Azar Plans ‘Fundamental Rethinking’ of Provider Pay

The HHS secretary plans to move beyond new hospital price transparency requirements that were included in a recently released Medicare inpatient payment proposed rule.

May 2—A newly proposed direct primary care payment model is part of a “fundamental rethinking of provider compensation” by the federal government, said Health and Human Services (HHS) Secretary Alex Azar II.

The Centers for Medicare & Medicaid Services (CMS) recently announced it was putting together a direct primary care (DPC) model, based on some of the 1,000 stakeholder responses it received after asking about new directions for payment models.

CMS has released little information on what the coming DPC model will entail, but Azar described it as allowing Medicare beneficiaries “to receive convenient, accessible primary care from a physician they know at a predictable and affordable cost.”

“Such a model would have the potential to enhance the doctor-patient relationship by eliminating administrative burden for clinicians and providing increased flexibility to provide the high-quality care that is most appropriate for their patients, thus improving quality while reducing expenditures,” a CMS release stated.

To help build DPC models, CMS recently issued a request for information (RFI) on various components, including: provider and state participation, payment, general model design, and program integrity and beneficiary protections.

“It’s another tool in the toolkit where they can try to both induce a focus on primary care but also in a way that’s pretty physician-friendly, which I think is a lot of the motivation,” Susan Dentzer, president and CEO of the Network for Excellence in Health Innovation, said in an interview.

The goal appears to be helping more physician practices remain independent. The share of physicians owning their own medical practice fell below 50 percent for the first time in 2016, according to an American Medical Association study.

The DPC model is just the first of several new Medicare and Medicaid payment models that HHS plans to push out, Azar said at the World Health Care Congress in Washington, D.C.

“These will be significant steps representing the kind of fundamental rethinking of provider compensation that may help us deliver value,” Azar said.

In previous comments, CMS Administrator Seema Verma has said other coming models will include those focused on consumer-driven health care, state-based and local innovation, and behavioral health and opioid addiction treatment.

Among the recommendations from hospital advocates was a dedicated model that tests coverage and payment changes that would lead to more effective and widespread adoption of virtual care strategies, as described in a letter responding to the RFI.

Transparency Push

A new hospital requirement to post chargemaster prices online was included in the recently released Inpatient Prospective Payment System proposed rule. Azar said he wanted federal price and quality transparency requirements to go much further and noted the same rule sought comments on possibly requiring providers to inform patients of their out-of-pocket costs for a service before the service is furnished.

Azar described patient access to such information as a “fundamental right” and cited the proliferation of high-deductible health plans (HDHPs) as increasing the need for price transparency. The share of workers covered by HDHPs reached 28 percent in 2017, according to a Kaiser Family Foundation survey.  

Azar cited his own experience as an HDHP enrollee who had extensive problems finding the price for a “routine electro-cardio stress test” after his hospital-employed physician ordered one. He eventually found out that his insurer’s negotiated payment for the test was much higher than the average price for the test as displayed by another large hospital system’s price transparency tool.

Another benefit of greater patient access to prices is that many patients likely would seek tests and imaging at cheaper locations, which could reduce “unsustainable” increases in healthcare spending, Azar said. The potential savings were seen in several studies that Azar cited in which employer-sponsored and commercial insurance price transparency programs provided large savings.

“Imagine the savings that would have accrued over the entire system if I could have easily found out where I could get the procedure cheapest,” Azar said.

Healthcare industry professionals have had wide-ranging reactions to the CMS transparency push.

“Could this make a difference in consumer behavior? Yes, in certain situations,” Dentzer said.

Such transparency also could lead providers to cut prices, she said.

The large companies that belong to the Pacific Business Group on Health (PBGH) tried emphasizing price transparency to covered employees in recent years but found little engagement with those tools, said David Lansky, president and CEO of PBGH. Additionally, employers have had a hard time gleaning what information patients actually want, and many HDHP enrollees have resorted to reducing all use of health care, including needed services.

Instead, PBGH member-companies have increased their focus on approaches that encourage providers to deliver high-quality care, such as reference pricing and value-based plan designs, Lansky said.

But Alan Warren, PhD, chief technology officer for Oscar Health, a six-year-old insurance company known for technological innovation, said the company has found continued strong customer interest in knowing provider prices in advance.

“Our customers want to know what things cost; that’s very important information,” Warren said. However, when patients found that estimates Oscar provided did not always match up with what they were charged—due to the addition of unanticipated services—the insurer moved from providing specific price estimates to giving enrollees a range of expected costs.

Amy Compton-Phillips, MD, chief clinical officer of Providence St. Joseph Health, said patients don’t want to know the chargemaster price but instead what they will owe, which is complicated by the difference in negotiated rates with each insurer.

“Trying to have something that’s relevant to that person, who’s trying to understand the price, is really challenging,” Compton-Phillips said.

The system’s orthopedic facility does post the self-pay prices for uncomplicated total knee and total hip procedures. However, charges vary based on whether the procedures are performed in inpatient or ambulatory surgery center settings and also by insurer.

“If we can figure out a way to make it simple, we would be doing the world a huge service,” Compton-Phillips said.

Other HHS Initiatives

Additional HHS initiatives aimed at overhauling the healthcare delivery system, Azar said, include cutting regulatory burdens. Azar said rules changes already proposed in 2018 would save providers more than 4 million hours a year in compliance work, and changes in the coming months will save providers “billions” of dollars more in compliance costs.

Azar said the administration also is working on a “comprehensive plan” to reduce drug prices. Hospitals and advocates have sued the administration over one cost reduction effort, which cut Medicare payments to many of the hospitals that participate in the 340B drug discount program by nearly 30 percent.

President Donald Trump “wants to go much further,” Azar said.

Azar also detailed the growing amount of federal health program data that the administration has released to researchers and other entities. The Trump administration recently issued the first release of Medicare Advantage encounter data, and Azar said it plans to release similar data from Medicaid and the Children’s Health Insurance Program in 2019.

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Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare