The Future of Payment Reform: Looking to the CMMI for Hints
By Andrew Collard
Understanding how healthcare payment and delivery will evolve in the next 5-10 years is one of the most important (and most challenging) considerations for our clients developing innovative new products. It is paramount to understand how a new treatment, device, or diagnostic will fit into this evolving landscape – to inform stakeholders input, clinical trial parameters, revenue expectations, and ultimately value. It is important to note that the Affordable Care Act wasn’t a binary change in healthcare reform, but rather, as CMS uses its new authority under the ACA, payment reform will continue to evolve and even accelerate over the next 5-10 years. In fact, CMS has established ambitious goals to transition >50% of Medicare payments to Alternative Payment Models (e.g. ACOs, bundled payments, etc.) by 2018.
AC blog post 6.22.16
CMS Targets for Payment ReformSource: http://www.allhealth.org/briefingmaterials/1-PRESSPRESENTATION_J9.PDF
One of the most underappreciated and powerful parts of the ACA was the creation of the Center for Medicare and Medicaid Innovation (CMMI), which pilots many alternative payment and delivery programs that could reduce cost and/or improve quality. If any pilot program reduces cost while maintaining or improving quality, CMS can implement the pilot nationally without the need for new legislation. This ability to scale pilot programs streamlines reform, and side steps the need for repeated Congressional approval for each new program. While it is impossible to know which pilots will ultimately be successful, it is important to look at which are being tested as indications for the direction healthcare reform is headed.Toward that end, I recently had the opportunity to visit the Center for Medicare and Medicaid Innovation (CMMI). It truly is an amazing place that has attracted passionate and intelligent people, and ground zero for healthcare reform in the US.Below are a few of the most fascinating pilot programs with the potential to impact key areas we advise:
Comprehensive Care for Joint Replacement (CJR): Program to fund bundled payments for care after hip/knee joint replacement. The bundle comprises all care within 90 days of the joint replacement, including surgery, hospitalization, rehabilitation, and follow-up.
Comprehensive ESRD Care Model (ESRD ACO): Similar to the ACO concept but for dialysis patients. Participating dialysis centers are responsible for all of their patients’ healthcare costs (hospitalizations, etc.) with capitation and shared savings like an ACO, subject to quality metrics.
Medicare Part B Drug Payment Model: Program tests an alternative drug payment concept for high-priced infusions and hospital administered therapies (rather than ASP +6%), tied to quality, side effect management, and cost. Could be a huge financial hit to infusions centers and oncologists.
Oncology Care Model: Piloting episodic payment for cancer chemotherapy (per line of therapy for patient diagnosed), though this is in the very early stages given constraints around existing diagnostic codes.
Bundled Payments for Care Improvement Initiative: Bundled payments for select DRGs, including hospital costs, post-acute care, and readmissions.
It remains to be seen whether these models will ultimately be successful in improving quality and cost, but either way, they reflect areas of focus for CMMI and the direction payment reform is headed. Drug, device, and diagnostics manufacturers will increasingly need to articulate how they will navigate (and even better, enable) this evolving environment.New development strategies must incorporate knowledge and insight into these payment trends to optimize the outcome for investors, management, and especially patient and physician stakeholders.