Value Based Reimbursement: CMS Dials Back; Large Employers Forge Ahead

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Last week, CMS announced in proposed rulemaking its proposal to cancel the Episode Payment Models (EPMs) and Cardiac Rehabilitation (CR) incentive payment model.  It also announced plans to revise certain aspects of the Comprehensive Care for Joint Replacement (CCJR) model, such as granting certain hospitals selected for participation in the CCJR model a one-time option to choose whether to continue their participation in the CCJR model, and a change to increase the pool of eligible clinicians that qualify as affiliated practitioners under the Advanced Alternative Payment Model track.  CMS noted in the proposed rulemaking that it “continues to believe that cardiac and orthopedic episode models offer opportunities to redesign care processes and improve quality and care coordination across the inpatient and post-acute care spectrum while lowering spending.”  CMS qualified that statement, however, by noting “it is appropriate to propose to rescind the EPMs and CR incentive payment model, and reduce the geographic scope of the CJR model” for several reasons, but most notably due to its belief that the mandatory models could impede its efforts to engage providers in future voluntary payments.

On the other hand, a recent survey of large U.S. employers  found that with an average 5% increase in healthcare costs, employers “plan to focus more on how health care is delivered and paid for while still pursuing traditional methods of controlling costs such as cost sharing and plan design changes.” Healthcare delivery developments and the ability of large, self-insured employers to tailor the design of their health plans have enabled these employers to take advantage of, for example, telemedicine regardless of state reimbursement laws and to engage with accountable care organizations for unique payment models.  Certainly, these employers have the distinct ability to mine their own claims data, which they own, and integrate that data with other data sources such as FMLA and disability, to understand trends and tailor plan design and payment accordingly.  Of course, legal issues must be considered with these approaches as self-insured employers are subject to ERISA as well as the myriad of federal laws that apply to health plans, and federal and state employment laws.

While some fear that the recent actions of CMS may stymie the value based reimbursement landscape, there are indications to the contrary on the commercial side. We are seeing employers continuing to move away from looking solely at costs to looking at cost and quality, and engaging with providers to understand how to better gauge quality.  We have also seen employers engage directly with provider partners to tailor benefit design and payment, and to seek to share data on additional cost drivers, such as socioeconomic determinants of health.  More direct collaboration with providers and the patients they serve, either via direct data sharing and meetings between the employer and providers or via a third party administrator, will continue to break down barriers and foster more innovation in healthcare delivery.  Careful  planning is of course important not only to ensure a model that evolves as data is gathered, but also to ensure that these new care delivery models comply with applicable laws.