value-based healthcare programs

Bipartisan Payment and care models that improve quality and reduce cost are hard to argue with. They are part of existing payment programs, so do not invoke ideological questions on the appropriateness of federal support. Plus market innovation is supported by both sides.


• Markets• Morality• Entitlements

Polarizing

• Cost control• Access to and availability of care• Quality of care

Bipartisan

Issue categories that are polarizing and those that generally enjoy bipartisan support


• Cures is broad and sweeping legislation that covers many topics, mostly on streamlining and accelerating the discovery of new drugs and medical devices. It includes provisions to improve mental health and substance abuse treatment and to improve patient access to new therapies, among many other areas covered by the Act.

• The Act also establishes programs and oversight to promote health information interoperability and to prohibit “information blocking” practices.

The 21st Century Cures Act became law on December 13, 2016 with broad bipartisan support.


EXECUTIVE ORDER: Minimizing the Economic Burden of the Patient

Protection and Affordable Care Act Pending Repeal


• On January 20, 2017, President Trump signed an Executive Order on “minimizing the economic burden” of the ACA.

• The Executive Order, widely viewed as a symbolic act to show action on repealing the ACA, asks the executive branch and HHS to:1- Take steps to minimize the “unwarranted economic and regulatory burdens” of the ACA, and

2- Waive, defer, grant exemptions from, or delay provisions of the ACA that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

The Executive Order focused on limiting the ACA where possible


• The Order calls for preparing “to afford the States more flexibility and control to create a more free and open healthcare market.”

• Also calls for federal departments or agencies with healthcare jurisdiction to “encourage the development of a free and open market in interstate commerce for the offering of healthcare services and health insurance, with the goal of achieving and preserving maximum options for patients and consumers.”

The Executive Order also reflects principles of open markets and promoting innovation


• Tom Price, Secretary of HHS is a staunch opponent of the ACA. However, he made comments in his confirmation hearings on portions of the ACA that promote programs aimed at innovation in healthcare delivery and value-based care.

• Price indicated that he supports in principle the activities of the Center for Medicare and Medicaid Innovation (CMMI) which was established by the ACA to test and promote innovative payment and delivery system models that have the potential to improve the quality of care.

Secretary of HHS Tom Price indicated his support for innovation programs under the ACA


• While Price does not support all of the activities of CMMI, he appears to support the mission of CMMI in principle, which is essentially a test bed for value-based healthcare programs. This provides another indication that these programs may continue to enjoy support in the Trump Administration with Price as Secretary of HHS.

Secretary of HHS Tom Price indicated his support for innovation programs under the ACA (continued)


• Bipartisan support - The success of Cures indicates that bipartisan cooperation will continue on key healthcare issues, notwithstanding the extreme ideological divide on market and entitlement related healthcare issues. Value-based payment programs have historically fallen into the non-ideological, bipartisan category.

• Market-based innovation – The emerging evidence is that Congress and the Administration will support innovation in payment and delivery models, and flexibility in programs that will be included for participation in federal payment programs, which will flow through to commercial payment programs.

Pulling the threads together, the evidence shows us that VBC is likely to enjoy continued federal government support


• Support for Existing ACA Innovation programs – Although highly uncertain, there are some indications that not all of the ACA will be scrapped. And in this case the innovative payment and delivery programs, which are on the non-ideological side, may be among those pieces of the ACA that will survive and be supported in some form.

• Spillover effect to Commercial VBC programs - Federal government support is likely to influence the continued development of commercial VBC programs.

Pulling the threads together, the evidence shows us that VBC is likely to enjoy continued federal government support


• The trend towards consumer responsibility could possibly accelerate if a significant structural basis of the reform is increased tax credits and health savings accounts. • These programs could put more responsibility on the patient to shop

for healthcare.

• The overall share of payment could shift to individuals from third party payors. • Would emphasize information provided to patients on cost and

quality to support shopping• VBC would likely continue, but given its diminished importance in the

payment mix overall, it could get less policy attention and decelerate.

Another trend to watch with Healthcare Reform Part II is consumer-directed healthcare payment methods


Questions

Will New Healthcare Policy Impact Value-Based Healthcare?

Healthcare

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