Will New Healthcare Policy Impact Value-Based Healthcare?

March 15, 2017
Daniel Orenstein
General Counsel
Is Value-Based Healthcare Here to
Stay? Looking for Answers in New
Policies

© 2017 Health Catalyst
Proprietary and Confidential
®
What are the differences among these words? Chaos, confusion,
mess, commotion, mayhem, havoc, shambles, pandemonium, uproar,
disruption, turmoil, upheaval, disturbance, turbulence, disarray, unrest,
disorder, anarchy
2
Source: https://www.quora.com/What-are-differences-between-these-words-Chaos-confusion-mess-commotion-mayhem-havoc-shambles-
pandemonium-uproar-disruption-turmoil-upheaval-disturbance-turbulence-disarray-unrest-disorder-anarchy-Could-anyone-group-them-to-help-me-be-
more-clear-on-which-word-to-use-in-which-situation
health policy

• Definition of Value-Based Care (VBC)
• Federal government VBC programs
• Government influence on the progression of VBC
• Health Care Reform Part II (Republican-style)
• Evidence on continued government support for VBC
• Trends to follow
• Bipartisanship vs. Polarization
• Market-based innovation
• Consumer-directed payment reforms
• Q&A - Discussion
Agenda
3

VBC describes payment programs and care models which are
designed to shift payment from the volume of procedures
(FFS) to the outcomes or results of the healthcare services,
With the goal of achieving the highest quality healthcare at a
lower systemic cost.
Defining Value-Based Care
4

• Medicare Access and CHIP Reauthorization Act (MACRA)
• Merit-based Incentive Payment System (MIPS)
• Advanced Alternative Payment Models (APM)
• Medicare Shared Savings Program
• Medicare ACOs, established by the Affordable Care Act (ACA)
• Bundled payment programs, and other demonstration programs,
conducted by the CMS Innovation Center (CMMI)
Federal Government VBC programs have helped set the
course for the healthcare industry
5

HHS has stated it wants to shift the Medicare program to have 50% of
its payments for healthcare items and services comprised of value
based payments by 2018.
--Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume, CMS, Jan. 26, 2015, available at:
https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html
The federal government (HHS) has set an aggressive goal for
VBC
6

VBC has made progress as measured by the number of
hospitals participating
7
A recent Washington Post-Philips survey shows that about a third of responding hospitals and health
systems were participating in voluntary value-based payment models.
12%
17%
19%
15%
45%
38%
22%
26%
43%
45%
59%
60%
Northeast
Midwest
South
West
Under consideration Yes No
Source:http://www.washingtonpost.com/sf/brand-connect/philips/transforming-healthcare/?origin=13_us_en_wpvbc_philipsnatwitter____nabcd_paid

What is the average percentage of revenue attributable to value-
based payment among hospitals and health systems? 156
respondents
1- 7% --16%
2- 12% -- 22%
3- 14% -- 25%
3- 22% -- 27%
4- 38% -- 10%
Poll Question #1
8

However, as measured by percentage of a hospitals’ total
payments that are value-based today, VBC is just coming out
of the gate
9
“Despite the Department of Health
and Human Services’s (HHS) goal
of shifting 50 percent of Medicare
payments from fee-for service to
value-based payment models that
emphasize quality and outcomes
by 2018, the respondents said that
only 14 percent of their payments
were currently tied to value, as
defined by CMS, and an even
smaller 6.7 percent of their revenue
was actually at risk.”
14.1%
6.7%
Payment tied to
value
Revenue at risk
under VBP

• Federal requirements, or mandates, play a significant role in
adoption of value-based payment programs
• 36% federal requirements, 6% commercial payors, 4% state laws
• Competitive considerations are also a significant factor. Health
systems do not want to be left behind or left out of consideration
for value based payor contracts
• 37% voluntary, 9% competitive considerations
Hospitals’ motivations for participating in VBC might not be
“purely” to pay for quality/outcomes and reduce cost
10

• Republicans are finding themselves boxed in by the popular
provisions of the ACA
• Subsidies to purchase health insurance (22M more people covered)
• No denial of coverage for individuals with pre-existing conditions
• Coverage for children up to age 26
• “Repeal and replace,” “repeal and delay,” “modify without repeal”
• These are just some of the top level designations, with many policy ideas
still being floated and evaluated for restructuring healthcare coverage
• Some of these policy solutions may affect the progress of VBC, but we
don’t yet know which ones will make it into legislation
Healthcare Reform Part II (Republican-style) is still in the
early innings
11

• The Bill (released March 6, 2017) should be characterized as a
“partial” ACA repeal and replacement.
• The Bill retains many features of the ACA, for example:
• Coverage for pre-existing conditions
• Coverage for children up to age 26 on parents’ plan
• No annual or lifetime caps
• The most significant changes are rolling back the Medicaid
expansion and replacing the ACA credits to purchase health
insurance and cost sharing with tax credits tied to age.
• Doesn’t clearly address cost control, payment methods within
health plans. Medicare ACOs, CMMI, MACRA are not affected.
House proposed ACA replacement Bill deals with
coverage rather than payment reform
12

Bipartisan Cooperation on Health Policy
13

Senate
92392
Bipartisanship is reflected in the MACRA vote tally
14
Congress
8
YesNo
37

What percentage of Congress voted in favor of the 21st Century Cures
Act? 160 respondents
1- 51% -- 24%
2- 67% -- 20%
3- 74% -- 16%
4- 88% -- 20%
5- 94% -- 20%
Poll Question #2
15

Senate
94392
… as well as the 21st Century Cures Act vote tally
16
Congress
5
YesNo
26

Federal healthcare policy issues that polarize vs. those that
enjoy bipartisan support
17
Issue Polarizing or
Bipartisan
Explanation
Healthcare
coverage design
Polarizing Federal coverage involves questions that invoke party ideology
about whether, and to what extent, the federal government
should be involved in an industry that operates largely in private
markets, as well as the scope of federal entitlements.
Reimbursement
methods
Mixed To the extent that reimbursement reflects cost control efforts,
there is bipartisan support. However, some efforts at cost
control, such as allocating appropriate resources to end of life
care, have been viewed as ethically questionable “rationing” by
conservatives.
Value-based
healthcare
programs
Bipartisan Payment and care models that improve quality and reduce cost
are hard to argue with. They are part of existing payment
programs, so do not invoke ideological questions on the
appropriateness of federal support. Plus market innovation is
supported by both sides.

• Markets
• Morality
• Entitlements
Polarizing
• Cost control
• Access to and availability of care
• Quality of care
Bipartisan
Issue categories that are polarizing and those that
generally enjoy bipartisan support
18

• Cures is broad and sweeping legislation that covers many topics,
mostly on streamlining and accelerating the discovery of new drugs
and medical devices. It includes provisions to improve mental
health and substance abuse treatment and to improve patient
access to new therapies, among many other areas covered by the
Act.
• The Act also establishes programs and oversight to promote health
information interoperability and to prohibit “information
blocking” practices.
The 21st Century Cures Act became law on December 13,
2016 with broad bipartisan support.
19

Proprietary and Confidential20
EXECUTIVE ORDER:
Minimizing the Economic Burden of the Patient
Protection and Affordable Care Act Pending
Repeal

• On January 20, 2017, President Trump signed an Executive Order
on “minimizing the economic burden” of the ACA.
• The Executive Order, widely viewed as a symbolic act to show
action on repealing the ACA, asks the executive branch and HHS
to:
1- Take steps to minimize the “unwarranted economic and regulatory burdens”
of the ACA, and
2- Waive, defer, grant exemptions from, or delay provisions of the ACA that
would impose a fiscal burden on any State or a cost, fee, tax, penalty, or
regulatory burden on individuals, families, healthcare providers, health
insurers, patients, recipients of healthcare services, purchasers of health
insurance, or makers of medical devices, products, or medications.
The Executive Order focused on limiting the ACA where
possible
21

• The Order calls for preparing “to afford the States more flexibility
and control to create a more free and open healthcare market.”
• Also calls for federal departments or agencies with healthcare
jurisdiction to “encourage the development of a free and open
market in interstate commerce for the offering of healthcare
services and health insurance, with the goal of achieving and
preserving maximum options for patients and consumers.”
The Executive Order also reflects principles of open markets
and promoting innovation
22

• Tom Price, Secretary of HHS is a staunch opponent of the
ACA. However, he made comments in his confirmation
hearings on portions of the ACA that promote programs aimed
at innovation in healthcare delivery and value-based care.
• Price indicated that he supports in principle the activities of the
Center for Medicare and Medicaid Innovation (CMMI) which
was established by the ACA to test and promote innovative
payment and delivery system models that have the potential to
improve the quality of care.
Secretary of HHS Tom Price indicated his support for
innovation programs under the ACA
23

• While Price does not support all of the activities of CMMI, he
appears to support the mission of CMMI in principle, which is
essentially a test bed for value-based healthcare programs.
This provides another indication that these programs may
continue to enjoy support in the Trump Administration with
Price as Secretary of HHS.
Secretary of HHS Tom Price indicated his support for
innovation programs under the ACA (continued)
24

• Bipartisan support - The success of Cures indicates that
bipartisan cooperation will continue on key healthcare issues,
notwithstanding the extreme ideological divide on market and
entitlement related healthcare issues. Value-based payment
programs have historically fallen into the non-ideological, bipartisan
category.
• Market-based innovation – The emerging evidence is that
Congress and the Administration will support innovation in payment
and delivery models, and flexibility in programs that will be included
for participation in federal payment programs, which will flow
through to commercial payment programs.
Pulling the threads together, the evidence shows us that
VBC is likely to enjoy continued federal government support
25

• Support for Existing ACA Innovation programs – Although
highly uncertain, there are some indications that not all of the ACA
will be scrapped. And in this case the innovative payment and
delivery programs, which are on the non-ideological side, may be
among those pieces of the ACA that will survive and be supported
in some form.
• Spillover effect to Commercial VBC programs - Federal
government support is likely to influence the continued
development of commercial VBC programs.
Pulling the threads together, the evidence shows us that
VBC is likely to enjoy continued federal government support
26

• The trend towards consumer responsibility could possibly
accelerate if a significant structural basis of the reform is
increased tax credits and health savings accounts.
• These programs could put more responsibility on the patient to shop
for healthcare.
• The overall share of payment could shift to individuals from
third party payors.
• Would emphasize information provided to patients on cost and
quality to support shopping
• VBC would likely continue, but given its diminished importance in
the payment mix overall, it could get less policy attention and
decelerate.
Another trend to watch with Healthcare Reform Part II is
consumer-directed healthcare payment methods
27

Questions
28

Will New Healthcare Policy Impact Value-Based Healthcare?

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