CMS Acting Administrator Andy Slavitt’s Comments before the Federation of American Hospitals

Source: CMS
CMS Acting Administrator Andy Slavitt’s Comments before the Federation of American Hospitals

Welcome to Washington! I could tell you stories… Not long ago I was where you were– in the private sector attending conferences. Now, after a lot of years in health care, I ended up here where I find myself focused on the role CMS can play to be a productive and simplifying force at a time when all of us in health care are going through substantial and dramatic changes. Newly eligible consumers … different payment models … technology advances … more care integration … new requirements. Even change we welcome represents new challenges and the sheer volume of change has driven us all into implementation mode. From the not-so-distant past, I remember how CMS often felt opaque to me and I probably said more than once how helpful it would be to know CMS’s agenda rather than divining them by poring through an often intricate set of regulations so my commitment to you is to talk straight and engage in real dialogue. In my time left at CMS, likely under a year, I’d like to focus our culture on closing the gulf between the transformative policy agenda that happens here and the realities of care delivery in the real world. We can do that only by listening and continually improving what we do. And in the midst of this, I see it as a great time for hospitals to not only advocate for what you want, but strategically plan for the changes we see ahead.

So today, I’ll lay out our 2016 agenda specifically as it relates to our work with the hospital community in three parts.

  • first is how hospitals can participate with us in what I will call the “retailization” of health care;
  • second is how we can advance our care delivery payment initiatives in ways that really advance the ball on care;
  • and third, and perhaps as important as anything, is how CMS can be a better, more responsive partner to you by listening and simplifying.

The agenda starts with our shared priority: understanding how we receive care today in America where the consumer is more diverse, more mobile and more demanding than ever before. The consumers CMS serves represent our country’s needs as a whole– 140 million Americans– most on fixed or low incomes in every type of care situation–

–the Medicare patient leaving the hospital with five prescriptions to fill and 2 appointments to book,

–the marketplace customer who will have coverage for the first time and finally be able to have his wife’s chronic fatigue looked at,

–the daughter who has made the difficult decision to move her mother in a nursing home,

–the Medicaid patient waiting for her kidney transplant and managing to make it to dialysis for most appointments,

–the cancer patient who has decided he wants to be treated at home in more comfort.

–the family with a child with disabilities on Medicaid that requires 24 hour care and is watching every dollar and interviewing every home care worker.

These are the people we serve every day and these are the people I wake up every day thinking about. Since my email address is available to the public, I’ve now learned that many of them wake up every day thinking about me too.

As I read the many emails beneficiaries send me, I see that even in a wide diversity of circumstances, everyone is hoping for the same basic things from the health care system: to get care they can afford, to keep their family well taken care of, to have some understanding of what comes next, and when they’re sick, they want nothing more than to get them home and return them to as productive and healthy life as possible.


Many hospitals have led the tremendous, nationwide effort to enroll people in new Marketplace or Medicaid coverage. And I thank you and congratulate you. Covering over 17 million newly insured Americans over the last few years is as profound a change as most of us have seen in our careers. Health care coverage says a lot about who we are as a country and is not only a more financially sensible way to get people care, but I know I speak for many that it provides a more moral and humane underpinning to how we feel about our industry. 

New coverage must only be the start of things. We have the opportunity to change health in America like we did 50 years ago at the dawn of Medicare and Medicaid, back when 1/3 of seniors lived in poverty to a time, now, when less than 10 percebt of seniors live in poverty. When people have insurance, their lives change in profound ways– from being able to access preventive care to being able to afford the prescription drugs for their chronic condition, or no longer worrying about the financial threat that would accompany a cancer diagnosis. And there are of course the economic effects – like reducing uncompensated care and hospital bad debt – which I will come back to in a moment.

But as I thank you, I want to openly discuss the next opportunities in a retail world. We are all used to living in a wholesale world where employers and health plans sit on the other side of the table from you to negotiate for better prices and new types of contracts. But what if we were all of the sudden living in a world where millions and millions of consumers carried that clout as their own agents and could ask for the things that were right for them and their families? In other words, are you ready to respond to a fully retail world?

Do you see this shift? Well, it’s already happening. Consumers on the exchange are every day allowing you to see the most valuable commodity of all– the voice of your customer. Here’s what I mean. Consumers are already now selecting their plans not by looking at the plan first– but first selecting a hospital or physician or prescription they want . . . then looking at which health plan offers them. 3.6 million times this happened in the last 3 months in just the 38 Federal marketplace states. They are shopping for their health care, not their health coverage.  And it’s only a matter of time before the price of the hospital service and the quality score is known to them when making this decision. And even more compelling, 70 percent of renewing consumers on the Federal exchange– seven-zero— came back to the exchange to actually choose a plan at renewal instead of accepting automatic enrollment. These are millions of opportunities for consumers to find you every open enrollment.

What do they want? Consumers are screaming that affordability matters more to them than it does to employers when they act as their agents. 90 percent of people have selected bronze or silver plans. This compares with fifteen percent as the highest anyone has seen in traditional employer markets. And consumers typically want affordability– those who switched plans saved over $500/month. So if consumers want savings, what do they appear to be willing to compromise on? According to a Kaiser Family Foundation report last May, consumers would much prefer a narrower network to a higher deductible or higher premium. This means we all need to be a part of reducing premiums– governments with subsidies, health plans with MLR limits, and you as you respond to their direct feedback.

So one important decision for many hospitals is how to participate and what is the right pricing strategy. One approach is a “just say no” approach and treat exchange consumers like any other managed care negotiation. The other approach is to create a more aggressive “retail strategy.” Part of a retail strategy begins with acknowledging that unlike what most of us assumed– the exchange market developed alongside of, not in place of, the employer market. Many hospitals set their rates as if the Marketplace would be replacement business, not an additional market. Revisiting that assumption I believe gets you to a more marginal pricing approach for Marketplace business befitting the lower-income individuals who are 80 percent plus of the exchange population.

A retail strategy calls on you to imagine you are negotiating directly with a cash paying consumer who used to be a source of bad debt– except one who now has the wherewithal to pay for services and wants to build a relationship where they can also find elective, outpatient and wellness services. A retail strategy offers you the opportunity for innovation to meet the customer need. It may mean taking less and seeing more patients in response to their affordability preferences. It may mean partnering with smaller plans or offering your own exchange plans or other strategies you think of to build your retail business. Ultimately, consumers will reward providers who want their business and have a strategy to get it. Sounds like how retail markets work.

But retail won’t stop there. Consumers will want better service and fairer service, and will likely be less tolerant of things that don’t work well for them. When the auto mechanic tells you that your $3000 estimate turned out to be $10,000, you probably won’t go back. Hidden charges, for things that happen in the ER or when the anesthesiologist is out of network and has separate charges, won’t be tolerated. The promising news is that leaders always emerge– and I am beginning to have conversations with hospitals and physicians who want to lead the charge so there are no more consumer surprises in their hospitals. Those that make that promise can expect to be rewarded by consumers. The retail world is emerging and with it, there is new opportunity.

2. Delivery system reform

Access is one thing, but unless that access is to a better quality health care system, we are not going to succeed. So let me talk about our agenda for advancing new payment models that reward for quality and value. A year ago, we committed that by 2018 we will reach a point where over 50 percent of Medicare FFS payments will be in new models like ACO. Many CEOs and CFOs tell me that the “tipping point signal” is helpful. Living in a fee-for-service world today while preparing for a payment system that rewards more coordinated, more value-oriented care that is emerging is challenging. This commitment from us should help galvanize your organizations in the right direction. Change often boils down to practical decisions on where to invest and we aim to make the case that the investments you are making in a quality programs and population health will carry a greater return than another expensive MRI machine or a new wing in the hospital.

We see payment models not as an end, but rather as a tool to help you increase communication, coordination and improve patient care. On April 1, we are launching a large scale pilot to connect and coordinate care for patients having joint replacement surgery. We are excited about how many hospitals are redesigning care and focusing on whole patient episodes of care. Already hospitals and surgeons are telling us of new communication and data sharing relationships with post-acute facilities. This speaks not only to better care but also retail health care centered on the patient. We also just announced both the expansion and advancement of new ACO models. There are now over 475 total ACOs with 30,000 participating physicians and 8.9 million beneficiaries around the country. And, 64 representing 1.6 million people, are in 2-sided or full risk models, up from 19 just last year and zero before the Affordable Care Act.

Where do we go from here? We have been bringing a focus on outcomes to every area where a consumer or beneficiary of CMS seeks care– from the physician’s office to the hospital to home health. In 2016, the implementation of the bi-partisan MACRA legislation will touch more and more specialties and create more incentives for to join alternative payment models. One area still largely untouched is pharmaceuticals. How we bring this same thinking on value into the development and prescribing of medications is on the agenda in 2016. We have received a lot of input as we have laid out the need as a country to be able to drive innovation and new cures but also promote access to medication for all patients who need them.

3. Listen to what’s happening on the ground 

The third part of our agenda is about our commitment to improving the lines of communication that allow us to close the gap between policy making and the realities of frontline care delivery.

CMS has significant responsibility for implementing new laws which must intersect with an already complex system with many demands. And so good policy must be ultimately informed by the impact it has at the kitchen table of the American family and in the clinic or office where they seek care.

We have several important initiatives:

–We will focus specifically on policies that impact rural health and have established the Rural Health Council which will have three areas of focus in policy coordination and strategy: access to care issues, the economics of rural health care, and promoting innovation across rural America. The council will host a Rural Health Open Door forum call every six weeks to update you on new CMS policy and initiatives, and at one of our upcoming sessions, the Council will seek input into our very important 2016 agenda.

–We will continue our commitment to iteratively improving the new care delivery models we release. Our newly launched Next Generation ACO model is a good example. It contains the features you have told us would best enable you to coordinate care, including innovative options like telemedicine, home visits, and direct patient incentive and engagement options. We also clearly heard that hospitals want us to fundamentally re-think the benchmarking and rebasing methodologies in our Shared Savings ACO models. We published a proposed rule that reflected a lot of the input we received, and we are now receiving comments.  While these models will never perfectly represent the best way to capture the quality and cost performance of a hospital, they should be the early generation tools that can act as the change management opportunities to move towards more coordinated care in your community.

–To be truly responsive, we must lead a simplification kick to reduce burden and give physicians back more time to spend with patients. Several years ago, we launched an initiative that is reducing regulatory burden and saving hospitals $3.2 billion over five years on burden and regulatory reduction. But we are barely scratching the surface. The work we’ve done recently over the 2 Midnight policy reflects the result of receiving significant feedback and is intended to create more discretion for care providers and move the RAC program from a “gotcha” feeling to a more educational and partner-oriented approach using QIOs. We will watch the results from these changes closely in hopes that we can demonstrate that collaboration will lead to better results without driving up inappropriate costs.

–On the technology front, tonight Secretary Burwell will be speaking at HIMSS about the role of technology in improving care delivery and tomorrow night, I will be joined by Karen Desalvo, of ONC, to talk about how we are working together to push initiatives to promote interoperability, simplify requirements, and usher in a new wave of technology improvements. The implementation of the bi-partisan MACRA regulations in the next several months gives us the first opportunity to focus on the physician office incentives and we will look for opportunities to address these critical areas in the hospital setting as well. We want to move back to a world where doctors can focus on patient outcomes and technology is a helpful tool, not a hindrance. And it will take all of us– government, care providers, and innovators– to get there. Over the next day, we will talk about our approach and principles as we approach the MACRA regulations.


Before I close, I want to thank those of you that are demonstrating your commitment to health equity, especially by treating Medicaid patients and the dually eligible. I recognize the challenge this can add to your system and I want you to know that we have released several proposals both in Medicare and Medicaid intended to focus on improving reimbursement levels for lower socioeconomic status and higher need populations. And we are committed to looking at what more there is we can do. But I know that no matter what we do, that our lowest income and hardest to treat citizens won’t get the same high quality of care that others do without your commitment as part of your role in the medical community to provide high quality care for all patients. I thank you for it and I ask that you know our commitment to health equity will not waver.

I want to close by repeating the theme I hope you’ve heard from me today as I laid out a very candid look at our agenda. Success for us is helping build a better health care system for all Americans, with smarter spending, and resulting in healthier people. We are at early stages of a system where we cover more people and also change how we integrate and work together to provide for a more value-based system. I know this transformation creates challenges as it plays out every day– all progress does. As we move forward, we need to listen and stay close to the realities on the ground and work together with you to create new generations of solutions that work better and are simpler. We thank you for all the constructive engagement and look forward to working with you in the coming months and years.

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CMS Acting Administrator Andy Slavitt’s Comments before the Federation of American Hospitals

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