The title of Jimmy Buffett’s song “Changes in Latitudes, Changes in Attitudes” is a good description of the fundamental changes occurring in the US healthcare system:  Within the Federal Government – and Medicare in particular – widespread “Changes in Latitudes, Changes in Attitudes” are evident in the implementation of the Affordable Care and HITECH Acts, and the overall leadership of the Department of Health and Human Services.  Healthcare leaders in private organizations – and state and local governments – are embracing these changes, which collectively are leading to better healthcare quality and lower costs…. Or at least slower increases in healthcare costs, a.k.a. a bending of the healthcare cost curve.

Changes in Attitude

Traditionally government programs have worked at a long-arms distance from private companies and organizations.  For Medicare, this has meant that changes in rules and regulations were conveyed to healthcare providers and clinicians by publishing them in the Federal Register or as updates to the manuals used by Medicare’s bill-paying contractors. Private payers, (e.g. insurance companies), responded to these changes and updates because Medicare is the largest single payer for healthcare services. Providers and clinicians were thus always responding to a shifting quilt of payment rules and provisions – and more recently an additional layer of quality reporting requirements.

CMS and HHS have repositioned the government’s payment practices to serve an aligning leadership role that is minimizing confusion and complexity for providers and clinicians, while also promoting greater transparency and accountability. The government has accomplishing this by working with private payers (to the extent allowable by sunshine and antitrust laws) to give providers and clinicians more consistent guidance on payment policies and quality metrics, as well as incentives for improving the organization and delivery of care.  An example of this is the Comprehensive Primary Care Initiative (CPCI). The goal of this program is to promote higher quality patient-centric primary care. To determine the CPCI locations, CMS used a bidding process where the seven winning regions were those that committed the highest concentration of insured people, i.e., a combination of private payer, Medicaid, and Medicare covered lives. All the payers in the selected locations agreed to work collaboratively to identify the primary care practices that would get incentive payments for improving the quality and the integration of care – with each payer determining the specific level of financial incentives and support for each of their covered lives in these practices.

The key facets for the CPCI program are:

• Public and private sector payers are truly aligned for comprehensive healthcare transformation.
• It is using market forces to promote this transformation.
• It is a community based initiative that is engaging local leaders, and which requires their buy-in and shared ownership of the process and the outcome.
• It is structured to seek both quality improvements and costs savings.

Other initiatives from the ACA-created CMS Innovation Center are seeking to partner Medicare with local providers and payers for payment mechanisms that will promote better quality and lower costs, i.e. higher value healthcare that achieves the improvements that people and communities want.  Some of these programs involve bundling of payments around certain conditions, and the Innovation Center has explicitly stated a desire to consider providers’ ideas for new models of care and financing outside of the matrix of models it has already proposed.  (It is doing this through Health Care Innovation Awards.)

At the same time, “regular” Medicare is shifting its attitude about poor quality care. For example, last fall new Medicare rules became effective that prohibit hospitals from receiving a second payment from Medicare if a patient with pneumonia, congestive heart failure, or after a heart attack is readmitted to a hospital within 30 days, i.e. a return to the hospital that is preventable with good post-discharge care coordination and follow-up. This is just one of many new financial incentives – both positive and negative – involving actual quality of care that Medicare is moving forward with based upon various provisions of the ACA. (Private payers are implementing similar quality of care related payment policies.)

Changes in Latitude

While Jimmy Buffet was talking about geographic lines of latitudes, Medicare and HHS have exhibited changes in latitude for the requirements placed on many healthcare providers and clinicians – particularly those participating in programs designed to deliver higher quality care.  In addition to the Innovation Center examples cited above, Medicare’s new Shared Savings Program enables Accountable Care Organizations (ACO) to be structured in a wide variety of ways as long as they meet certain requirements and commitments.  And one area where they are permitted full autonomy is how an ACO distributes any shared savings (or other financial incentives) to the healthcare professionals and provider groups within or connected to the ACO.  While Medicare wants to be informed about these internal incentive structures – presumably to guide the development of future value-promoting programs – Medicare is not dictating this crucial facet of an ACO’s operations.

This attitude for considering such wide latitude of ideas illustrates the sea-change shift that has occurred within the government bureaucracy that has traditionally sought to evaluate “new ideas” primarily by comparing differences in existing care delivery models across the spectrum of the US healthcare system. However, CMS’ Innovation Center does not have full autonomy for conducting Medicare demonstration projects since it is required to focus on new models for paying healthcare providers, e.g., doctors and hospitals.  Because of this limitation (and related anti-kickback laws) the Innovation Center cannot do demonstrations that alter benefit structures, or empower ACOs to create new financial incentives for patients by changing co-payments or other cost sharing requirements. In contrast, private payers are implementing financial incentives to prompt patients to use certain providers, select primary care physicians to help guide them through complex care situations, or adhere to medical therapies for chronic conditions, etc. Perhaps in the future, (either directly or as part of the latitude for accountable healthcare systems), Medicare will be able to test modifications of beneficiaries’ cost-sharing to expand how patients are engaged for improving the quality of care and sharing cost savings.

Storms Ahead

While the changes occurring within CMS, private payers, and healthcare deliver organizations across the country are very exciting and have great potential, not every initiative or transformation will be 100% successful.  This is to be expected, and it will present the opportunity to learn from whatever shortfalls occur – as well as organizations that exceed expectations.  This knowledge will be important for creating new initiatives and modifying existing ones as they move forward.  Hopefully, other organizations committed to improving care and lowering costs in the public’s interest will be on board with CMS’ new attitude, support the inevitable challenges that law ahead, and seek to calm the waters of public discourse rather than whip the storms like Thor.