Our efforts in regulatory reform are meant to be disruptive because the status quo is simply unacceptable. That's certainly the view of many Americans who are burdened by our healthcare system, and the view of President Trump.
As Prepared for Delivery
Thank you for welcoming me here today.
I’m glad to get to speak to all of you because your work covers such a broad swath of American healthcare: not just hospitals but smaller clinics and practices, too, which together form the diverse healthcare system we all rely on for care.
In addition, I’m always glad to speak with an organization that, like me, hails from the great state of Illinois.
I’m also glad to be speaking with you at this time because we all know we are at a critical juncture for healthcare in America.
Healthcare is an issue that is front of mind for President Trump, and the American people’s desire for better care at a lower cost has never been greater.
All of you know how crucial it is for our healthcare system to move from a system that is primarily procedures-focused to one that is more patient-centered and value-driven—and we will not get there without the help of every sector of healthcare, from the Joint Commission to hospital leaders, provider groups, patient advocates, community health aides—everyone.
Many of you are likely aware that Secretary Azar has identified this value-based transformation of our entire healthcare system as one of his top four priorities for HHS.
President Trump sees the need for this transformation because he understands how broken our healthcare system is, and he’s extremely frustrated by the burden it imposes on the American people. He wants to deliver Americans better care at a lower cost, and he instinctively knows that means driving toward value.
But under one name or another, the Trump administration is at least the third administration to work toward this goal.
We all have more experience with value-based initiatives than we often give ourselves credit for. What, after all, was Part D and the revamped Medicare Advantage, besides ways to drive value through competition and incentives? What was the medical-severity DRG reform that I worked on under the Bush administration? All are related to “value-based” efforts in some fashion.
At the same time, since Secretary Mike Leavitt helped launch value-based care as a named movement back in the 2000s, progress hasn’t been as rapid as we need it to be.
Working with accountable care organizations and other entities, HHS has been moving in the right direction. Just from 2017 to 2018, for instance, the share of Medicare beneficiaries in alternative payment models went from 13 percent to 17 percent—that is progress, but it’s still under 1 in 5 Medicare beneficiaries.
Part of the reason the shift to value has been too slow is that it requires such a significant reorienting of our healthcare system. We have to take a holistic view of all of our policies and programs to help push this transformation along—and that’s what we’ve done and will continue to do at HHS.
All of the providers that you help accredit and oversee have a role to play in this transformation. There are a number of areas I could highlight regarding the move from volume to value, including health IT, payments innovation, and the involvement of private sector actors and investors. But the specific area I want to hone in on today is regulation.
Some of you may know that in my previous tour of duty at HHS, I served as the agency’s deputy general counsel for regulations and chief regulatory officer. Now, in my return to the department, I get to be chief regulatory officer again. I’ve also taught administrative law and healthcare regulations as a law professor, and worked as a regulatory lawyer at my former law firm.
Regulatory reform, it’s fair to say, is a personal passion. But, a few of you may be wondering: what exactly does regulation have to do with moving to value-based care?
I’m glad you asked.
I hope you’ll understand after this talk, why I believe regulation, or more specifically, the proper reforming of it, has to be a central piece of any effective movement toward a value-based healthcare system.
Reforming regulations, I believe, will create huge new opportunities for American healthcare providers. I want to start with one of the most obvious areas for reform: the sheer amount of time physicians spend complying with billing requirements, quality reporting, and so much more.
I believe there has never been an administration more focused on reducing provider burden than this one.
Administrator Verma at CMS has made reducing provider burden and supporting focus on patients one of her top priorities.
The results, just so far, speak for themselves: CMS estimates that our regulatory reforms will eliminate more than 53 million hours of paperwork for physicians alone through 2021, saving our system $5.2 billion. We’ve eliminated 105 separate clinical measures that were no longer meaningful or useful.
This means that doctors, nurses, and other health professionals will now be able to spend 53 million hours focusing on helping patients instead of being burdened by paperwork.
We also believe there may room for further reforms in the area of reporting, especially around the voluminous quality programs HHS runs.
But we need to go beyond just paperwork reduction. We need to think about how to reform our regulations to encourage more innovative ways to pay for value and coordinate care.
Innovation is at the center of all of our regulatory reform efforts at HHS, and innovation in coordinated care especially is the centerpiece of the reforms we’re undertaking around value-based care.
In recognition of the importance of regulatory reform to paying for value, last summer, I launched a project we’ve named the Regulatory Sprint to Coordinated Care.
Each of those words in the name is deliberately chosen.
It’s a sprint, because we are intent on gathering the information we need and moving to rulemaking as soon as possible.
It’s about coordination, above all—we’re focused on understanding how regulations are impeding coordination among providers that can provide better, lower cost patient care, and then reforming these regulations consistent with the laws and their intents.
And, finally, it’s about care. Regulating healthcare means regulating some of the most intimate decisions and relationships in our lives—deciding where and when to seek healthcare, how to make decisions with our doctors and family members, and more. We believe this effort can meaningfully improve the quality of care received by American patients.
The drive to coordinated care provokes some obvious questions that point toward the need for regulatory reform.
How can we expect physicians to act as navigators of the health system, while also holding them accountable, if their decision-making is hamstrung by outdated regulations?
How interested can we really expect providers to buy into payments based on outcomes, if we’re not giving them the freedom to experiment and coordinate? Why take on risk without the tools needed to improve outcomes?
And how can we really make major steps in preventing and curing disease without also thinking about creative arrangements where everyone is incentivized to keep people healthy?
So, as you can clearly see, the regulatory sprint is really at the heart of our value-based efforts. In fact, in the very first speeches Secretary Azar gave about how his vision for value-based care he identified barriers to coordinated care as one of the top priorities.
Another way you can tell we’re serious about the regulatory sprint to coordinated care, of course, is that we have a Twitter hashtag—that’s #RS2CC. Simple, brief, does the job right—just like we’d like to make our regulations.
I want to drill down on a couple particular regulations we’re examining as part of the regulatory sprint: the Stark Law and the Anti-Kickback Statute. The two other main regulations we’re looking at are crucial, as well: HIPAA and 42 CFR Part 2.
I want to emphasize that we’re coming to examine these regulations with a great deal of appreciation for why they were enacted and what they’ve accomplished.
As an attorney, where Stark and Anti-Kickback were probably my most significant area of specialization, I am sympathetic to what these laws stand for. All of us should be.
But rightly reformed, these regulations, and the exceptions and safe harbors within them can and should be reoriented, I believe, to help us transition to a much better kind of healthcare system.
So what would this look like for the Stark Law in particular? As many of you probably know, when enacted in 1989, the Stark Law rightfully addressed the concern that inappropriate motives could distort decision-making in healthcare.
There was a worry that some physicians might order services based on their financial interest in service providers, rather than the good of the patient.
This law, clearly, was passed with good intentions. We don’t want people referred to services they don’t need or steered to less convenient, lower quality, or more expensive healthcare providers because of their doctor’s financial interest.
Of course, it’s worth bearing in mind the larger context: fee-for-service in the form of the inpatient prospective payment system was, and is, a reform that responded to poor incentives in the previous system, which reimbursed based on reasonable cost.
The Stark Law dealt with the incentives of fee-for-service in two specific ways.
First, it banned doctors from referring patients for certain designated health services payable by Medicare to an entity in which the physician, or any immediate family member, holds a financial relationship.
Second, it prohibited the entity from filing claims with Medicare, or billing another individual, entity, or third-party payer for those referred services. The restrictions are absolute, with certain enumerated exceptions, but the law grants HHS the authority to carve out exceptions for financial relationships that do not pose a risk of program or patient abuse.
We believe the exceptions that may make sense today look a lot different than they did when the law was passed. Certainly, our healthcare system looks a lot different than it did when the law was passed—and we want it to look even more different still.
When we had a purely fee-for-service system, we needed to think really hard about who was deciding who was getting paid those fees for those services.
In a system where we’re paying for value, where providers are taking on some risk for outcomes and cost overruns, we don’t have nearly as much need to interfere with who’s getting paid for what service—because providers are getting paid for outcomes, not services.
And make no mistake about it: That is where we are going, quite quickly.
Last month, we unveiled a new set of primary care models that will enroll one quarter of Medicare beneficiaries and one quarter of providers into arrangements where the providers take on risk. Value-based care is here—and it’s time for our regulations to reflect it.
It’s hard to overstate how much the current state of Stark Law as it’s currently written is written to prevent paying for value.
The law currently has almost 20 enumerated exceptions — but not one that is directly related to paying for value.
We often say that we get what we pay for in healthcare: we pay for volume and procedures, so what we get is a whole lot of volume and a whole lot of procedures.
Well, we also get only what we permit: if we don’t permit value-based compensation arrangements, it’s a bit odd to lament that they’re not more prevalent.
So last year, we conducted a major request for information on the Stark Law, which closed in August.
We received approximately 375 comments, totaling upwards of 3,500 pages. This wasn’t one of those RFIs where we get a hundred thousand form submissions—not that there’s anything wrong with those!
We received comments from a wide range of stakeholders, including individuals, rural interests, integrated systems, and industry associations. Most commenters believed that regulatory changes are needed to support the move to value-based payments. But I should note, across the comments, there was also recognition—a recognition that we share—that the potential for program integrity vulnerability or other abuses continues to be a significant threat that cannot be ignored.
We look forward to moving ahead with rulemaking on the Stark Law soon, and the same goes for the Anti-Kickback Statute, which I’ll discuss briefly, before giving you a sense of where we hope to end up on these rules.
Our Office of the Inspector General issued an RFI on the Anti-Kickback Statute last summer as well, the comment period for which closed in October.
Here, too, we are going to be very attentive to the need for program integrity. But in a system where we want to pay for value in part by giving providers more freedom to innovate, we simply have to look at the current interpretations of the Anti-Kickback Statute.
How can we expect a provider to improve outcomes for, say, a patient with poor attendance at appointments if we’re not willing to look at how the patient can get some assistance in transporting them to those appointments?
How can we really encourage patients to take more ownership over their own healthcare without thinking about providing them, maybe free of charge, with patient-empowering technologies, whether that’s a heart monitor or a tablet or something else?
These are vital questions if we want to empower patients and providers to drive value.
Ultimately, by coming up with creative answers to these questions, we can build an American healthcare system that is incredibly high quality, but also competitive, affordable, accessible, and patient-friendly.
To get there, I believe we need to do everything we can to help healthcare function with the same levels of competition, transparency, and choice as any other market, and to do that, we need the regulatory reforms I’ve just talked about.
I can get really frustrated with the way some people look at regulatory reform—remember, personal subject for me—when it’s primarily viewed as a giveaway to industry.
Done right, regulatory reform is actually a challenge to industry.
It’s an opportunity to examine the barriers that regulations create between market actors, and determine how we can reshape or reduce them so that new arrangements, relationships, and solutions can emerge, all while maintaining safeguards for innovation, competition, patient access, and sound use of taxpayer dollars.
Really, in healthcare, failing to undertake regulatory reform is a giveaway to industry. Maintaining existing, dysfunctional rules allows incumbent actors to use them as barriers to competition, preventing innovation from disrupting the status quo and bringing new options to patients.
Our value-based reforms might mean changes for some business models, but they also represent new opportunities for competition and innovation.
Our efforts in regulatory reform are meant to be disruptive because the status quo is simply unacceptable. That’s certainly the view of many Americans who are burdened by our healthcare system, and the view of President Trump
Under President Trump, I believe we can take significant strides toward the goals all of us here share: not just bringing our HHS programs and rules into the 21st century, not just transforming our system into one that finally pays for performance and value, but building a system where American patients finally get the kind of affordable, top quality care they deserve.
Thank you very much for having me here today.