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Patients with advanced illness receive fragmented, hospital-based care that is unaligned with their preferences near the end of life. We describe a team-based intervention that provides home-based, coordinated care to more than 2,000 seriously ill patients daily in nineteen urban, suburban, or rural counties in California. In the last month of life, compared to matched Medicare beneficiaries in similar counties, this program reduced hospital days by 1,361 per 1,000 beneficiaries, hospital deaths by 8.2 percent, inpatient payments by $6,127, and the total cost of care by $5,657 per beneficiary. The Centers for Medicare and Medicaid Services (CMS) has announced a new Medicare payment model for serious illness care, based in part on this program. To inform model development and implementation, we describe lessons learned about changing the focus of care for advanced illness from hospital to home, broadening care coordination to achieve system integration, and developing methods for payment and quality accountability that transform care delivery.

Home health and personal care aides are one of the largest groups of health care workers in the US, with nearly three million people providing direct care for people with serious illness living in the community. These home care workers face challenges in recruitment, training, retention, and regulation, and there is a lack of data and research to support evidence-based policy change. Personal care aides receive little formal training, and they experience low pay and a lack of respect for the skill required for their jobs. High turnover and occupational injury rates are widely reported. There is little research on the factors associated with higher-quality home care, the extent to which worker training affects client outcomes, and how regulations affect access to and quality of home care. Health care leaders should seek to fill these gaps in knowledge, support the establishment of training standards and programs, implement Medicaid reimbursement strategies that incentivize improvements in pay and working conditions, reform regulations that now prevent the full utilization of home care workers, and create sustainable career pathways in home care policies.

Alternative Payment Models (APMs) can address the limitations inherent in fee-for-service payment to support new approaches to health care delivery that produce greater value. But the models being tested are directly layered on top of fee-for-service architecture, specifically the Medicare Physician Fee Schedule. Shoring up that architecture to produce greater value, in combination with APMs, should be considered an integral part of the movement to value-based payment. We propose ending the split within the Centers for Medicare and Medicaid Services between the people managing the Medicare Physician Fee Schedule and those creating and testing APMs, with both groups advised by a revamped Physician-Focused Payment Model Technical Advisory Committee that covers both dimensions of creating greater value.

Telehealth services have the potential to improve access to care, especially in rural or urban areas with scarce health care resources. Despite the potential benefits, telehealth has not been fully adopted by health centers. This study examined factors associated with and barriers to telehealth use by federally funded health centers. We analyzed data for 2016 from the Uniform Data System using a mixed-methods approach. Our findings suggest that rural location, operational factors, patient demographic characteristics, and reimbursement policies influence health centers' decisions about using telehealth. Cost, reimbursement, and technical issues were described as major barriers. Medicaid reimbursement policies promoting live video and store-and-forward services were associated with a greater likelihood of telehealth adoption. Many health centers were implementing telehealth or exploring its use. Our findings identified areas that policy makers can address to achieve greater telehealth adoption by health centers.

Payment systems generally do not directly encourage or support the reduction of health disparities. In 2013 the Finding Answers: Solving Disparities through Payment and Delivery System Reform program of the Robert Wood Johnson Foundation sought to understand how alternative payment models might intentionally incorporate a disparities-reduction component to promote health equity. A qualitative analysis of forty proposals to the program revealed that applicants generally did not link payment reform tightly to disparities reduction. Most proposed general pay-for-performance, global payment, or shared savings plans, combined with multicomponent system interventions. None of the applicants proposed making any financial payments contingent on having successfully reduced disparities. Most applicants did not address how they would optimize providers' intrinsic and extrinsic motivation to reduce disparities. A better understanding of how payment and care delivery models might be designed and implemented to reduce health disparities is essential., (Project HOPE—The People-to-People Health Foundation, Inc.)

In 2015, Congress repealed the Sustainable Growth Rate formula for Medicare physician payment, eliminating mandatory payment cuts when spending exceeded what was budgeted. In its place, Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA), which established a two-track performance-based payment system that encourages physicians to participate in alternative payment models. MACRA could have huge effects on health care delivery, but the nature of those effects is highly uncertain. Using the RAND Corporation's Health Care Payment and Delivery Simulation Model, we estimated the effects of MACRA on Medicare spending and utilization and examined how effects would differ under various scenarios. We estimate that MACRA will decrease Medicare spending on physician services by -$35 to -$106 billion (-2.3 percent to -7.1 percent) and change spending on hospital services by $32 to -$250 billion (0.7 percent to -5.1 percent) in 2015-30. The spending effects are critically dependent on the strength of incentives in the alternative payment models, particularly the incentives for physicians to reduce hospital spending and physician responses to MACRA payment rates., (Project HOPE—The People-to-People Health Foundation, Inc.)

In 2015 the Medicare Hospital Value-Based Purchasing (VBP) program paid hospitals $1.4 billion in performance-based incentives; 30 percent of a hospital's VBP Total Performance Score was based on performance on Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) measures of the patient experience of care. Hospitals receive patient experience points based on three components: achievement, improvement, and consistency. For 2015 we examined how the three components affected reimbursement for 3,152 hospitals, including their impact on low-performing and high-minority hospitals. Achievement accounted for 96 percent of the differences among hospitals in total HCAHPS points. Although achievement had the biggest influence on payments, payments related to improvement and consistency were more beneficial for low-performing hospitals that disproportionately served minority patients. The findings highlight the important inducement that paying for improvement provides to initially low-performing hospitals to improve care and the role this incentive structure plays in minimizing resource redistributions away from hospitals serving minority populations. Additional emphasis on improvement points could benefit hospitals serving disadvantaged patients., (Project HOPE—The People-to-People Health Foundation, Inc.)

Recent concerted efforts have sought to shift provider payment away from fee-for-service and toward risk-based alternatives. Despite these efforts, fee-for-service not only remains the dominant payment method but has continued to grow, with nearly 95 percent of all physician office visits in 2013 reimbursed in this fashion., (Project HOPE—The People-to-People Health Foundation, Inc.)

In recent years many policy makers have recommended alternative payment models in medical oncology in order to reduce costs and improve patient outcomes. Yet information on how oncology practices differ in their use of key service categories is limited. We measured annual payments for key service categories delivered to fee-for-service Medicare beneficiaries receiving care from 1,534 medical oncology practices in 2011-12. In 2012, differences in payments per beneficiary at the seventy-fifth-percentile practice compared to the twenty-fifth-percentile practice were $3,866 for chemotherapy (including administration and supportive care drugs), $1,872 for acute medical hospitalizations, and $439 for advanced imaging. Supportive care drugs, bevacizumab, and positron-emission tomography accounted for the greatest percentage of variation. Average practice payments for service categories were highly correlated across years but not correlated with each other, which suggests that service categories may be affected by different physician practice characteristics. These differences, even when clinical guidelines exist, demonstrate the potential for quality improvement that could be accelerated through alternative payment models., (Project HOPE—The People-to-People Health Foundation, Inc.)

Congress is again attempting to repeal the Sustainable Growth Rate (SGR) formula. The formula is a failed mechanism intended to constrain Medicare Part B physician spending by adjusting annual physician fee updates. Congress has averted formula-driven physician fee cuts each year beginning in 2003 by overriding the SGR, usually accompanied with last-minute disputes about how these overrides should be paid for. Last year Congress achieved bipartisan and bicameral agreement on legislation to replace the SGR—the SGR Repeal and Medicare Provider Payment Modernization Act of 2014, which we refer to as the "2014 SGR fix"—but was unable to find a way to pay for the legislation under current budget rules. Current congressional deliberations appear focused on how to pay for the fix, with wide consensus that the 2014 legislation should remain the basic model for reform. We describe key features of the 2014 SGR fix, place it in the context of both past and ongoing Medicare health policy, assess its strengths and weaknesses as a mechanism to foster improved care and lower costs in Medicare, and suggest further actions to ensure success in meeting these goals., (Project HOPE—The People-to-People Health Foundation, Inc.)

Since the inception of the Medicare Rural Hospital Flexibility Program in 1997, over 1,300 rural hospitals have converted to critical-access hospitals, which entitles them to Medicare cost-based reimbursement instead of reimbursement based on the hospital prospective payment system (PPS). Several changes to eligibility for critical-access status have recently been proposed. Most of the changes focus on mandating that hospitals be located a certain minimum distance from the nearest hospital. Our study found that critical-access hospitals located within fifteen miles of another hospital generally are larger, provide better quality, and are financially stronger compared to critical-access hospitals located farther from another hospital. Returning to the PPS would have considerable negative impacts on critical-access hospitals that are located near another hospital. We conclude that establishing a minimum-distance requirement would generate modest cost savings for Medicare but would likely be disruptive to the communities that depend on these hospitals for their health care., (Project HOPE—The People-to-People Health Foundation, Inc.)

As hard as it may be for clinicians to adopt new practices, it is often harder for them to "de-innovate," or give up old practices, even when new evidence reveals that those practices offer little value. In this article we explore recent controversies over screening for breast and prostate cancer and testing for sleep disorders. We show that these controversies are not caused solely by a lack of clinical data on the harms and benefits of these tests but are also influenced by several psychological biases that make it difficult for clinicians to de-innovate. De-innovation could be fostered by making sure that advisory panels and guideline committees include experts who have competing biases; emphasizing evidence over clinical judgment; resisting "indication creep," or the premature extension of innovations into unproven areas; and encouraging clinicians to explicitly consider how their experiences bias their interpretations of clinical evidence., (Project HOPE—The People-to-People Health Foundation, Inc.)

While new biologics have revolutionized the treatment of age-related macular degeneration-the leading cause of severe vision loss among older adults-these new drugs have also raised concerns over the economic impact of medical innovation. The two leading agents are similar in effectiveness but vary greatly in price-up to $2,000 per injection for ranibizumab compared to $50 for bevacizumab. We examined the diffusion of these drugs in fee-for-service Medicare and Veterans Affairs (VA) systems during 2005-11, in part to assess the impact that differing financial incentives had on prescribing. Physicians treating Medicare patients have a direct financial incentive to prescribe the more expensive agent (ranibizumab), while VA physicians do not. Medicare injections of the more expensive ranibizumab peaked in 2007 at 47 percent. Beginning in 2009 the less expensive bevacizumab became the predominant therapy for Medicare patients, accounting for more than 60 percent of injections. For VA patients, the distribution of injections across the two drugs was relatively equal, particularly from 2009 to 2011. Our analysis indicates that there are opportunities in both the VA and Medicare to adopt more value-conscious treatment patterns and that multiple mechanisms exist to influence utilization., (Project HOPE—The People-to-People Health Foundation, Inc.)

Spending on specialty medications, which represented a small proportion of US pharmacy spending at the beginning of this decade, is growing by more than 15 percent annually. It is expected to account for approximately half ($235 billion) of total annual pharmacy spending by 2018. Among the numerous reasons for the high cost of this heterogeneous group of medications are the increasing size of target patient populations, the high cost of drug development, and a complex and uncoordinated delivery system. In this article we describe the evolution of the specialty market, characterize the current state of specialty medication use, and articulate key challenges and potential solutions. Fully realizing the potential value of the expanding universe of specialty medications will require collaborative efforts to reduce waste and promote value. Those who prescribe, dispense, deliver, and pay for specialty medications will need to employ a combination of traditional and novel management approaches, such as prior authorization, step therapy, tiered formularies, administration at lower-cost sites, and the unique tools being developed for cancer medications., (Project HOPE—The People-to-People Health Foundation, Inc.)

The value of "specialty pharmaceuticals" for cancer and other complex conditions depends not merely on their molecular structures but also on the manner in which the drugs are assessed, insured, priced, prescribed, and used. This article analyzes the five principal stages through which a specialty drug must pass on its journey from the laboratory to the bedside. These include regulatory approval by the Food and Drug Administration for market access, insurance coverage, pricing and payment, physician prescription, and patient engagement. If structured appropriately, each stage improves performance and supports continued research and development. If structured inappropriately, however, each stage adds to administrative burdens, distorts clinical decision making, and weakens incentives for innovation. Cautious optimism is in order, but neither the continued development of breakthrough products nor their use according to evidence-based guidelines can be taken for granted., (Project HOPE—The People-to-People Health Foundation, Inc.)

The Affordable Care Act directed Medicare to update its home health prospective payment system to reflect more recent data on costs and use of services-an exercise known as rebasing. As a result, the Centers for Medicare and Medicaid Services will reduce home health payments 3.5 percent per year in the period 2014-17. To determine the impact that these reductions could have on beneficiaries using home health care, we examined the Medicare reimbursement margins and the use of services in a national sample of 96,621 episodes of care provided by twenty-six not-for-profit home health agencies in 2011. We found that patients with clinically complex conditions and social vulnerability factors, such as living alone, had substantially higher service delivery costs than other home health patients. Thus, the socially vulnerable patients with complex conditions represent less profit-lower-to-negative Medicare margins-for home health agencies. This financial disincentive could reduce such patients' access to care as Medicare payments decline. Policy makers should consider the unique characteristics of these patients and ensure their continued access to Medicare's home health services when planning rebasing and future adjustments to the prospective payment system., (Project HOPE—The People-to-People Health Foundation, Inc.)

Safety-net hospitals rely on disproportionate-share hospital (DSH) payments to help cover uncompensated care costs and underpayments by Medicaid (known as Medicaid shortfalls). The Affordable Care Act (ACA) anticipates that insurance expansion will increase safety-net hospitals' revenues and will reduce DSH payments accordingly. We examined the impact of the ACA's Medicaid DSH reductions on California public hospitals' financial stability by estimating how total DSH costs (uncompensated care costs and Medicaid shortfalls) will change as a result of insurance expansion and the offsetting DSH reductions. Decreases in uncompensated care costs resulting from the ACA insurance expansion may not match the act's DSH reductions because of the high number of people who will remain uninsured, low Medicaid reimbursement rates, and medical cost inflation. Taking these three factors into account, we estimate that California public hospitals' total DSH costs will increase from $2.044 billion in 2010 to $2.363-$2.503 billion in 2019, with unmet DSH costs of $1.381-$1.537 billion., (Project HOPE—The People-to-People Health Foundation, Inc.)

To better understand the financial viability of hospital emergency departments (EDs), we created national estimates of the cost to hospitals of providing ED care and the associated hospital revenue using hospital financial reports and patient claims data from 2009. We then estimated the effect the Affordable Care Act (ACA) will have on the future profitability of providing ED care. We estimated that hospital revenue from ED care exceeded costs for that care by $6.1 billion in 2009, representing a profit margin of 7.8 percent (net revenue expressed as a percentage of total revenue). However, this is primarily because hospitals make enough profit on the privately insured ($17 billion) to cover underpayment from all other payer groups, such as Medicare, Medicaid, and unreimbursed care. Assuming current payer reimbursement rates, ACA reforms could result in an additional 4.4-percentage-point increase in profit margins for hospital-based EDs compared to what could be the case without the reforms.

Millions of uninsured people use health care services every year. We estimated providers' uncompensated care costs in 2013 to be between $74.9 billion and $84.9 billion. We calculated that in the aggregate, at least 65 percent of providers' uncompensated care costs were offset by government payments designed to cover the costs. Medicaid and Medicare were the largest sources of such government payments, providing $13.5 billion and $8.0 billion, respectively. Anticipating fewer uninsured people and lower levels of uncompensated care, the Affordable Care Act reduces certain Medicare and Medicaid payments. Such cuts in government funding of uncompensated care could pose challenges to some providers, particularly in states that have not adopted the Medicaid expansion or where implementation of health care reform is proceeding slowly.

Because electronic communication is quick, convenient, and inexpensive for most patients, care that is truly patient centered should promote the use of such communication between patients and providers, even using it as a substitute for office visits when clinically appropriate. Despite the potential benefits of electronic communication, fewer than 7 percent of providers used it in 2008. To learn from the experiences of providers that have widely incorporated electronic communication into patient care, we interviewed leaders of twenty-one medical groups that use it extensively with patients. We also interviewed staff in six of those groups. Electronic communication was widely perceived to be a safe, effective, and efficient means of communication that improves patient satisfaction and saves patients time but that increases the volume of physician work unless office visits are reduced. Practice redesign and new payment methods are likely necessary for electronic communication to be more widely used in patient care.

Patent expiration of brand-name pharmaceuticals creates opportunities for large savings for state Medicaid programs because generic versions of medications frequently represent a lower-cost alternative. State Medicaid programs that quickly recognize the availability of generics and adjust their drug payments in response to falling market prices can obtain the greatest benefit. We examined one such case: the movement to generic fluoxetine following patent expiration for Prozac, a widely prescribed antidepressant and an expensive drug for Medicaid. We found large differences in states' responses to generic availability. States took between two and ten calendar quarters to reach 90 percent use of generic rather than brand-name fluoxetine and four to eight quarters to achieve a 50 percent decrease in reimbursement per pill. We estimated that states failed to realize $220 million in uncaptured savings during 2001-05. By coordinating their efforts, perhaps with federal help, states could gain access in a more timely way to market prices for generic drugs and, hence, take greater advantage of the savings that those drugs offer.

As part of the Affordable Care Act, primary care physicians providing services to patients insured through Medicaid in some states will receive higher payments in 2013 and 2014 than in the past. Payments for some services will increase to match Medicare rates. This change may lead to wider acceptance of new Medicaid patients among primary care providers. Using data from the 2011-12 National Ambulatory Medical Care Survey Electronic Medical Records Supplement, I summarize baseline rates of acceptance of new Medicaid patients among office-based physicians by specialty and practice type. I also report state-level acceptance rates for both primary care and other physicians. About 33 percent of primary care physicians (those in general and family medicine, internal medicine, or pediatrics) did not accept new Medicaid patients in 2011-12, ranging from a low of 8.9 percent in Minnesota to a high of 54.0 percent in New Jersey. Primary care physicians in New Jersey, California, Alabama, and Missouri were less likely than the national average to accept new Medicaid patients in 2011-12. The data presented here provide a baseline for comparison of new Medicaid acceptance rates in 2013-14.

Bundled payment entails paying a single price for all services delivered as part of an episode of care for a specific condition. It is seen as a promising way to slow the growth of health care spending while maintaining or improving the quality of care. To implement bundled payment, policy makers must set base payment rates for episodes of care and update the rates over time to reflect changes in the costs of delivering care and the components of care. Adopting the fee-for-service paradigm of adjusting payments with uniform update rates would be fair and accurate if costs increased at a uniform rate across episodes. But our analysis of 2003 and 2007 US commercial claims data showed spending growth to be highly skewed across episodes: 10 percent of episodes accounted for 82.5 percent of spending growth, and within-episode spending growth ranged from a decline of 75 percent to an increase of 323 percent. Given that spending growth was much faster for some episodes than for others, a situation known as skewness, policy makers should not update episode payments using uniform update rates. Rather, they should explore ways to address variations in spending growth, such as updating episode payments one by one, at least at the outset.

Many policy makers believe that when Medicare constrains its payment rates for hospital inpatient care, private insurers end up paying higher rates as a result. I tested this "cost-shifting" theory using a unique new data set that combines MarketScan private claims data with Medicare hospital cost reports. Contrary to the theory, I found that hospital markets with relatively slow growth in Medicare inpatient hospital payment rates also had relatively slow growth in private hospital payment rates during 1995-2009. Using regression analyses, I found that a 10 percent reduction in Medicare payment rates led to an estimated reduction in private payment rates of 3 percent or 8 percent, depending on the statistical model used. These payment rate spillovers may reflect an effort by hospitals to rein in their operating costs in the face of lower Medicare payment rates. Alternatively, hospitals facing cuts in Medicare payment rates may also cut the payment rates they seek from private payers to attract more privately insured patients. My findings indicate that repealing cuts in Medicare payment rates would not slow the growth in spending on hospital care by private insurers and would in fact be likely to accelerate the growth in private insurers' costs and premiums.

Medicare's core benefit design reflects private insurance as of 1965, with separate coverage for hospital and physician services (and now prescription drugs) and no protection against catastrophic costs. Modernizing Medicare's benefit design to offer comprehensive benefits, financial protection, and incentives to choose high-value care could improve coverage and lower beneficiary costs. We describe a new option we call Medicare Essential, which would combine Medicare's hospital, physician, and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits. Cost sharing would be reduced for enrollees who seek care from high-quality low-cost providers. Out-of-pocket savings from lower premiums and health care costs for a Medicare Essential enrollee could be $173 per month, compared to what an enrollee would pay with traditional Medicare, prescription drug and private supplemental coverage. Financed by a budget-neutral premium, we estimate that this new plan choice could reduce total health spending relative to current projections by $180 billion and reduce employer retiree spending by $90 billion during 2014-23. Given its potential, such an alternative should be a part of the debate over the future of Medicare.

Reforming China's public hospitals to curb widespread overtreatment and improve the quality and affordability of care has been the most challenging aspect of that nation's ambitious health reform, which began in 2009. This article describes a pilot project under way in several of China's provinces that combines payment reform with the implementation of evidence-based clinical pathways at a few hospitals serving rural areas. Results to date include reduced length-of-stay and prescription drug use and higher patient and provider satisfaction. These early results suggest that the pilot may be achieving its goals, which may have far-reaching and positive implications for China's ongoing reform.

Reimbursement contracts, in which health insurers receive rebates from drug manufacturers instead of paying the transparent list price, are becoming increasingly common worldwide. Through interviews with policy makers in nine high-income countries, we describe the use of these contracts around the globe and identify related policy challenges and best practices. Of the nine countries surveyed, the majority routinely use confidential reimbursement contracts. This alternative to drug coverage at list prices offers benefits but is not without challenges. Payers face increased administrative costs, difficulties enforcing contracts, and reduced information about prices paid by others. Among the best practices identified, policy makers recommend establishing clear and consistent processes for negotiating contracts with relatively simple rebate structures and transparency to the public about the existence, purpose, and type of reimbursement contracts in place. Policy makers should also work to address undesirable price disparities within their countries and internationally, which may occur as a result of this new pricing paradigm.

Around the world, rising health care costs are claiming a larger share of national budgets. This article reviews strategies developed to contain costs in health systems in Canada, England, France, and Germany in 2000-10. We used a comprehensive analysis of health systems and reforms in each country, compiled by the European Observatory on Health Systems and Policies. These countries rely on a number of budget and price-setting mechanisms to contain health care costs. Our review revealed trends in all four countries toward more use of technology assessments and payment based on diagnosis-related groups and the value of products or services. These policies may result in a more efficient use of health care resources, but we argue that they need to be combined with volume and price controls--measures unlikely to be adopted in the United States--if they are also to meet cost containment goals.

The true measure of health care reform's success is whether it drives down medical costs over the long term. The Patient Protection and Affordable Care Act has several features designed to modernize the delivery of services and thus ensure a more efficient, more effective, and less expensive health care system. These features include bundling medical services into larger payment groups, using value-based purchasing, and improving care coordination. These changes could spark a productivity revolution in health care that would make it much more affordable and simultaneously increase the quality of care. The success of these efforts at controlling long-run cost growth will require activism from the government and the private sector.

In 2003 the Indiana Office of Medicaid Policy and Planning implemented the Indiana Chronic Disease Management Program (ICDMP). This paper reports on the fiscal impact of the ICDMP from the state's perspective, as estimated from the outcomes of a randomized trial. Medicaid members with congestive heart failure (CHF) or diabetes, or both, were randomly assigned by practice site to chronic disease management services or standard care. The effect of the ICDMP varied by disease group and risk class: while cost savings were achieved in the CHF subgroup, disease management targeted to patients with only diabetes resulted in no significant fiscal impact.

Reimbursement strategies represent a key tool in implementing public policy. Often the relationship between changes in reimbursement policy and changes in provider behavior is difficult to predict, particularly in complex service systems. Here we present findings from a multiyear study involving the comparison of alternative Medicaid reimbursement systems for intensive case management services: a fee-for-service arrangement developed specifically for this study, and the partial capitation system in use in New York State. We focus on the impact of these two reimbursement schemes on the number and types of services provided by case managers and on client outcomes.

In 1993 Medicaid physician fees were about 73 percent of Medicare payment levels and about 47 percent of private physician fees. Overall Medicaid fees grew by 15 percent from 1990 to 1993, slightly faster than Medicare or private-sector fees. However, there were considerable differences in fees across the states (from fourfold to thirty-ninefold between the lowest and highest states). Fees for maternity services varied the least. Medicaid fees generally were highest in Alaska, Arizona, Arkansas, Nevada, and Wyoming; they were lowest in New Jersey, New York, and Rhode Island.