FY 2017 Annual Performance Plan and Report - Goal 1 Objective D

Topics on this page: Goal 1. Objective A | Table of Related Performance Measures | Analysis of Results | Plans for the Future | Objective Progress Update Summary

Goal 1. Objective D: Reduce the growth of healthcare costs while promoting high-value, effective care

Healthcare costs can consume an ever-increasing amount of our nation’s resources, straining family, business, and government budgets. In the United States, the sources of inefficiency that are leading to rising healthcare costs include payment systems that reward medical inputs rather than outcomes, contain high administrative costs, and lack focus on disease prevention. The Affordable Care Act provides the framework to make healthcare safer and less costly.

As part of health reform implementation, HHS is lowering costs for American families and individuals through insurance market reforms that ensure that preventive care is available for all Americans and builds on improving the quality of care. HHS is transforming Medicare from a system that rewards volume of service to one that rewards efficient and effective care, reduces delivery system fragmentation, and better aligns reimbursement rates with provider costs. In 2011, Medicare made almost no payments to providers through alternative payment models (APMs), but by the end of 2014 such payments represented approximately 22 percent of Medicare payments. For the first time in history of the Medicare program, HHS has explicitly set goals for tying payments to APMs that reward quality and value over volume. AHRQ, CDC, CMS, HRSA, IHS, NIH, and ONC each play a distinct role in achieving this objective. HHS has identified the following measures as indicators for reducing healthcare costs while promoting high-value, effective care. The Office of the Secretary led this Objective’s assessment as a part of the Strategic Review.

Objective 1.D Table of Related Performance Measures

Alternative Payment Models: Increase the percentage of Medicare Fee-for-Service (FFS) Payments Tied to Quality and Value through Alternative Payment Models (Lead Agency - CMS; Measure ID - MCR30.1)

Reduce all-cause hospital readmission rates for Medicare beneficiaries by one percent below the previous year's actual rate (Lead Agency - CMS; Measure ID - MCR26)

Amount of savings by state AIDS Drug Assistance Programs (ADAPs) participation in cost savings strategies on medications (Lead Agency - HRSA; Measure ID - 16.E)

Analysis of Results

Health care costs consume a significant amount of our nation's resources. In the United States, one source of inefficiency is a payment system that rewards medical inputs rather than outcomes, has high administrative costs, and lacks focus on disease prevention. HHS, through the Innovation Center at CMS, established by the Affordable Care Act, identifies tests, evaluates, and expands, as appropriate, innovative payment and service delivery models that can reduce program expenditures for Medicare, Medicaid, and CHIP, while improving or preserving beneficiary health and quality of care. Under this authority, CMS is testing a variety of alternative payment models that create new incentives for clinicians to deliver better care at lower cost. This measure will help track progress toward the achievement of the Healthcare Payment Reform FY 2016 – 2017 Priority Goal.

In addition, CMS is implementing payment reforms that increasingly reward quality and efficiency of care (such as the readmissions/hospital acquired condition reduction program). These alternative payment models and payment reforms that increasingly tie Fee-for-Service (FFS) payments to value are currently moving the health care system in the right direction, but increased alignment across payers would be beneficial. To encourage alignment, Medicare is leading the way by publicly tracking and reporting payments tied to alternative payment models. Moving payments to more advanced payment models in an aligned fashion and on an aligned timeframe increases the overall likelihood that new payment models will succeed. CMS has established a baseline of 22 percent of Medicare FFS payments tied to alternative payment models in CY 2014.

In order the reduce Medicare expenditures and improve patient quality, CMS tracks preventable Medicare inpatient hospital readmissions. A hospital readmission occurs when a patient who has recently been discharged from a hospital (within the last 30 days of the admission) is once again readmitted to a hospital. Discharge is a critical transition in a patient’s care and incomplete handoffs at discharge can lead to costly adverse events and avoidable re-hospitalizations. In 2013 CMS established the Hospital Readmissions Reduction Program, which will reduce a portion of Medicare’s payment to certain hospitals based on the hospital’s excess Medicare readmissions for specific conditions. In addition, CMS leverages other efforts including Partnership for Patients to reduce preventable complications during a transition, as well as partnerships with the Community-Based Care Transitions Program and Quality Improvement Organizations. CMS exceeded the FY 2015 target for this goal, with readmission rates reduced to 17.6 percent.

HRSA supports state AIDS Drug Assistance Programs (ADAPs), through the Ryan White HIV/AIDS program, to provide assistance to low-income persons living with HIV/AIDS who have limited or no access to needed medications. Cost savings in FY 2013 decreased from the previous year to $896 million. Across the Ryan White HIV/AIDS Program, grantees are encouraged to maximize resources and leverage efficiencies. Within Part B state ADAPs use a variety of strategies to maximize resources, which results in a more effective use of funding and potentially enables ADAPs to serve more people. Cost savings strategies used by states include approaches such as recovering costs when another payor was primary, coordinating benefits with Medicare Part D, improving drug purchasing models, and participating in manufacturer rebate programs.

Plans for the Future

To encourage alignment between public and private payers and to help move health care payment reform forward, HHS has set a target for Medicare to have 30 percent of Medicare FFS payments tied to quality and value through alternative payment models by the end of 2016 and have 40 percent of Medicare FFS payments tied to quality and value through alternative payment models by the end of 2017. The Department’s key strategies to achieve these targets include growing and enhancing the Medicare Shared Saving Program and testing; expanding new payment and service delivery models; and establishing the Health Care Payment Learning and Action Network.

Over the last several years, CMS has undertaken several initiatives to reduce hospital readmissions in the Medicare program. These include publicly reporting hospital readmission rates through the Hospital Compare website, funding hospital-level improvements through the Partnership for Patients program, changing payment policies through the Hospital Readmissions Reduction Program and the Medicare Physician Fee Schedule, and CMS' many shared savings initiatives. CMS will continue with these successful efforts and also seek additional ways to reduce unnecessary readmissions.

HRSA will continue to provide technical assistance to state AIDS Drug Assistance Programs (ADAPs) on strategies to contain cost of medications, which can result in more effective use of funding and enable ADAPs to potentially serve more people living with HIV.

FY 2014 Strategic Review Objective Progress Update Summary

Please note that this section summarizes the result of the FY 2014 HHS Strategic Review process, limiting the scope of content to that available prior to spring of 2015. Due to this constraint, the following may not be the most current information available.

Conclusions: Noteworthy Progress

Analysis: HHS, as a whole, is strengthening the health system. Programs directed at reducing costs and improving the quality and safety of health care are well underway and targeted at areas of most opportunity and need. Indicators to date suggest that the nation is achieving historic progress in reducing growth in health care costs and improving quality even while the largest expansion in insurance coverage since the launch of Medicare and Medicaid is underway.

The Department is transforming the health system to achieve better care, smarter spending, and healthier people. For example, Accountable Care Organizations have demonstrated over $380 million in savings. HHS has estimated from 2010 to baseline to 2013, the health system has achieved a 17 percent decrease in hospital-acquired conditions, representing an estimated 50,000 deaths averted, 1.3 million patient harm events such as infections and adverse events avoided and $12 billion in savings overall.

The Department’s implementation of the Affordable Care Act has made a meaningful contribution to recent trends by introducing payment reforms in Medicare, Medicaid, and other public programs as well as aligning with the private sector. National health expenditures rose just 1.4 percent in real per capita terms in 2013, slower than the 1.5 percent increase in real per capita GDP in 2013. The last three years—2011, 2012, and 2013—are the three slowest years of growth in real per capita national health expenditures since record-keeping began in 1960.

HHS will continue to monitor influences on health care. AHRQ is a valuable resource for tracking health care costs and quality as well as providing supportive training and services to enhance quality. Recent efforts to defund the agency would threaten the progress being made to reduce the growth of healthcare costs while promoting high-value effective care. Another challenge in this area is that some consumers have had difficulty understanding the full scope of benefits from the Affordable Care Act.

In the coming year HHS plans to improve results and better manage progress by implementing the newly developed Delivery System Reform Priority Goal with related performance indicators. CMS is working to enhance transparency for consumers through rules and information collections including publishing the Medicare Shared Savings Program Final Rule.

¹ Based on CY 2011 data.

² Based on CY 2012 data.

³ Based on CY 2013 data.

⁴ The FY 2016 target was reduced to 17.4% from 17.7% as reported in the FY 2016 Congressional Justification.

⁵ Based on CY 2010 data.