Redefining Financial Incentives and Quality in the Healthcare Field through the Medicare Shared Savings Program

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By Alexis Boaz (NHS ’15)

According to data released by the Center for Medicare and Medicaid Services (CMS), the United States spent $2.7 trillion dollars on health care in 2011, which made up 17.9 percent of the GDP (Squires, 2012).   Spending on physician and clinical services increased 4.3 percent to $541.4 billion. The most significant increase in spending came from Medicare spending, which made up 21 percent of the national health spending at $554.3 billion, followed by Medicaid, which spent approximately $407.7 billion (National Health Expenditures, 2012). There are many factors that can be attributed to the vast overspending that the United States incurs, which is 5.4% more of its GDP than the next closest country, France (Squires, 2012). Some of the overspending can be traced back to the unintuitive fee-for-service system of reimbursement our current healthcare system employs, which encourages overspending, treating patients for as long as possible, performing potentially unnecessary and dangerous procedures, and recommending excessive testing. Reimbursements are rewarded for various expensive procedures on an episodic basis, focusing on short-term results rather than for maintaining the overall health of patients by preventing the illnesses from ever reaching advanced stages. The constant threat of potential lawsuits taint the system and the practice of health care providers as their spending runs rampant in an attempt to avoid lawsuits. Unlike other industrialized countries, the United States relies on a privatized health care system for everything that does not fall inside of the realm of Medicare and Medicaid (Squires, 2012). Rather than working in an integrated system that coordinates care to obtain optimal patient outcomes, the system works disjointedly while producing mediocre outcomes that are unjustifiably low considering what a major expenditure it is for the United States.

The Patient Protection and Affordable Care Act (ACA) attempts to overcome the issue of poor quality measures and the exponential, unsustainable, and exorbitant spending in the United States, while attempting to provide Americans with long-term and affordable solutions to health care. While the ACA has many aspects that would improve the health care system, including the health insurance exchanges and the Medicaid expansion, the formation of accountable care organizations (ACOs) through the Medicare Shared Savings Program (MSSP) has the potential to revolutionize health care delivery by creating lasting impacts on the quality and performance as well as by dramatically cutting costs through improved efficiency of the health care system.  In accordance with the implementation of the ACA, CMS established the MSSP in an attempt to utilize the accountable care organization model in order to improve the quality of care to Medicare beneficiaries who typically use the Fee-For-Service (FFS) payment model. An accountable care organization (ACO) is a healthcare organization characterized by the coordinated care efforts of hospitals, physician groups, and other healthcare stakeholders who seek quality improvement while being accountable for the cost, efficiency, and overall care of a defined group of patients. ACOs improve quality by ensuring that patients receive better treatment through more efficient coordination of integrated care and a reduction of unnecessary and duplicative services, thus operating with greater financial efficiency. Such an improvement in quality can lead to better outcomes by meeting defined performance standards while cutting costs. It is projected that over a four-year span, the MSSP and other ACO-related initiatives could result in up to $940 million in federal savings (HHS, 2012).

ACOs formed through the MSSP will be reimbursed through Medicare by using its Medicare-enrolled tax ID number or CMS Certification number (FAQ, 2012) and must serve at least 5,000 Medicare beneficiaries (Methodology, 2012). The MSSP was meant to incentivize the cooperation between different members of the healthcare sector, so once the participants who currently bill Medicare come together, they can apply to become an ACO. The MSSP ACO participants can then share in the savings through either a one-sided payment model or a two-sided payment model. Through the one-sided payment model, the ACO would have a share in the savings with Medicare for the term of the ACO’s first agreement, but not in the losses. This would be ideal for newly formed ACOs who are still transitioning. After the first term under the one-sided track, the ACO can then use the two-sided track. The two-sided track, typically employed by more experienced ACOs, would allow the ACO to gain more savings while assuming more risk by participating in the losses. The ACO would be paid in accordance with the Medicare fee-for-service schedule. In order to share in the savings, the ACOs must annually meet the 33 defined quality measures set by CMS (HHS, 2012). They must also generate savings under the performance-based payment methodology (Methodology, 2012). The savings will be gained after the performance is compared to the quality and savings benchmark on an annual basis. Each year, the benchmark will be updated by the CMS to reflect the projected growth of the national per capita expenditures for Parts A and C of the Medicare Fee-for-Service program (Methodology, 2012).

Since 2010, there are currently a total of 220 ACOs participating in the MSSP, with the numbers rising to serve more than 4 million Medicare beneficiaries (HHS, 2012). However, as more ACOs form through the MSSP they must overcome many challenges, including fundamental changes to the system. The first challenge faced would be forming the ACOs. Providers who are comfortable with the current system would be hesitant to form a group that would change the way in which they provide their services. Redefining financial incentives for health care providers and switching to evidence-based practice that is patient centered will be a concept difficult for many to adapt. Once the health care provider has decided that it wants to be a part of an ACO, it must find other healthcare providers that would meet the MSSP’s standards of an ACO, including a primary care provider. They must have enough of an infrastructure to be able to handle at least 5,000 Medicare beneficiaries, as well as meet the requirements set by CMS. By becoming a member of an ACO, the health care provider would have to be concerned about their current patients, and whether or not the patient would continue to see them or choose to opt out from joining the ACO network. Patient loyalty and the physician-patient relationship would play a large role in this. Additionally, switching from operating as a private enterprise to operating under an umbrella of an organization with a governance body would be challenging to implement.

Once the ACO has been formed and approved, the health care providers must form an integrated system. This means that they would have to make sure that their infrastructure is up to date in order to perform coordinated, patient-centered quality care. This would include expensive transitioning to electronic health records (EMR). This dramatic change in infrastructure may set back the immediate functioning of the ACO as the participants adjust to the IT changes. The ACO would be incurring greater financial risk with the ACO model if they are unable to effectively implement it. Also, if the MSSP ACO contracts with other payers and insurers, the different payers may not employ the same quality measures as the MSSP, therefore burdening the ACO with implementing and recording the different quality measures, while displaying potentially conflicting incentives. (Davis, 2012). The ACO’s administration would have to audit and keep records in order to ensure that it can participate in the savings by proof of meeting the 33 CMS criteria.

The formation of MSSP ACOs can help perpetuate change that can transform the health care system as it will force health care providers to reevaluate patient care, the integration of medical technology, and the coordination of patient care. ACOs will more than likely be a significant presence among health care providers, competing against other healthcare providers who have yet to adopt the ACO system. Although under the ACO system, the patient is not required to be treated by specified physicians, the care coordination made possible by ACOs will set the quality standard in care. Other health care providers would then be forced to adopt health information technology systems, such as electronic health records in accordance with meaningful use r to compete with the ACOs and to coordinate care between providers, because patients will become accustomed to ACOs as they redefine the norm of efficiency in data transparency. This will rapidly increase the transition from paper-based systems to EHRs, as well as encourage communication between the different health care providers. Additionally, the formation of ACOs would also cause health care providers to re-examine the current incentives of reimbursement of treating when sick and being paid more when people are sicker, and flip the incentives around by rewarding those who practice preventive, evidence-based medicine to maintain the health of patients.

The Congressional Budget Office released a report projected health expenditures doubling by 2035 (The Long-Term Budget Outlook, 2013). This further demonstrates that the realignment of incentives, reduction of spending on health care, and cost cutting is crucial to the financial stability of the United States. With the fundamental change in care, the health care system will not only enter the 21st century in terms of the use of technology in the system, but will also increase the health status of Americans through better coordinated, more efficient health care, and centralized information transparency.



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