The Obama administration Monday announced a goal of accelerating changes to Medicare so that within four years, half of the program’s traditional spending will go to doctors, hospitals and other providers that coordinate their patient care, stressing quality and frugality.

The announcement by Health and Human Services Secretary Sylvia Burwell is intended to spur efforts to supplant Medicare’s traditional fee-for-service medicine, in which doctors, hospitals and other medical providers are paid for each case or service without regard to how the patient fares. Since the passage of the federal health law in 2010, the administration has been designing new programs and underwriting experiments to come up with alternate payment models.

Last year, 20 percent of traditional Medicare spending, about $72 billion, went to models such as accountable care organizations, or ACOs, where doctors and others band together to care for patients with the promise of getting a piece of any savings they bring to Medicare, administration officials said. There are now 424 ACOs, and 105 hospitals and other health care groups that accept bundled payments, where Medicare gives them a fixed sum for each patient, which is supposed to cover not only their initial treatment for a specific ailment but also all the follow-up care. Other Medicare-funded pilot projects give doctors extra money to coordinate patient care among specialists and seek to get Medicare to work more in harmony with Medicaid, the state-federal health insurer for low-income people.

Burwell’s targets are for 30 percent, or about $113 billion, of Medicare’s traditional spending to go to these kind of endeavors by the end of President Barack Obama’s term in 2016, and 50 percent — about $215 billion — to be spent by the end of 2018.

The administration also wants Medicare spending with any quality component, such as bonuses and penalties on top of traditional fee-for-service payments, to increase, so that by the end of 2018, 90 percent of Medicare spending has some sort of link to quality. These figures do not include the money that now goes to private insurers in the Medicare Advantage program, which enrolls about a third of all Medicare beneficiaries.

Monday’s announcement did not include any new policies or funding to encourage providers, but Burwell said setting a concrete goal alone would prompt changes not only in Medicare but also by private insurers, which are also trying some of these alternative models. Leavitt Partners, a consulting firm, counts 317 commercial ACOs and 40 in the Medicaid program.

“For the first time we’re actually going to set clear goals and establish a clear timeline for moving from volume to value in the Medicare system,” Burwell said at an announcement at the department’s headquarters, where she was joined by leaders from insurance, hospitals and doctors groups. “So today what we want to do is measure our progress and we want to hold ourselves in the federal government accountable.”

Some providers have eagerly embraced the new payment models, some with success. Roughly a quarter of ACOs saved Medicare enough money to win bonuses last year. Others are wary, particularly since they could lose money if they fall short on either saving Medicare money or achieving the dozens of quality benchmarks the government has established.

“ACOs are quite expensive to set up,” said Andrea Ducas, a program officer at the Robert Wood Johnson Foundation, a New Jersey philanthropy that is funding research into ACO performance. “There’s a significant upfront investment and if you’re not sure you’re going to make it back, there’s a pause.”

In the largest ACO experiment, the Medicare Shared Savings Program, 53 ACOs saved enough money in 2013 to get bonuses from the government, but 41 spent more than the government estimated they should have. Those ACOs did not have to repay any money, but in future years Medicare intends to require reimbursements from those who fall short. Providers have been pushing Medicare to increase the cut they get from these programs and lessen the financial risks in ACOs and the other programs.

“Government needs to do more to make sure there’s more shared savings going back to the providers,” said Blair Childs, an executive with Premier, a company that assists hospitals and providers in establishing ACOs and other models.

It is still too early to know whether these alternate payment models actually improve the health of patients and whether the savings that have been achieved so far — often by focusing on the most expensive patients — will plateau. Studies on the success of these programs have shown mixed results.

“We still have very little evidence about which payment methods are going to be successful in getting the results we want, which are better quality care and more affordable care,” said Suzanne Delbanco, executive director of Catalyst For Payment Reform, a California-based nonprofit that has been tracking the spread of alternative payment models in the private sector.  “We’re just wanting to avoid a situation where a few years from now, where we’ve completely gotten rid of fee-for-service, we don’t want to wake up and say, ‘Oh my gosh, we did it and we’re no better off.’”

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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Hospitals need to focus more on reducing preventable errors and infections and the government must create more economic incentives to improve patient safety, Vice President Joe Biden said at a conference in Irvine, Calif. over the weekend.

“Up until now, our health care system – in my humble opinion – hasn’t sufficiently linked quality … with safety,” he said. “Not enough time has been focused on keeping bad things from happening.”

But Biden said the paradigm is starting to change. Hospitals are now penalized for unnecessary readmissions and new technology alerts nurses of possible problems and reduces the reliance on handwritten doctors’ orders.

Gains have been made in improving hand hygiene and reducing central line infections, he said. And a recent government report by the Agency for Healthcare Research and Quality found that 1.3 million fewer hospital-acquired conditions occurred – and 50,000 fewer deaths – in 2013 compared to 2010.

“This is the time to double down on your commitment to patient safety,” he told the crowd of doctors, nurses, hospital executives and patient advocates. “We’ve gone from accepting the inevitable to showing what’s absolutely within our wheelhouse to be able to change.”

The conference was sponsored by the Patient Safety Movement, an organization aimed at reaching “zero preventable patient deaths by 2020.” There were panels on patient involvement, on lessons learned from Ebola and on measuring hospital efforts to improve safety.

Alicia Cole, who attended and spoke at the conference, has spent years recovering from multiple hospital-acquired infections. She went into a Burbank hospital in 2006 for a simple surgery to remove small fibroids and ended up with a staph infection, sepsis and flesh-eating disease.

“Instead of getting better I deteriorated,” Cole said. She has had numerous additional surgeries, had to stop working and still sees a doctor weekly. “My life completely changed.”

Jim Bialick, president of the Patient Safety Movement Foundation, said it’s critical to bring together patients, doctors and technology companies to create solutions. “Traditional methods aren’t working,” he said.

Bialick said he appreciates the government’s renewed focus on the issue. For instance, its Partnership for Patients program is working with 3,700 hospitals across the nation to reduce preventable infections and readmissions.

Much of the discussion at the conference focused on sepsis, a blood infection that costs the health care system more than $20 billion annually and has a mortality rate of up to 50 percent. Several hospitals, including UC San Francisco, have programs aimed at identifying victims early.

Chris Fee, associate professor of emergency medicine at UCSF, said reducing sepsis deaths is about recognizing symptoms in patients and getting treatment started as soon as possible. Technology can be key in alerting hospital staff of abnormal vital signs and lab tests he said.

“We have to remember that patients can be very ill and look quite well,” Fee said.

The UCSF project started as a pilot and has since expanded to the entire hospital. Fee said it is credited with reducing mortality from 18 percent in 2012 to 12 percent in 2014 and saving more than 100 lives.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

At the Cleveland Clinic’s sprawling main campus, patient Morgan Clay is being discharged.

Clay arrived a couple of weeks ago suffering from complications related to acute heart failure. He’s ready to go home. But before Clay can leave, pharmacist Katie Greenlee stops by the room.

“What questions can I answer for you about the medicines?” Greenlee asks as she presents a folder of information about more than a dozen prescriptions Clay takes.

“I don’t have too many questions,” Clay says. “I’ve been on most of that stuff for a long time.”

Clay is 62 years old and has been on many of the medications since he was in his 20s, when he developed heart problems.

Still, Greenlee wants to make sure Clay understands the importance of taking his pills at the right time and at their full dosage. Not taking medicine correctly is a big reason patients return to the hospital. And research has found that as many as 30 percent of prescriptions are never filled.

Since the Cleveland Clinic began sending pharmacists into cardiovascular patient rooms at discharge, it has drastically reduced its number of readmissions. And that means it has reduced its Medicare fines, mandated by the Affordable Care Act.

But this kind of success in the ACA’s readmissions program, now in its third year, has been hard to achieve for other Cleveland hospitals that serve more poor patients.

This month, the National Quality Forum began a two-year trial period that adjusts Medicare’s metrics to account for poorer patient populations. NQF is a not-for-profit advisory group that works with federal regulators on the penalty metrics.

NQF’s Chief Scientific Officer Dr. Helen Burstin says one main question is being asked: “How much should these issues around socioeconomic status (and) poverty be considered as well for the readmission program?”

During the trial period, researchers will gather data on which penalty measurements are related to poverty and how they could be risk adjusted, Burstin says.

“Socioeconomic status may be a proxy for some other really important factors, such as whether somebody has social support at home, whether somebody has the ability to come back and have a follow-up appointment with their doctor after hospitalization,” she says.

The key, Burstin says, is to understand which factors hospitals could be accountable for improving.

“So we would also like to begin to understand what’s underlying those differences,” Burstin says. “And, ultimately begin to understand which of those lend themselves towards improvement strategies, like making sure somebody does in fact have what they need to make sure they don’t bounce back into the hospital.”

Burstin says federal regulators at the Centers for Medicare and Medicaid Services are part of the discussions and “willing to participate in the trial going forward.”

Cleveland may be the perfect place to help answer this question.

On the near West Side of Cleveland, Dr. Alfred Connors is chief quality officer at county-owned MetroHealth System. About half of the hospital’s patients are uninsured or on Medicaid, which is government coverage for the poor and disabled.

“So we take care of people who are homeless, people who don’t have places to go when they leave, people who really don’t have family supports. They are living by themselves on a very limited income,” Connors says.

Unlike the Cleveland Clinic, MetroHealth has seen its Medicare fines increase since the program began in 2012. MetroHealth had a .83 percent cut in Medicare reimbursement for 2015, as compared with a .45 percent in 2013.

The Clinic’s main hospital is more likely to have privately insured patients, like Clay. Since 2013, the Clinic’s main campus has seen its penalty drop to .38 percent of Medicare payments from .74 percent.

There are several factors at play in the numbers. First, the maximum penalties increased to a 3 percent cut in Medicare funding in the fall of 2014. The penalty has ratcheted up from 1 percent when the program began.

In addition, federal regulators began tracking two new conditions. The penalties were originally based on readmissions of Medicare patients who went into the hospital with one of three conditions – heart attack, heart failure and pneumonia – and returned within 30 days. Now, federal regulators are also including readmissions for hip/knee replacement surgery and chronic obstructive pulmonary disease, or COPD.

Still, the Cleveland Clinic’s Chief Quality Officer Dr. Michael Henderson says socioeconomic issues like poverty are an important factor.

“One of the real benefits of some of these programs that have come in place is it’s really put coordination of care on the map for patients,” Henderson says.

Leaders at Cleveland-area hospitals say that regardless of the amount of care and coaching a patient gets in the hospital, a patient’s home environment is critical.

University Hospitals – the city’s other big hospital system – also serves a high proportion of low-income patients at its main campuses. It reported a .59 percent penalty in Medicare reimbursements for 2015 up from a .11 percent hit in 2013.

Dr. William Annable, chief quality officer at University Hospitals, is skeptical about the program and its penalties: “There are some people in the health care industry who see it as the government trying to solve society’s problems on the back of the hospitals.”

This story is part of a partnership that includes WCPN/Ideastream, NPR and Kaiser Health News.

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

Better, Smarter, Healthier: In historic announcement, HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value