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#9 Managing Delivery System Reform and Strengthening Medicare Advantage

Why This Is a Challenge

A paradigm shift is underway in the Nation's health care system—both public and private—to improve patient care and reduce wasteful spending through heightened focus on quality of care rather than quantity of care. The pace of change is rapid and the magnitude substantial. New models are being introduced that focus on rewarding the delivery of high-value health care and promoting innovative care redesigns that provide patients with better coordinated care. These models are intended to incorporate new understandings of medicine, social science, population health, technology, data analysis, and behavioral incentives. Medical, mental health, and social services are being integrated in new ways.

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For HHS, this shift—propelled by reforms under the Patient Protection and Affordable Care Act, Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), and other statutes—affects all parts of Medicare, as well as Medicaid and public health programs. Stakeholders include patients, providers, vendors, managed care organizations, private payers, administrative contractors, State agencies, and taxpayers. HHS is investing significant resources in developing evidence-based tools, realigning provider and beneficiary incentives, testing new coordinated and integrated care designs, promoting meaningful use of electronic health records (EHRs) and other technologies, and enhancing patient engagement and access to health information.

Delivery system reform in a highly complex environment requires concurrent, sustained, and multifaceted planning, execution, and oversight. To participate successfully in new models, providers and others must commit resources and reshape the delivery of care. Models often involve new types of caregivers as well as individuals and entities undertaking new roles and responsibilities in Federal health care programs. HHS must effectively educate and oversee both experienced participants and new entrants into these programs.

Key Components of the Challenge

Implementing Medicare's Quality Payment Program. MACRA revamped Medicare's physician reimbursement system, affecting physicians and other clinicians reimbursed under the Medicare Physician Fee Schedule. The new Quality Payment Program (QPP) introduces into physician reimbursement two new mechanisms linked to quality and efficiency: (1) a Merit-Based Incentive Payment System (MIPS) and (2) alternative payment models (APMs). To meet statutory deadlines, much must be accomplished quickly. This novel and complex program presents substantial policy, administrative, operational, logistical, and technological challenges. The Centers for Medicare & Medicaid Services (CMS) must consolidate three existing incentive programs into MIPS and craft advanced APMs suitable for physicians with various practice characteristics and levels of operational readiness. In so doing, CMS must be mindful of administrative burden. Notably, there is concern that small and rural providers may need assistance navigating the transition. Physicians must prepare for significant changes in reimbursement methodology, reporting, and, depending on circumstances, delivery of care and workflow. Quality measurement is a key component of the QPP. Challenges highlighted in HHS's recent Quality Measure Development Plan1 for the QPP include closing known measurement and performance gaps; harmonizing and aligning measures across programs, settings, and payers; and refining measure development. CMS has signaled plans to finalize measure sets in annual rulemaking.

Managing the CMS Innovation Portfolio. The diverse CMS innovation portfolio poses a significant management challenge for HHS. Comprising dozens of new models in various stages of development and implementation, the portfolio touches on virtually every aspect of health care delivery and experiments with a variety of payment structures, including shared savings, episode-based payments, population-based payments, capitation, and value-based purchasing. Many new payment structures are hybrids involving both traditional and new types of payments, giving rise to additional challenges in managing risk. Many models involve novel business arrangements among providers and new incentives to promote patient engagement in their own care. These arrangements and incentives also give rise to challenges for risk management. CMS operates both voluntary models and models that are mandatory in designated geographic areas; mandatory models pose unique challenges in ensuring provider readiness.

HHS must ensure that Medicare realizes benefit from the Government's substantial investment in designing, testing, and implementing new models, including the Center for Medicare & Medicaid Innovation's (CMMI) 10-year, $10 billion budget. Perhaps equally challenging is ensuring that models are viable in light of providers' substantial investments in infrastructure and care redesign. Responsibility for administering and overseeing new models is shared across several CMS components, including CMMI and the Center for Program Integrity. CMS leverages expertise across HHS through partnerships with other HHS operating divisions. These collaborations within and outside CMS require shared vision, clear communications, and continuous coordination.

Strengthening Medicare Advantage. Approximately 30 percent of Medicare beneficiaries are enrolled in Medicare Advantage (MA), a three-fold increase since 2004. Ensuring a sound MA program is essential to meeting intended coverage, access, quality, and cost goals. OIG work has identified challenges in the MA program with respect to the precision and use of data, payment accuracy, and program integrity, including vulnerabilities at both the plan and provider levels. CMS estimated for FY 2015 that 9.5 percent of payments to MA organizations were improper, mainly due to insufficient documentation to support diagnoses submitted by MA organizations.2 Notwithstanding these vulnerabilities, MA organizations have the potential to increase efficiency and quality through better coordinated care, aligned incentives, and performance measurement. HHS is developing new models for MA, including a Value-Based Insurance Design model. (For more information on improving the effectiveness of Medicaid managed care, see TMC #2.)

Progress in Addressing the Challenge

Implementing the QPP. CMS is making steady early progress in implementing the QPP, including recently issued final program regulations. HHS has begun issuing other program policies and guidance, including the Office of the National Coordinator for Health Information Technology's guidance for measuring interoperability and heath information exchange. CMS is deploying an integrated policy and technology team to plan and execute the QPP. CMS is testing user-centered IT designs and planning education and technical assistance initiatives to promote clinician acceptance of, and readiness for, the QPP. In April 2016, CMS released a solicitation for direct technical assistance to support implementation of the QPP. CMS more recently announced a new, long-term initiative to increase clinician engagement, including an 18-month pilot program to reduce medical review for certain physicians practicing within specified alternate payment models with two-sided risk.

Designing and Assessing Models. CMS is compiling a growing roster on its website of early results from, and evaluations of, new programs and models. For example, CMS reported that Medicare accountable care organization (ACO) programs, comprising over 400 ACOs, generated total gross program savings of more than $466 million for Medicare in 2015; CMS also reported improvements in quality performance.3 Further, CMS reported second-year results for the Independence at Home (medical home) Demonstration of an average savings of $1,010 per beneficiary, with all participating practices improving quality from the first performance year in at least two of the six quality measures. Results vary across models, with some more promising than others.

CMS continues to test initiatives to speed adoption of best practices, accelerate development of new models, and reform Medicaid and the Children's Health Insurance Program, among others. Models include multiple types of ACOs, primary care medical homes, and bundled payment initiatives. More recently, CMS has been developing and refining models that will qualify as advanced APMs under the QPP. HHS is supporting the Health Care Payment Learning and Action Network to collaborate on aligning reforms across health care sectors. CMS issued regulations for an expanded Medicare Diabetes Prevention Model. CMS continues to provide guidance and education to model participants, as well as to state Medicaid agencies engaged in reforms through CMMI's Medicaid Innovation Accelerator Program, and has taken steps to include in new models program integrity safeguards, including transparency of data and monitoring for indicators of abuse or gaming.

In March 2016, HHS announced that it met, earlier than scheduled, its goal of tying 30 percent of traditional Medicare payments to APMs by the end of 2016. HHS aims to increase this amount to 50 percent by 2018.

Strengthening Medicare Advantage. CMS is using audits to oversee, among other things, MA organizations' implementation of programs to detect, correct, and prevent fraud, waste, and abuse, which are required by their compliance plans. CMS has issued guidance on sharing information between CMS contractors and with other program integrity stakeholders, such as State agencies, to more effectively coordinate efforts to identify and investigate fraud. HHS has stated a goal of having all MA contracts audited annually. CMS has taken steps to incorporate recovery audit contractors into MA, as required by statute.4 CMS has enhanced the transparency of information about MA plans by publicly reporting on its website additional data, including information about grievances filed with plans and plans' oversight of sales agents and brokers. CMS announced changes to the Star Ratings system, developed through a public process, aimed at better accounting for costs of caring for enrollees. Further, CMS has developed a Network Management Module to help assess network adequacy.

What Needs To Be Done

Continue Implementing the QPP. Physician payment reform under MACRA will require sustained focus. For a successful transition, CMS must address policy, infrastructure, data systems, oversight, and provider education needs. Physician representatives have identified challenges, including complexity of reporting and measurement, scope and availability of APMs, provider education, daunting timelines, infrastructure investments, new business requirements, and administrative burden. CMS should allocate sufficient resources to ensure issuance of timely and clear program regulations and guidance and to provide meaningful education and technical assistance. In addition to well-functioning, physician-oriented websites, CMS must ensure that it has fully operational back-end payment and data systems for the QPP. CMS must coordinate with the Office of the Assistant Secretary for Planning and Evaluation and the Physician-Focused Payment Model Technical Advisory Committee on the development of APM opportunities submitted by physicians. CMS needs to develop quality measures as outlined in the Quality Measure Development Plan and monitor for any unintended impacts the quality measures have on Medicare beneficiaries. CMS needs to ensure that its medical records review reduction pilot program operates in a manner that protects the Medicare program from fraud and abuse.

Effectively Manage and Oversee New Models. CMS must continue to manage its growing portfolio of complex models and innovations to ensure they achieve their intended quality of care and efficiency outcomes. CMS must issue clear guidance on program requirements; administer (or contract for) financial, beneficiary alignment, and other systems necessary for effective operations; and test, evaluate, and verify model progress and outcomes. Attention should be paid to the policy, evaluative, compliance, and practical day-to-day challenges for CMS and providers of concurrent participation in multiple models. Further, CMS must clearly define actionable and meaningful quality measures and ensure that they, in fact, measure what CMS intends them to measure to achieve desired quality goals. CMS should carefully monitor for successes and benefits that can be scaled and replicated, as well as for potential problems-including inefficiencies and misaligned incentives. As the testing of multiple models matures, CMS will need to effectively manage the transition from testing a model to its expansion, as appropriate.

New models rely significantly on data, EHRs, and technology. CMS must ensure that data collected and provided for new payment models are complete, accurate, timely, and secure and that new technologies, such as telemedicine, achieve their intended results. Data from providers and others must be integrated and shared across models within HHS and with stakeholders, as appropriate. (For more information on the challenges associated with electronic information and health IT, see TMC #3.) To the extent that resource, cost, and quality performance are measured on the basis of Medicare Parts A and B claims data, CMS must ensure the soundness and reliability of such data. CMS should adopt sound record retention and documentation practices for all models.

CMS must monitor for program integrity risks in new models, incorporate safeguards tailored to specific risks in particular models, and assess the effectiveness of the safeguards it employs. Detected program integrity problems should be remediated promptly and safeguards strengthened to prevent program and patient abuse or gaming. Sharp attention to program integrity is especially important for models that introduce new payment incentives, which might lead to new fraud schemes, or for which waivers of payment or fraud and abuse laws may have been issued under sections 1899(f) or 1115A of the Social Security Act. As a critical element of program integrity, CMS must maintain accurate historical and real-time information about new models, including, for example, information about providers and beneficiaries. (For more information on fraud and abuse in Medicare Parts A and B, see TMC #1.)

Strengthen Medicare Advantage. CMS should continue to focus on ensuring that MA plan enrollees have access to and receive the services to which they are entitled and that those services are of appropriate quality. CMS must strengthen the MA program to ensure that benefits are provided only to eligible beneficiaries. Further, CMS must ensure that data and other information related to payment from providers and plans are available for fraud detection and prevention. CMS must use data effectively to ensure payment accuracy and to review MA organizations' performance. Ensuring the accuracy and integrity of risk-adjustment and other data used to establish payment rates is also critical to protect against gaming or abuse and reducing the payment error rate. HHS should take steps to address the obstacles to accurate risk-adjustment payments and recovery of improper payments recently identified by the Government Accountability Office.5 Finally, CMS will need to oversee new models within the MA program to ensure that they meet intended quality of care and cost-containment goals.

Key OIG Resources


  2. GAO Report:; Annual Financial Statement Audit
  4. GAO Report:
  5. Ibid.
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