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Getting Higher Quality at Lower Costs: The Biggest Health Story You May Have Missed This Year

We have made significant advances in getting better care at lower costs by changing the incentives for the way care is given and putting more information in the hands of health care providers and patients.

While 2014 is ending with evidence of the dramatic gains in health coverage, a more subtle revolution is occurring in how health care is delivered. Using new authorities created by the Affordable Care Act (ACA), in partnership with health care providers, payers, and patients, we have made significant advances in getting better care at lower costs by changing the incentives for the way care is given and putting more information in the hands of health care providers and patients.

Before the ACA, most of the health care system had incentives to do more -- more tests, more procedures, more visits to the doctor meant more money for hospitals and physicians. Now, through a series of innovative approaches, these incentives are changing and health care providers are being paid based on the quality and efficiency -- not quantity -- of the care they give. This practice, known as “value based purchasing,” and other efforts under the ACA to create systems where doctors help coordinate care for patients to avoid hospital readmissions and get patients the care they need on sooner. These systems also are putting in place safeguards to avoid simple mistakes that that have caused many Americans to pick up infections or to suffer other medical complications when they went into a hospital for care in the past.

These types of initiatives are already producing results for patients. For example, Medicare has linked payments to hospital performance on readmissions measures, and the rate of hospital readmissions in Medicare has dropped dramatically, decreasing by nearly 10 percent as compared to the historical average through 2013. This has avoided 150,000 readmissions in 2012 and 2013.

Improvement has also been seen more broadly on patient safety, with an estimated 17 percent decline in hospital acquired conditions from 2010 to 2013, avoiding 1.3 million infections, accidents, and other events that harm patients and saving 50,000 lives. These improvements are estimated to have saved $12 billion in health care spending by avoiding the costs of treating complications. 

Even as we have seen these improvements in the quality and safety of patient care, health care spending growth has remained at historically low levels, with new data released in early December confirming that 2011, 2012, and 2013 saw the slowest growth in real per capita health care spending since records began in 1960. Spending growth per enrollee has remained slow across Medicare, Medicaid, and privately insured people, and indications are that growth has remained slow through the first half of 2014 as well, even as the number of people with insurance coverage has expanded dramatically. Leading measures of growth of employer benefit costs show continued slow growth as well, and the prices of health care services have continued to rise at historically slow rates.

Some of the achievements in improving health care quality are summarized in a biennial report to Congress about the Center for Medicare & Medicaid Innovation, which was released today. Consider announcements made in the last 30 days alone:

  • Incentivizing higher quality services for Medicare beneficiaries: Accountable Care Organizations (ACOs) are networks of doctors and other health care providers that are reimbursed based on the quality and efficiency of the care they provide their patients, not the quantity of the services they provide their patients. This shift is aimed at achieving better health outcomes for patients, while reining in unnecessary health care spending to slow health care costs growth. The ACA adopted this model nationwide in Medicare, spurring a dramatic increase in participating health care providers around the country. The Department of Health and Human Services (HHS) recently announced that 89 new ACOs will be begin participating in Medicare in 2015, meaning that 424 ACOs will be providing care to more than 7.8 million beneficiaries as of January 1, 2015. This includes Pioneer ACOs, where the highest performing groups of health care providers can get compensated at higher rates for their services.
  • Improving quality for federal employee health plans: The Office of Personnel Management issued a proposed rule this month to establish a plan performance assessment system for the federal employees’ health program that serves over 8 million people starting in 2016. Under this proposal, for the first time, health plans participating in the Federal Employee Health Benefits Program would have a portion of their payments tied to clinical indicators of quality of care such as preventive care, chronic disease management, medication use, behavioral health, as well as customer service and resource use.
  • Quality incentives for Health Insurance Marketplace plans: A proposed rule issued by the Centers for Medicare and Medicaid Services (CMS) in November would require health plans sold on the ACA's Health Insurance Marketplaces to implement and report on quality improvement strategies. Those quality improvement strategies should incorporate some of the principles Medicare is using to encourage quality improvements, such as the adoption of ACOs or by basing payments that health care providers get from insurance companies on the quality of care provided.
  • Supporting State-led efforts to improve quality and costs: HHS announced this month that 28 states, 3 territories, and the District of Columbia would receive $665 million to design and test comprehensive state-led efforts to improve health care quality and cost. In combination with the first round of funding for State Innovation Models announced last year, this means that over half of states, representing nearly two-thirds of the population, are participating in efforts to support comprehensive state-based innovation in health system transformation.
  • Making it easier to compare doctors and hospitals: CMS also last week added updated quality information to Medicare’s Physician Compare website for physician groups and ACOs related to diabetes and cardiovascular care. CMS also refreshed the Hospital Compare website with new information for each hospital for the Value Based Purchasing Program, Hospital Acquired Conditions Reductions Program, and the Hospital Readmissions Reduction Program. Together, along with other information about each hospital, these data provide a thorough set of quality and safety information for patients and their families to consider when choosing a hospital.

The Administration has also taken steps to improve the information available on Nursing Home Compare and announced the methodology and timeline for the creation of a star rating system for Home Health Compare, both tools to help patients and families select post acute care providers. The Compare sites empower consumers with information to make more informed health care decisions, encourage providers to strive for higher levels of quality, and drive overall health system improvement.

The Administration is committed to realizing the ACA’s goal of better care through quality improvement, and 2015 will bring even more activity towards those goals. Today’s report to Congress about the Innovation Center details how the Center is testing over 20 new payment and service delivery models and engaging over 2.5 million beneficiaries around the country in an effort to improve quality and reduce costs.

While the details vary, these value-based purchasing systems are pointing the way to smarter purchasing of health care that can lead to better results for patients and taxpayers. These actions underscore the Administration’s commitment to pursuing value-based purchasing in health care across all programs, as well as to promoting the adoption of new payment models that promote comprehensive accountability for health care quality and costs. All of them aim to get more information to health care providers and patients, and to link the federal government’s payments to health care providers to producing better outcomes and more efficient care delivery.