Skip to main content

Transitioning from Volume to Value: Accelerating the Shift to Alternative Payment Models

In early 2015, both Congress and the Department of Health and Human Services (HHS) took steps to improve quality and lower health care costs. Congress enacted legislation to replace Medicare’s sustainable growth rate (SGR) with a system of payment for health care providers that are paid under Medicare’s Physician Fee Schedule. In addition to the passage of the SGR legislation, HHS has set goals to increase value-based purchasing in Medicare. In January, the HHS Secretary announced that the agency will take steps to promote the transition to alternative payment models, by establishing new goals to increase value-based payments in Medicare to 50 percent of all payments by 2018. As part of that effort, the CMS Center on Medicare and Medicaid Innovation (CMMI) announced a Next Generation ACO, designed to build on lessons learned in the Medicare Shared Savings Program (MSSP) and the Pioneer ACO program, as well as continuing demonstrations of other payment models.

Alternatives to fee-for-service (FFS) have proliferated in recent years as the federal and some state governments, private insurers, and employers seek increased value in the health care system. According to a recent study, there are more than 744 ACOs operating as of March 2015, with more than 400 of these participating in the MSSP or Pioneer program. While policymakers have taken action to encourage the formation of ACOs, private-sector payers have become increasingly concerned about the cost and quality of the health care system, and businesses are utilizing ACOs as a delivery model for their employees. Today 132 private payers have at least one ACO contract.

BPC reviewed implementation of ACOs in Medicare and offered near-term recommendations to improve this model, some of which were incorporated as part of CMMI’s Next Generation ACO model. While this report focuses primarily on ACOs and the role they play as APMs in delivery system reform, BPC’s previous white papers also examined the potential of other models of care?such as patient-centered medical homes, payment bundles, and revisions to fee-for-service?and recognizes that additional models may be developed over time.

In practice, ACOs have enjoyed modest successes, but at the same time, they have encountered significant challenges. Specifically, quality results were disappointing in many cases, and most ACOs generated modest or no savings?especially in the MSSP. Medicare’s current ACO programs lack many of the features BPC proposed in 2013, such as giving providers clearer expectations, engaging beneficiaries directly with the ACOs, and establishing stronger incentives for both providers and beneficiaries to participate?features which could help improve the success of Medicare ACOs. The establishment of a clear and viable pathway from the status quo to greater amounts of responsibility and risk is one of the most significant and important challenges for the long-term success of ACOs as an APM.

Read more from BPC’s series on delivery system reform.

Read Next
Downloads and Resources

Support Research Like This

With your support, BPC can continue to fund important research like this by combining the best ideas from both parties to promote health, security, and opportunity for all Americans.

Give Now