Obamacare's Renewed Effort to Cut Medicare Bills After Setbacks

  • 21 health systems join Next Generation ACO program, CMS says
  • HHS wants half of Medicare payments tied to quality, value

Health systems in at least 14 states are joining a new version of a program under Obamacare meant to lower costs in the half-trillion-dollar Medicare program, after some groups quit an earlier effort.

It’s the latest initiative to change the way hospitals and doctors are paid under the Patient Protection and Affordable Care Act, which became law in 2010 as President Barack Obama’s signature domestic policy achievement. In all, 21 systems are taking part in the Next Generation Accountable Care Organization program, which started on Jan. 1, the Centers for Medicare and Medicaid Services said Monday. The systems, such as Steward Health Care and WakeMed, will cover about 650,000 individuals this year.

The U.S. has been trying a series of programs under the law to move Medicare away from paying doctors and hospitals for each visit or procedure, and focus instead on the quality of the service. But the results have been patchy, with many systems dropping out of a previous initiative called the Pioneer ACO Program because they struggled to meet its criteria and some had to pay penalties.

Health and Human Services Secretary Sylvia Mathews Burwell has set a goal of tying 30 percent of Medicare payments to programs like ACOs by the end of this year. By 2018, HHS wants half of Medicare payments to flow through ACOs and other programs that take into account whether beneficiaries are receiving quality care.

Of the 32 systems that began the five-year Pioneer program, just nine remain for 2016, its final year. Seven of them are starting in Next Generation this year. The others have exited or moved to other Medicare programs.

Dartmouth-Hitchcock health care system left Pioneer last year after getting a penalty for failing to meet savings benchmarks. And although it believes in the aims of ACOs and was accepted into the Next Generation program, Dartmouth-Hithcock didn’t sign up for this year.

The risk of another penalty was too high, according to Robert Greene, the system’s executive vice president and chief population health management officer. The system will make a decision on 2017 after seeing the government’s savings expectations, he said in a telephone interview.

One main difference between Pioneer and Next Generation is in how savings are calculated, said Patrick Conway, deputy administrator for innovation and quality at CMS. The programs use different benchmarks and take into account different estimates of how much medical costs should increase in a given year.

Across the U.S., most of the 477 Medicare ACOs are eligible for payments from the government if they save money and meet quality standards. Sixty-four of them -- including Pioneer and Next Generation -- are taking on more risk: they may have to pay the government if it turns out their care is more expensive than expected.

Overall, there are more than 8.9 million Medicare beneficiaries covered in several different kinds of accountable care programs, the Administration said Monday. About 37.8 million people are covered by traditional Medicare and another 18.1 million in the privately run Medicare Advantage program.

Pioneer participants, including Dartmouth-Hitchcock and Maine’s Beacon Health, have said the program was tougher on health systems that already had relatively low costs.

“To go further, it’s not just cutting fat; we need to make structural changes,” Greene said. “If you take someone running a five-minute mile and try get them to four minutes, not only is there a lot of training and hard work, there just aren’t a lot of places to cut.”

Beacon Health decided to split its Pioneer ACO. Rural hospitals, with about 6,000 patients, are now going to be part of a less stringent program, while other facilities with about 17,000 patients, are entering the Next Generation program, according to Chief Financial Officer Jeff Sanford.

The Next Generation rules give Beacon more flexibility in how it takes care of patients, including provisions for expanded use of home visits and remote visits using technology, or telehealth, Sanford said.

“We like the financial model a lot better than the Pioneer model,” he said. “There’s more flexibility in terms of patient engagement.”

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