HHS FY2016 Budget in Brief

HHS FY2016 Budget in Brief: Centers for Medicare & Medicaid Services (CMS): Center for Medicare & Medicaid Innovation

Centers for Medicare & Medicaid Services

The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.

CMS Center for Medicare & Medicaid Innovation Budget Overview

(Dollars in millions)

Obligations and Outlays 2014 2015 2016 2016
+/- 2015
Innovation Activities 991 1,501 1,298 -203
Innovation Supports 101 202 187 -15
Administrative Expenses 89 138 161 +23
Total, Innovation Center Obligations 1,181 1,842 1,646 -195
Total, Outlays 997 1,291 1,590 +299

CMS Innovation Programs

The Center for Medicare and Medicaid Innovation (“Innovation Center”) was established by Section 3021 of the Affordable Care Act.  The Innovation Center is tasked with testing innovative health care payment and service delivery models with the potential to improve the quality of care and reduce Medicare, Medicaid, and the Children Health Insurance Program expenditures.  The Affordable Care Act appropriated $10 billion to support Innovation Center activities initiated from FY 2011 to FY 2019.

Since its launch in November 2010, the Innovation Center has embarked on an ambitious research agenda.  Models currently being developed and tested include Medicare payment reforms that encourage efficient and high quality care, new approaches to better coordinate care for beneficiaries who are enrolled in both Medicare and Medicaid, and new mechanisms to promote patient safety in hospitals. Additional models are currently under development and will be tested in the coming months and years.

The Innovation Center’s portfolio of models has attracted participation from a broad array of health care providers, states, payers, and other stakeholders, and serves Medicare, Medicaid, and CHIP beneficiaries in all 50 states, the District of Columbia, and Puerto Rico.  Over 2.5 million Medicare, Medicaid, and CHIP beneficiaries are or soon will be receiving care furnished by the more than 60,000 providers participating in Innovation Center payment and service delivery models. 

Preliminary Second Year Results from the Pioneer ACO Model

Preliminary results for the second performance year of the Pioneer ACO Model were released on September 16, 2014. The mean quality score among Pioneer ACOs increased by 19 percent, from 71.8 percent in 2012 to 85.2 percent in 2013. Pioneer ACOs generated estimated total model savings of over $96 million and savings to the Medicare Trust Funds of approximately $41 million. Model savings and other financial results are based on preliminary results and are subject to revision. The mean quality score among ACOs increased by 19 percent and organizations showed improvements in 28 of the 33 measures compared to year 1. Pioneer ACOs achieved lower per capita growth in spending for the Medicare program at 1.4 percent, which is about 0.45 percent lower than Medicare fee-for-service per capita growth. Eleven Pioneer ACOs earned shared savings, three generated shared losses, and three elected to defer reconciliation until after the completion of performance year three. The remaining six Pioneer ACOs did not earn shared savings or generate losses.

In its first four plus years of operation, from FY 2010 through FY 2014, the Innovation Center obligated approximately $3.0 billion.  Cumulative obligations are projected to increase to $4.8 billion by the end of FY 2015 and to nearly $6.5 billion by the end of FY 2016 as the portfolio of models being tested continues to expand.  CMMI is on track to obligating the full $10 billion appropriation by 2019.  In FY 2015 and FY 2016, over 90 percent of spending is projected to be on specific models and initiatives, as well as necessary innovation supports, with the remainder dedicated to administrative expenses.  While model spending is projected to slightly decrease in FY 2016 (as compared to FY 2015), this reduction primarily reflects the estimated timing of major awards, and not a contraction in the Innovation Center’s portfolio. 

Innovation Center Models

As of January 2015, the Innovation Center is testing 24 major payment and service delivery models under the authority of Section 1115A of the Social Security Act.  The Innovation Center also administers over 20 other Medicare demonstrations that are authorized and funded by other statutory authorities.  Each of the models below will be comprehensively evaluated with the potential for expansion if they are certified to be effective at improving quality without increasing spending or reducing spending while maintaining quality.

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Primary Care Transformation

Federally Qualified Health Center Advanced Primary Care Demonstration:In 2011, the Innovation Center selected 500 federally qualified health centers to participate in a three year demonstration to evaluate the effect of an advanced primary care practice model, also known as a patient centered medical home, on the quality and cost of care provided to Medicare beneficiaries.  Participating health centers that pursued level three status as a patient centered medical home as defined by the National Committee for Quality Assurance were eligible for additional Medicare care management payments. This model ended on October 31, 2014, at which point 434 federally qualified health centers remained in the model, serving 207,000 Medicare beneficiaries. The evaluation for this model is underway.

Comprehensive Primary Care Initiative:

In October 2011, the Innovation Center announced the Comprehensive Primary Care Initiative.  In this initiative, private payers and state Medicaid programs partner with Medicare to invest in primary care.  The Initiative was rolled out in two phases.  The Innovation Center first selected seven markets with significant payer interest to participate in this demonstration.  The markets include Arkansas, Colorado, New Jersey, Oregon, New York’s Capital District Hudson Valley region, Ohio and Kentucky’s Cincinnati Dayton region, and the Greater Tulsa region of Oklahoma.  Through this initiative, approximately 2,500 providers are serving an estimated 396,000 Medicare beneficiaries at over 480 practice sites.  The selected practices receive additional care coordination or similar payments from all participating payers, allowing them to transform their practices and make expanded services available to all patients.  In years two through four of the initiative, practices have an opportunity to earn shared savings. The distribution of shared savings is adjusted based on patient acuity, the number of attributed beneficiaries, and performance on quality metrics.

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Accountable Care Models

 As part of CMS’s effort to promote accountable care, the Innovation Center has launched four initiatives.  These initiatives build upon the Medicare Shared Savings Program established by the Affordable Care Act. 

Pioneer Accountable Care Organization (ACO) Model:  This model allows health care organizations and providers that are already experienced in coordinating care for patients across care settings to move more rapidly to a population based Medicare payment model.  Pioneer ACOs assume more risk than participants in the Shared Savings Program and must commit to having the majority of their revenues across all payers come from performance-based contracts (in which payment depends on quality of care) by the end of the second performance year.  Nineteen organizations are currently participating in the model. 

Advance Payment ACO Model: This model tests whether pre-paying a portion of future shared savings can increase participation in the Medicare Shared Savings Program.  Providing up-front payments to certain physician-led and rural organizations in the Shared Savings Program will allow these ACOs to make investments in infrastructure and staff in order to improve patient care and reduce costs.  Advance payments will be recouped from the actual shared savings payments that ACOs earn.  There are currently 35 ACOs participating in the Advance Payment Model, although the last advance payments were made in June 2014.  Ten ACOs that started in 2012 generated shared savings in the first year of the program. 

ACO Investment Model: In October 2014, the Innovation Center announced a new model that builds on the experience with the Advance Payment Model to encourage new ACOs to form in rural and underserved areas and to assist current Medicare Shared Savings Program ACOs in transitioning to arrangements with greater financial risk.  The Model will be available to two cohorts of ACOs: those that plan to join the Medicare Shared Savings Program in 2016 and those that started participating in the Program in 2012, 2013, or 2014.  Current Advance Payment ACOs are not eligible to participate. 

Comprehensive End-Stage Renal Disease (ESRD) Care Initiative: In February 2013, the Innovation Center announced the Comprehensive ESRD Care Initiative, which will incentivize the provision of high quality, efficient, and coordinated care to Medicare beneficiaries who require dialysis.  In order to participate, groups of providers (including dialysis facilities, nephrologists, and others) must form Seamless Care Organizations, which assume full clinical and financial accountability for assigned beneficiaries.  These organizations will be eligible to share in any model savings with Medicare.  Initial applications from providers to participate in this model have been received.

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Bundles for Care Improvement

Bundled Payments:  The Bundled Payments for Care Improvement Initiative seeks to better coordinate care by providing a bundled Medicare payment for an episode of care involving one or more providers.  Providers paid through the bundle may include (among others) hospitals, physicians, and skilled nursing facilities.  The Innovation Center has begun testing four initial models as part of the broader Bundled Payments Initiative – each model incorporates a different set of services and payment arrangements.  In each model, providers or other risk-bearing organizations must offer a discount to Medicare as a condition of participating in the initiative.  As of October 2013, providers were participating in all four of the bundled payment models.  Awardees that entered into agreements with the CMS Innovation Center between October 2013 and January 2014 have begun the risk-bearing phase for some or all of their episodes.  The initiative is projected to serve 130,000 Medicare beneficiaries.  There are 48 episodes of care that participants can choose from, such as acute myocardial infarction and urinary tract infection.

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Initiatives to Speed the Adoption of Best Practices

Partnership for Patients:  The Partnership for Patients is a collaborative effort by CMS and more than 8,400 stakeholders across the nation, including over 3,700 hospitals, to improve patient safety.  The Partnership set ambitious targets of reducing hospital acquired conditions by 40 percent and hospital readmissions by 20 percent (compared to a 2010 baseline) over four years.  While a final evaluation is not yet complete, early indicators suggest the Partnership has helped lead to significant decrease in hospital-acquired conditions.  A cumulative total of 1.3 million fewer hospital-acquired conditions were experienced by hospital patients in 2011, 2012, and 2013 relative to the number of hospital-acquired conditions that would have occurred if rates had remained steady at the 2010 level. Approximately 50,000 fewer patients died in the hospital as a result of the reduction in hospital-acquired conditions. 

Transforming Clinical Practice Initiative: In October 2014, the Secretary announced a new initiative, totaling $800 million in Innovation Center funding and another $40 million in Quality Improvement Organization funding, designed to help clinicians achieve large-scale health transformation.  The Initiative will support 150,000 clinicians over the next four years in sharing, adapting and further developing their comprehensive quality improvement strategies.  CMS will award cooperative agreement funding for two types of network systems under this initiative: Practice Transformation Networks and Support and Alignment Networks.  The Practice Transformation Networks are peer-based learning networks designed to coach, mentor, and assist clinicians in developing core competencies specific to practice transformation.  The Support and Alignment Networks will utilize national and regional professional associations and public-private partnerships that are currently working in practice transformation efforts to provide a system for workforce development aligned with the goals of the model.

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Initiatives to Accelerate New Service Delivery and Payment Model Testing

Health Care Innovation Awards:  In 2012, the Innovation Center announced 107 recipients of Health Care Innovation Awards.  These awardees, which include providers, payers, local governments, and other partners, were chosen based on the strength of their proposals to implement or expand compelling new models to improve care and reduce costs, with a particular focus on high need populations and workforce development.  Awards span a three year time period.

In May 2013, the Innovation Center announced a second round of Health Care Innovation Award grants, focused on several key areas, including outpatient and post-acute care, populations with specialized needs, practice transformation, and population health.  A total of 39 awards awardees for this second round of funding were announced in two groups in May 2014 and June 2014.  The performance period for round two began in September 2014 and extends through June 2017.

State Innovation Models:  Round two of the State Innovation Model initiative provides more than $665 million to support states in transforming their health care payment and delivery systems.  In order to qualify for awards, states proposed reforms that incorporated multiple payers and are expected to improve quality of care and the health of the state population, while reducing costs.  Some states are receiving funding to support the testing of such models.  Round two awardees were announced in December 2014.  A total of 28 states, 3 territories and the District of Columbia will receive funding through round two. 

Innovation Accelerator Program: CMS launched the Medicaid Innovation Accelerator Program in July 2014 with the goal of improving health and health care for Medicaid beneficiaries by supporting states’ efforts to accelerate new payment and service delivery reforms. While complementing other federal-state delivery system reform efforts such as the State Innovation Models initiative, the Innovation Accelerator Program will provide additional federal tools and resources to support states in advancing Medicaid-specific delivery system reform and by sharing lessons and best practices. For example, through the Innovation Accelerator Program, CMS will provide technical assistance and other types of technical support to states interested in accelerating the development and testing of Substance Use Disorder service delivery innovations.

Maryland All-Payer Model: In 2014, the Innovation Center began collaborating with the State of Maryland on a new model testing the impact of all-payer hospital rate-setting on the quality and cost of care.  While Maryland has utilized all-payer rate setting for over three decades, this new model will allow the State to focus more directly on the challenges currently facing Maryland’s hospitals.  In particular, the new model will require limited overall cost growth, measurable savings for Medicare, and improvement on critical quality and outcome measures.  If this model meets key goals over its initial five-year testing period, Maryland will have the opportunity to propose approaches to expand the model to other provider types, in addition to hospitals.

Medicare Care Choices Model:  This model provides a new option for Medicare beneficiaries with certain conditions to receive palliative care services from participating hospice providers while concurrently receiving certain curative services.  Currently, Medicare beneficiaries are required to forgo curative care in order to receive access to palliative care services offered by hospices.  This initiative represents a fundamental change in the delivery of care for persons with terminal illness.  CMS will evaluate whether providing palliative services can improve quality of life and care, increase patient satisfaction, and reduce Medicare expenditures. Thirty thousand beneficiaries are estimated to be enrolled in this model throughout the three-year period of performance.

Prior Authorization Models: In 2014, the Innovation Center announced that it will begin testing two prior authorization models for repetitive scheduled non-emergent ambulance transport and non-emergent hyperbaric oxygen therapy. The objective of the models is to test whether prior authorization helps reduce improper payments and thereby lowers Medicare costs, while maintaining or improving quality of care.  The models will not create additional documentation requirements; rather, they will require reporting the same information that is currently necessary to support Medicare payment, only earlier in the process. This effort will help ensure that all relevant coverage, coding, and clinical documentation requirements are met before the service is rendered to the beneficiary and before the claim is submitted for payment. 

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Initiatives Focused on the Medicaid Population

Strong Start for Mothers and Newborns:  The Strong Start initiative, which began in February 2012, supports reducing the risk of significant complications and long‑term health problems for both expectant mothers and newborns.  The Innovation Center has worked with experts at the Centers for Disease Control and Prevention, National Institutes of Health, Administration for Children and Families, and the Health Resources and Services Administration to identify the goals and shape the direction of Strong Start.

Strong Start contains two strategies: 1) a public­‑private partnership, building on the work of Partnership for Patients to test ways to encourage best practices and support providers in reducing early elective deliveries prior to 39 weeks; and 2) a four‑year initiative to test the effectiveness of specific enhanced prenatal care approaches to reduce the frequency of premature births in pregnant Medicaid or CHIP beneficiaries.  In February 2013, CMS awarded $41.4 million to 27 recipients under this initiative in 32 states, the District of Columbia, and Puerto Rico, projected to reach 80,000 women enrolled in Medicaid and CHIP over the life of the demonstration.   

Initiatives Supporting Medicare-Medicaid Enrollees

More than 10 million Americans are dually enrolled in the Medicare and Medicaid programs.  Section 2602 of the Affordable Care Act established the Federal Coordinated Health Care Office, also known as the Medicare‑Medicaid Coordination Office, to promote access to care, improve the overall beneficiary experience, and coordinate services for Medicare‑Medicaid enrollees.  This office also provides technical assistance to support states' efforts toward innovative service delivery for Medicare-Medicaid beneficiaries. 

Medicare‑Medicaid Financial Alignment Initiative: To incentivize high-quality, coordinated care, CMS has partnered with states to design person‑centered approaches to aligning care across primary, acute, and behavioral health and long‑term supports and services.  States participating in the initiative have designed models to improve quality and achieve savings using either a capitated payment system or the current fee for service structure. Implementation of the first financial alignment models began in 2013.  As of December 2014, CMS has approved capitated models in nine states, a fee-for-service model in one state, and has allowed one state to implement both models. Additionally, Minnesota has implemented an alternative model to integrate care for Medicare-Medicaid enrollees, building on the state’s current Dual Eligible Special Needs Plans infrastructure.

Initiative to Reduce Avoidable Hospitalizations among Nursing Facility Residents:  Nursing facility residents often experience potentially avoidable inpatient hospitalizations, which are expensive, disruptive, and disorienting for the frail elderly and people with disabilities.  Through this initiative, CMS partnered with seven organizations in 2012 to implement evidence‑based interventions that both improve care and lower costs, focusing on reducing preventable inpatient hospitalizations among long‑term residents of nursing facilities.  This initiative has served an estimated 24,000 Medicare-Medicaid enrollees each year and has enhanced care for many others served by these nursing facilities.  This initiative supports the Partnership for Patients’ goal of reducing hospital readmission rates by 20 percent.


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