Medicare’s Push for More “Skin in the Game” : Page 3 of 3

June 15, 2012

Providers’ Skin in the Game

Patients are not alone in Medicare’s move to increase others’ skin in the game, as providers are also feeling the effect of this shift. To control healthcare use and perhaps reduce payments, Medicare is looking to bundle payments to providers. In some cases, these bundled payments are significantly lower than those same payments made in fee-for-service cases. The other benefit to Medicare in bundling payments is it puts control of healthcare use in the hands of providers. Depending on the bundled responsibilities, providers would be forced into a position of making utilization decisions.

Although this sounds a lot like the health maintenance organization (HMO) gatekeeper approach of the late 1990s, there are several differences. While HMOs proved successful in reducing costs, they were overwhelmingly unpopular with the public. The hope this time is that an approach the forces control into the hands of providers through accountable care organizations (ACOs), rather than large insurers, will be more acceptable to the public. To foster acceptance of this concept among patients and providers, the final ACO rule has been adjusted by the
US Department of Health and Human Services to be more flexible than the draft regulations. Some of the ways the final rule is more provider-friendly include13:

•            Presence of an upfront payment option

•            Primary care providers are the only providers required to be in an ACO

•            No downside financial risk

•            Fewer report requirements

•            No mandatory electronic health record systems

•            Primary care–weighted metrics

•            Transparent savings pool distribution tied to achieving goals.

One of the ACO initiatives already underway is the Pioneer ACO Model.14 This model is a CMS Innovation Center initiative designed to support organizations with experience operating as ACOs or in similar arrangements in providing more coordinated care to beneficiaries at a lower cost to Medicare. The Pioneer ACO Model will test the impact of different payment arrangements in helping these organizations achieve the goals of providing better care to patients while reducing Medicare costs.

Another ACO project being tested is PRIDE (Personalized Regionally Integrated Disease Entities).15 PRIDE is a conglomeration of organized medical systems that have a goal to introduce accountable care into communities as a means of reducing costs and improving outcomes. All of these ACO programs are based on the following principles:

•            Defining the bundles

•            Defining the payment method

•            Implementing quality measurement

•            Determining accountability

•            Engaging providers

•            Redesigning care.

A danger of implementing bundled payments to providers is that certain providers involved in these programs may become underutilized. This was demonstrated using data from the nationally representative Dialysis Outcomes and Practice Patterns Study (DOPPS). DOPPS showed that uncontrolled secondary hyperparathyroidism has been on the rise among black hemodialysis patients since the implementation in January 2011 of the CMS’s bundled payment system for dialysis services, which includes intravenous vitamin D analogs. Previously, the use of these analogs was paid separately and dialysis centers received payment for the cost of these analogs plus an additional 6%. This resulted in a moral hazard favoring overutilization because of desirable reimbursement levels. By reversing the payment and making it a cost instead of a profit, these dialysis centers now face a moral hazard of underutilization.

Providers’ Guidance

So what does this movement mean for providers? For one, providers will increasingly be called upon to educate their patients regarding the true benefits and costs of a healthcare service so that the most intelligent decision can be made, leading to appropriate utilization as patients are increasingly forced to dig into their pockets to cover a greater share of the costs. Providers will also have to be careful stewards in bundled payments systems to ensure that healthcare utilization does not fall below appropriate levels.

Programs are available to assist patients in making difficult healthcare decisions, such as the Dartmouth-Hitchcock Center for Shared Decision Making ( Realizing that at times it can be hard for patients to decide whether to have surgery, to have a test, or to continue with treatment, such programs use the process of shared decision-making, wherein a conversation between a provider and a patient ensues in which the provider contributes his or her medical expertise and the patient communicates his or her life goals, values, and the importance he or she attaches to these values as they relate to a healthcare decision. In preference-sensitive healthcare situations, there is no single “best” therapeutic action that’s indicated for all patients; therefore, the goal of these programs is to help patients make an informed, preference-based choice among several relevant options.

Education is a critical component in preventing against depletion of Medicare resources, as educated decisions ensure the patient receives appropriate treatment and the payer does not incur unnecessary expenses that have little benefit. To ensure an educated decision is made regarding healthcare utilization, providers are no longer solely tasked with identifying clinically appropriate treatments for their patients, but must also carefully consider in conjunction with their patients the value of those treatments from the perspective of the payer, whether the payer is the patient, Medicare, or the provider group. Such an approach will hopefully save Medicare resources while still enabling patients to get the care they need and deserve. 


The author and series editor report no relevant financial relationships.



1. US Centers for Medicare & Medicaid Services. National health expenditures 2010 highlights. 2010. Accessed April 20, 2012.

2.  Owens DK, Qaseem A, Chou R, Shekelle P; Clinical Guidelines Committee of the American College of Physicians. High-value, cost-conscious health care: concepts for clinicians to evaluate the benefits, harms, and costs of medical interventions. Ann Intern Med. 2011;154(3):174-180.

3.  Rethinking comparative effectiveness research. Biotechnol Healthc. 2009;6(2):35-38.

4. Social Security Act Amendments. §1862(a)(1).

5.  Blum J. A History of creating the Medicare Prescription Drug Benefit: striking compromises, avoiding past mistakes, and minding budgetary constraints. 2006. Avalere Health LLC. Accessed April 20, 2012.

6.  Medicare Payment Advisory Commission Public Meeting [transcript]; November 3, 2011: Washington, DC. Accessed April 20, 2012.

7. Kaiser Family Foundation. Medigap reforms: potential effects of benefit restrictions on Medicare spending and beneficiary costs. July 2011. Accessed April 20, 2012.

8. Medicare Payment Advisory Commission. Report to the Congress: aligning incentives in Medicare. June 2010. Accessed April 20, 2012.

9. US Congressional Budget Office. Reducing the deficit: spending and revenue options. March 2011. Accessed April 20, 2012.

10.US Department of Health and Human Services. America’s health literacy: why we need accessible health information. 2008. Accessed April 20, 2012.

11. Health literacy interventions and outcomes: an updated systematic review. Rockville, MD: Agency for Healthcare Research and Quality, 2011. AHRQ Publication No. 11-E006. Accessed April 20, 2012.

12.US Department of Health & Human Services; Agency for Healthcare Research and Quality. Health literacy interventions and outcomes: an updated systematic review. Accessed May 31, 2012.

13.Kaiser Health News. HHS releases final regulations for ACOs. Accessed June 4, 2012.

14.  Centers for Medicare & Medicaid Intervention. Pioneer ACO model. Accessed June 4, 2012.

15.  Shulkin DJ. PRIDE in accountable care. Pop Health Manag. 2011;14(5): 211-214.