The Outlook for ACA Healthcare Delivery Reforms

Guest post by Ken Perez, vice president of healthcare policy, Omnicell, Inc.

Ken Perez
Ken Perez

The Patient Protection and Affordable Care Act (ACA) mandated five major healthcare delivery reforms that collectively aim to improve care quality and slow the growth of healthcare spending. In the five years since passage of the ACA, each of these delivery reforms has been implemented, revised and broadened.

What is the outlook for these changes? Clearly, the long-term strategic intent of the Obama administration is to shift Medicare payments from fee for service to fee for value. On Jan. 26, 2015, Health and Human Services Secretary Sylvia Burwell set forth quantified goals and an aggressive timeline for directing an increasing share of Medicare payments through alternative payment models (APMs) such as accountable care organizations (ACOs) and bundled payments, from 20 percent in 2014 to 50 percent in 2018. Let’s consider each of the major healthcare delivery reforms.

Accountable Care Organizations

On January 11, the Centers for Medicare & Medicaid Services (CMS) announced that 477 organizations are participating in one of Medicare’s four accountable care programs.

With 434 current participants, the Medicare Shared Savings Program (MSSP) accounts for the vast majority (91 percent) of the total. Although the total number of MSSP ACOs has grown steadily each year since the program’s inception in 2012, cumulatively about 100 ACOs (19 percent) have dropped out of the program.

Medicare’s first ACO program, the higher-risk, higher-reward Pioneer ACO Model, suffered numerous departures during the second half of 2015, as the number of Pioneers has dropped from 32 original participants announced in December 2011 to a current total of nine, a 72 percent decline. However, some of the departing Pioneers have transferred to the MSSP or the even higher-risk, higher-reward Next Generation ACO Model, which was launched in March 2015.

CMS also disclosed that 21 organizations are participating in the Next Generation ACO Model, including five former Pioneers. The remaining 13 of the 477 ACOs are the initial participants in the first disease-specific Medicare ACO program, the Comprehensive ESRD Care Model, which was announced in October 2015.

Despite these seemingly impressive numbers, to achieve the aforementioned goal of flowing half of Medicare payments through APMs by 2018, CMS needs even more growth in the number of Medicare ACOs coming onboard in the next couple of years, perhaps 150-200 net new ACOs per year in 2017 and 2018.

Bundled Payments

In 2013, CMS launched the Bundled Payments for Care Improvement Initiative (BPCI), a voluntary program which offers providers four episode-based payment models. In three of the models, implementation is divided into two phases. During Phase 1, “the preparation period,” CMS shares data and helps the participating providers learn in preparation for Phase 2, “risk-bearing implementation,” in which the providers begin bearing financial risk with CMS for some or all of their episodes. CMS required all participants to transition at least one episode (e.g., Acute Myocardial Infarction) into Phase 2 by July 1, 2015, to continue participating in the BPCI.

In November 2015, CMS issued its Final Rule for the Comprehensive Care for Joint Replacement model, a five-year, episode-based bundled payment program for lower extremity joint replacements (hips or knees) that is mandatory for 789 urban hospitals. Under the model, hospitals will have both upside potential and downside risk, depending on their spending per episode relative to the Medicare target price. Spending in excess of the target price may require hospitals to repay some funds to CMS. Repayments are waived in the first performance year, with escalating stop-loss limits through the fifth and final performance year.

Hospital Re-admissions Reduction Program (HRRP)

The HRRP requires CMS to reduce payments to hospitals with excess readmissions. The program’s readmissions adjustment factor has grown from -1 percent of operating diagnosis-related group (DRG) payments for all discharges in FY 2013 to -3 percent in FY 2015.

During its first two years, the HRRP applied readmission measures to three conditions: acute myocardial infarction, heart failure, and pneumonia. In FY 2015, the program includes patients admitted for an acute exacerbation of chronic obstructive pulmonary disease, as well as patients admitted for elective total hip arthroplasty and total knee arthroplasty. In FY 2017, the HRRP will add patients admitted for coronary artery bypass graph surgery to the calculation of a hospital’s readmissions payment adjustment factor.

Hospital Value-Based Purchasing (VBP)

In simple terms, VBP links Medicare’s payment system to the quality of care delivered. The program reduces hospitals’ base operating DRG payments, and hospitals are able to earn back a value-based incentive payment percentage that depends on the hospital’s quality performance and the range and distribution of all hospitals’ scores for a fiscal year. The VBP reduction started at -1 percent in FY 2013 and has escalated by a quarter of a percent annually. It will plateau at -2 percent in FY 2017.

Hospital-Acquired Condition (HAC) Reduction Program

Starting in FY 2015, the HAC Reduction Program requires CMS to reduce hospital payments by 1 percent for hospitals that rank in the lowest quartile with regard to HACs. In FY 2016, the program will add Surgical Site Infections from Colon Surgeries and Abdominal Hysterectomies as a measure, with Methicillin-resistant Staphylococcus aureus and Clostridium difficile Infection to be added in FY 2017.


The ACA’s five major delivery reforms vary in their areas of focus as well as their operational and financial impacts, but together they are sending a clear signal that the movement toward fee for value is inexorable. The planned evolution and bolstering of these reforms in the years ahead will require provider organizations to enhance their performance management capabilities and take on greater financial risk.

Write a Comment

Your email address will not be published. Required fields are marked *