Innovations lead to savings for largest health care payer

The Centers for Medicare and Medicaid Services has a lot of incentive to search for innovative ways to reduce the costs of health care.

“We are the largest payer for health care in the U.S., probably in the world,” said Patrick Conway, administrator for innovation and quality and chief medical officer at CMS, on week four of Theme Month, featuring Advances in Health Care for the month of September. “We insure almost 140 million people now, spend in total almost $1 trillion a year — so over $2.5 billion a day — and certainly we are shifting how we pay for health care, in paying for quality instead of volume.”

CMS is currently working on an innovative approach to health care spending, called the accountable care initiative. The idea is to coordinate care within accountable care organizations in order to provide better patient outcomes and quicker recovery times, while reducing the number of admissions and re-admissions.

And it’s working. Conway said the country has 500 accountable care organizations, and together they’ve resulted in a cumulative total of more than $1 billion in savings. And the program is still in the early stages; the organizations are still learning how to do the work, and CMS is still learning how to partner with them effectively.


The core concept of the program is to get the patient to spend as little time in hospitals and emergency rooms as possible, focusing instead on visits to primary care providers and home-based recovery programs. Conway repeatedly used the phrase “home and healthy” to emphasize this point.

But just because the patient is home doesn’t mean they’ve stopped receiving care.

“By using electronic health records and, I’d say technology broadly — including telehealth and other technologies — we’re seeing ACO’s monitor patients at home for complications, like weight gain for congestive heart failure,” Conway told the Federal Drive with Tom Temin.

In fact, by focusing on quality of care in order to reduce health episodes or complications that lead to readmissions, the patients actually receive better care while CMS saves money.

“We’re seeing great success in terms of improving quality and lowering costs,” Conway said. “Prior to these payment models, for example, if a patient were to be readmitted to a hospital, we would pay that hospital again. So the incentive was really misaligned with what you’d want for your own mother or family member, which is well-coordinated care, no infections or complications, and getting home and healthy as quick as possible.”

Conway said that in the previous model, physicians were paid by volume of patients, which incentivized them to deprioritize quality of care in favor of moving as many patients through the office as possible. Now, the pay is based on the needs of the patient.

CMS is also applying the same principles to Medicaid and the Children’s Health Insurance Program, working with 37 states to improve care for infants and children. This is key to its strategy of improving overall health while reducing costs. Conway said the first five years can set a person’s health trajectory for life.

One of its biggest initiatives is attempting to lower preterm birth rates, because they are extremely expensive and complications from preterm birth can affect a child’s health for years.

“It’s a series of interventions to try to decrease preterm birth, and we’re seeing states and communities and nationally [we’re] moving in the right direction,” Conway said. “[There’s] still much more work to do. For example, we still have disparities in preterm birth in terms of race and ethnic disparities in this country.”

Conway also noted that race and ethnic disparities tend to correlate with wealth and poverty disparities.

He said another initiative involves the Partnership for Patients, a series of networks that promotes reducing preventable harm and adverse events. Conway said that translates to 2 million injuries, infections and adverse events avoided, 87,000 lives saved, and $20 billion in cost savings.

“To make it tangible, I remember taking care of a child who died from a central line infection when I was a resident,” Conway said. “We’ve decreased these bloodstream infections by more than 60 percent nationally. These are real people who avoid either death or a significant infection and are able to go home and healthy instead, which is why we do this work.”

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