The Lynx Group

Global Fees, ACOs, and New Reimbursement Trends Will Influence Medicare’s Future

July 2011, Vol 2, No 4

Philadelphia, PA—Growth in Medicare Part B spending, increasing roles in specialty pharmacy, formation of accountable care organizations (ACOs), and bundling of payments for care are all anticipated trends in the Medicare and reimbursement arenas, according to Jayson Slotnick, JD, MPH, Partner, Health Policy Strategies, Washington, DC.

In 2009, a total of 46.3 million Americans were covered by Medicare, and approximately 10,000 new people are becoming Medicare eligible every day as a result of the baby boomers coming of age. Conse quent - ly, the government is faced with the huge spending for Medicare Part B, said Mr Slotnick.

“Some figures from the most recent Medicare Trustees Report note that government is looking at huge growth in Part B spending. Within Part B spending is specialty drugs—especially physician-administered drugs,” Mr Slotnick said. “Part B costs are growing rapidly, averaging 8.3% annual growth over the past 5 years,” he noted. This continuing expansion and growth evokes 3 independent issues in Medicare Part B:

  • How much of the cost will be reimbursed?
  • Will there be any payment at all?
  • How will it be billed?

Healthcare Reform Specifics
From a broader perspective, the healthcare reform, or the Patient Protection and Affordable Care Act (ACA), addresses coverage and delivery system reforms—in the form of ACOs and comparative effectiveness research—among other grand-scale initiatives.

“Our federal government can create markets, change markets, and destroy markets. With the latest reiteration of health reform, we have all 3 occurring at the same time,” said Mr Slotnick, who represents innovative companies in the pharmaceutical/biotechnology device and diagnostic base, monitoring what goes on at the Centers for Medicare & Medicaid Services (CMS) and the US Food and Drug Admin - istration regarding commercialization of products.

The ACA does nothing to change compendia policy or coverage criteria; however, it includes an expansion of the 340B drug discount program. Also, the ACA preserves current average sales price payment methodology for small molecule pharmaceuticals and for biologics administered in physicians’ offices.

The ACA’s newly created CMS’s Center on Medicare and Medicaid Innovation will test new ways to improve quality and manage costs. Demonstrations of payment and delivery system reforms in Medicare, Medicaid, and both programs will be established and may require more federal money if quality is improved. Successful models may go nationwide without further congressional action.

ACOs Gaining Momentum
The ACA’s Medicare shared savings program creates the option for healthcare providers to form ACOs. A new nationwide ACO option in Medicare starts January 2012. Physicians, hos - pitals, and other providers will be responsible for quality and overall care of Medicare patients through an ACO.

Medicare’s program will share savings from better quality, fewer hospitalizations, and elimination of unnecessary costs with ACO providers. Payment models will include feefor- service with shared savings, and partial capitation. The formation of multipayer ACOs is likely with partici - pa tion from state Medicaid programs.

Many provider groups will be able to form an ACO, including hospitals, physicians, physician groups, and other healthcare professionals via a joint venture or partnership arrangement. In addition, physicians and other healthcare professionals in group practices or a network of practices, along with integrated hospital– physician systems, will have an opportunity to establish ACOs.

The ACO option further extends to hospitals, physicians, and post–acute care providers, such as skilled nursing facilities and home healthcare agencies. Although ACOs need not include a hospital, ACOs do require physician participation.

Global Fees Enhance Patient Care

Continued consolidation of physicians’ offices will be seen in the near future. Mr Slotnick indicated there would be an increased migration of specialty products to the pharmacy benefit, specifically pertaining to the use of pharmacy benefit tools on specialty products and paying for adherence to clinical guidelines.

The specialty pharmacy arena will also have an increased role in data collection and demonstrating value proposition.

Currently, the federal government is establishing demonstrations to replace the traditional fee-for-service payment with global fees to achieve incentives for quality. With global fees, the provider gets to keep any savings from greater care efficiency and elimination of unnecessary services.

There are many opportunities to improve quality, access, and cost-effectiveness through the use of global fees. To be effective, an adequate global fee is required, along with risk adjustment, capacity, infrastructure, new workflow, and care redesign.

Bundled Payment
In the new Medicare bundled payment initiative, a national Medicare pilot program is under way to investigate the single, bundled payment based on an episode of care rather than the fee-for-service payment system. This bundled payment approach would include all inpatient, physician, outpatient, and post–acute care services from 3 days before admission through 30 days after discharge. The demonstration project is set to begin by January 2013.

As an option, state Medicaid programs could participate in this project or demonstrate their own bundled payment models. If the state health plans are successful, the overall Medicare bundled payment may expand nationwide in 2016.

Reimbursement Trends
Significant new reimbursement trends include measurement and public reporting of clinical performance; expectation for evidence-based, patientcentered clinical practice; payment methods that place physicians, hospitals, and other providers financially at risk for low-quality performance, which is in contrast to “insurance risk” experienced by health plans; and bundling of payments for an episode of care or a condition.

Other increasing reimbursement trends involve using cost-effective - ness and comparative effectiveness re - search in making coverage decisions; payment rates and methods that are increasingly driven by budget considerations; and recognition that the fiscal outlook for Medicare is very poor, according to Mr Slotnick.

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