Mr. Raich goes to Medicare

August 25, 2016

Recently, I traveled to Baltimore to visit the Department of Health and Human Services Centers for Medicare and Medicaid Services.  This gave me a little insight into how things are playing out.

During my 30 years in health care I have heard the word “change” many times. Now the current buzz words are “value versus volume” and “bundled payments”, phrases that are causing the latest round of mergers and acquisitions (M&A).  Instead of hospitals buying physician groups, it seems whole hospitals and health systems are merging.

These changes are very evident in the CMS Department of Performance-Based Payment Policy Group the Division of Shared Saving Program the Division of Value-Based Payment.

During my visit I learned CMS is a very busy place with more than 3,000 employees in one office building. They have others too, including many departments that all are trying very hard to move the quality of health care forward.  It is also a very large organization with tentacles in many different areas.

My visit provided some great insight into what is happening in the bundled payment world.  For example, if you go to, you’ll find the 75 different innovation models either in use or being proposed for use at this time.  The most interesting seems to be the Bundled Payment for Care Improvement Initiative, which allows you to see each bundle payment model that is currently being used.  It was interesting to note the current Oncology Care Model has 195 practices and is an Episode-Based Payment Initiative which looks at the patient’s age, gender and comorbidity, and pays a bonus to those practices that keep patients out of the emergency room and hospital.  This model took effect in July of 2016 and will be closely watched as a template for other models.

What bundles will come next? The best guess would be to look for high frequency procedures with relative standardized episodes of care. For example, some Blue Cross Blue Shield plans are bundling endoscopies into a single payment by ambulatory care center.

What’s in the crystal ball of health care changes for the next ten years?  My read is that there will be continued consolidation of health care until there are approximately 200 healthcare systems nationwide.  These systems would control utilization and quality in their region (remember, many of the new payment models are based on “regional” quality of care).  These regional players would then diffuse their government payments downward to their own providers. This model seems to fit the current financial situation.  Now no one at CMS will confirm this model and frankly they will be downstream of this change anyways.

Bottom line from my visit:  We will have more bundled payments, we will have regional healthcare measurements and metrics and healthcare will continue to consolidate.  Until November at least, at which point all bets are off. But remember, The Department of Health and Human Services Centers for Medicare and Medicaid Services provide services for 100 million lives.  Medicare is the biggest insurance plan in the nation, so it’s no wonder politicians look at it and say, “Why not have Medicare for everyone?”

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