CMS Administrator Lays Out Vision for Value-based Health Care

As CMS administrator, Donald Berwick, M.D., has played a key role in implementing various provisions of the Patient Protection and Affordable Care Act, including the expansion of Medicaid, writing new rules and regulations, and the establishment of pilot projects to test different health care models and payment policies.

Berwick is a Harvard University professor, a pediatrician and former president and CEO of the Institute for Healthcare Improvement, a nonprofit organization in Cambridge, Mass., that advances concepts to improve patient care. He is a strong believer that physicians and hospitals can improve care, reduce medical errors and save money. As CMS administrator, Berwick has sought to change Medicare from a volume-based to a value-based purchaser of health care, a fundamental shift that has profound implications for family physicians.

AAFP News Now recently sat down with Berwick to talk about a variety of issues that will affect family physicians and to better discern the future direction of CMS and Medicare.

Q. You and others have talked about making Medicare a value-based purchaser of health care. What do you mean by that, exactly, and how will that transformation take place during the next few years?

A. In health care payment right now, a lot of payers ask for claims that show how much work or services were rendered, and that is what you get paid for. The payment system we are headed for in this country is, and should be, based on how well your health care services perform and positive patient outcomes. The former process is irrational and doesn't follow every other sector of our lives -- meaning we want to buy the best thing that offers the best value for what we need it to do.

No one really wants to be in a hospital. What we want is health and well-being and good outcomes -- the best possible outcomes that science and health care providers can offer. So a more rational payment scheme in health care, like any other sector, would be paying for quality of health care services, paying for the results that we are after, and doing it fairly, rather than just paying for volume.

The schematic that we are in right now is a pay-for-volume format. Where we are headed is a pay-for-value, pay-for-excellence, pay-for-quality structure.

Q. How will that translate into what Medicare does?

A. Under the Affordable Care Act and other legislation, care is encouraged more and more to attach rewards to payment for excellence. For example, value-based purchasing in hospitals will be more and more measured for things like reducing infection rates or their patient positive outcomes. The better the outcomes and the lower the infection rates, the higher the rate of pay for health care providers.

The statutory framework asks that we migrate toward the same kind of thing for doctors. It is a little harder for doctors because it is harder to attribute outcomes to individual doctors or doctor groups. The better quality of health care services you provide will translate to how much better you can do economically. And that's the direction of a payment system I think we are headed to that better serves patients.

This also will help doctors and nurses focus their energies on doing exactly those things that help the patient and not wasting their time or their energy or the patient's time with procedures and tests that don't actually help.

Q. You also have talked about this being the era of health care delivery improvement. Can you explain that?

A. Paying for value is an incentive. It is a motivation toward improvement. The underlying idea of improvement is that American health care, historically built in fragments, often cannot achieve for patients what it really wants to achieve. No one really wants that. Health delivery system reform refers to really reconfiguring care into much more seamless coordinated-care operations so that people, especially those with chronic illnesses, experience continuity of care over time and space.

So when patients come home from the hospital, there is a smooth handoff, and all the necessary information follows them. When they are seeing a specialist, that specialist is coordinating care with their primary care doctor.

In a fragmented payment system, it is so much harder to accomplish this. When payment is based on better integration, the result will be better integration of health care services. A delivery system redesign really means improving care for people when they are sick to ensure that they are safe and care is delivered according to science. And that includes improving seamless and coordinated care for patients -- especially people with chronic illnesses. And then there is prevention, (including) a bigger investment in keeping people healthy, helping them to understand how to keep themselves healthy instead of waiting for illness to occur or reoccur, and educating people on how to prevent (illness). All of that involves design.

Q. You spoke briefly about the fee-for-service system. How do you feel about the AMA/Specialty Society Relative Value Scale Update Committee, or RUC?

A. The current fee-for-service framework gives CMS advice on how much work is involved in each particular procedure or service a doctor does in an encounter. How much energy does it take? How much work does it take to remove a wart or to do an appendectomy or to counsel a patient? That comes out of the fee-for-service environment. It means we are trying to figure out the production costs, the input costs.

When you think about a truly value-oriented health care system where we are paying more for outcomes and for excellence, then you would become less interested in paying piece-by-piece for the input costs. But in the fee-for-service system, we need to have a rational way to decide how much energy went into a particular service.

Q. Is the RUC a rational way to do that?

A. It is the way that is set up now. The RUC very carefully considers all the information it has and how much it takes to do a procedure.

Q. Will the RUC become less relevant with the shift to value-based health care?

A. As we shift to value-based health care, there are questions about how you measure value, how you assess outcomes, how much benefit a patient has gotten or how high the quality is. That becomes more and more salient, and the questions about exact input costs become a little less salient. This is a different kind of challenge. The challenge is to be able to accurately measure and assess health and outcomes of patients.

Q. What does that mean for the RUC, then?

A. The RUC's job, as currently defined, is to assess the relative resource use for an input to get the work done. The RUC's current assignment is not to assess outcomes.

Q. What role will family physicians play in the reformed health care system?

A. The heart of the matter with respect to reform in health care systems is to establish a seamless and coordinated care model, especially for people with chronic illness. If you look at how health care operates, primary care becomes more and more important in that realm because it is the patient's home base. It is the base in care where plans can be made with patients and where care can be monitored.

What I know about a strengthened health care system is that primary care disciplines, including family practice, become a much more important focus, more centralized for patients to get proper help.

Q. How do you see small and medium-sized practices becoming Medicare accountable care organizations, or ACOs?

A. We are a very complex country, lots of different demographics and environments. As a nation, what we need to do is find the right fit for every kind of environment: small and rural settings, and inner-city and smaller city areas. For every kind of environment in America, we have to find a kind of coordinated and seamless care model that will really allow doctors, nurses, pharmacists and others to combine their efforts to take care of patients better.

The accountable care organization is one such form. When we issued the proposed rule (for ACOs) at the end of March, we were hopeful that there was enough room in that proposal for doctors, in many different contexts, to see how they could come together to form ACOs and for the new care models to thrive.

We will know from the mandated 60-day comment period (which ends June 6, 2011) thoughts and concerns from -- I hope -- many people (regarding) whether they can find the daylight in this proposed rule for them to form an ACO.

We will respond to those comments and make the final rule better. I think it also is important to notice that in the Affordable Care Act and other current policy frameworks, an ACO is not the only route to coordinated care. As we move toward bundled payments, medical homes and health homes, for example, all of those are important elements of improved care.

If this is done right, no matter what kind of context the doctor is practicing in, small practice, large practice, urban or rural, they will find a way to be more effective participants in building seamless care.

Q. Do you think it is harder for a small or medium-sized practice to become an ACO?

A. I believe it is harder. When you look at the job that an ACO has to do to take care of people who are attributed to it and to actually help orchestrate their care much more effectively on behalf of the patient, they have to be accountable for serious quality measurements and to invest in supports for coordinated care like outreach to patients, patient education and care coordination. All of these involve investments of capital and time, and I know that smaller practices have a somewhat higher threshold to cross to do this.

I am firmly convinced that they can do it. If we write the final rule correctly and are able to offer certain forms of supports for small and rural practices, for example, to get over that bar into coordinated care, they will thrive, they will do very, very well.

Q. What will be some of those supports to help small and medium-sized practices become ACOs?

A. While we are awaiting and reviewing comments, we will be listening very carefully to any ideas that come our way to help make a final rule stronger than the proposed version. In the proposal, you will notice there are two different tracks for organizations or sponsors of ACOs. One involves only shared shavings, no risk in the first two years, no downside risk. The other one is for organizations -- some physician groups -- that are more ready to accept the downside/upside risk.

Q. If you were talking to a small or medium-sized physician practice right now, what would you say to them? Why should they want to become an ACO?

A. They are in the best possible position to help coordinate care for patients. They are the closest to the patients and the most knowledgeable source of their patients' care needs. They know what is going on with them. If they can find a route and a way to band together and take responsibility for the care of patients over time and space to help coordinate specialty care; to work hard with hospitals; (and) to work hard on issues such as unnecessary readmissions, patient complications, secondary prevention and chronic illness. They are the best possible leaders in our country to make this work right.

Accountable care organizations are one framework that, if done well, allows them to share in the gains, which include better care and lower costs through improving care. So, they are the leaders that we need.

Q. How will patient-centered medical homes fit into health care reform in general and into ACOs?

A. Right now -- as your family physicians will tell you -- they tend to be paid in a fee-for-service, element-by-element environment, and they don't get paid for the acts of coordination, communication, working together, teamwork and planning. These are not normally part of the payment scheme for most primary care physicians.

Under medical homes, or health homes, we can begin to see the possibility of paying for and supporting coordinating functions: patient transitions, communications and education. As ACOs get up and running, I would strongly suspect that they would be very interested in medical homes -- being able to use the wisdom and coordinating capacity of physicians and nurses and others who work in that primary care home base. That's what ACOs can do to make sure that patients are getting the best possible care. ACOs and medical homes are related ideals.

Q. Would you say the patient-centered medical home is the future of health care?

A. There is no one future of health care. There is no one answer to the American health care dilemma, but there sure is a list of great ideas, and one of them is the medical home. I think it is a very important notion. The future of health care is a very wide-ranging collection of important innovations in care. It includes things that strengthen safety in hospitals, and strengthen primary care overall, giving patients a home place -- like the medical home. These are key elements that will allow coordinated care systems to develop like ACOs.