HHS sets goals to shift Medicare payments to reward quality of care rather than volume

By Sally Robertson, B.Sc.Jan 28 2015

New plans announced by the Department of Health and Human Services (HHS) mean that hospitals will need to accelerate changes to patient care if they are to avoid receiving lower payments.

The new goals and timeline are designed to move the Medicare program and healthcare in general towards paying providers based on quality of care rather than quantity.

"Burdens are being placed on doctors who have to explain that more care isn't always the best care," says Lisa Bielamowicz, executive director of the Advisory Board Company. She adds:

For years, Americans have believed that another test and another prescription is always better, but clinical evidence shows that isn't always the case.

Today, many healthcare providers are receiving payments based on each individual service they provide. Whether or not each blood test, surgery or clinical assessment helps or harms a patient is not taken into consideration, with providers being paid depending simply on how much care they deliver, regardless of whether it works.

Under the new plans, HHS hopes to tie 30% of the traditional fee-for-service Medicare payments to quality of care by the end of 2016 and 50% of payments by the end of 2018. The plan is to achieve this through alternative payment plans such as Accountable Care Organizations (ACOs) and bundled payment arrangements. ACOs are groups of healthcare providers such as doctors or hospitals that provide care to a number of patients, while bundled payments are multiple payments made to treat the same problem such as an injury.

In addition, the HHS has a set a goal of tying 85% of the traditional payments to quality by 2016 through programs such as value-based purchasing and readmission reduction programs. Under these models, providers are either rewarded or penalized depending on the quality of services they deliver. By 2018, the goal is to have 90% of the traditional payments tied to these arrangements.

This is the first time the HHS has set explicit goals for alternative and value-based payment models for Medicare.

HHS Secretary Sylvia Burwell says:

Whether you are a patient, a provider, a business, a health plan, or a taxpayer, it is in our common interest to build a health care system that delivers better care, spends health care dollars more wisely and results in healthier people. Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely.

“We believe these goals can drive transformative change, help us manage and track progress, and create accountability for measurable improvement.”