HHS looks to enable innovation through value-based payment

As healthcare moves from fee-for-service to value-based payment, the Department of Health and Human Services can either serve to enable innovation—or stifle it—through its reimbursement and regulatory activities.

That’s the message HHS Deputy Secretary Eric Hargan delivered on Monday at the opening session of the Cleveland Clinic Medical Innovation Summit.

HHS will play “an outsized role” in the industry’s transformation from volume- to outcomes-based care because of the reimbursement power of the Centers for Medicare and Medicaid Services as well as the Food and Drug Administration’s ability to determine the safety and efficacy of medical devices, according to Hargan.

“Innovators, particularly in the FDA regulated space, have to follow this back and forth between the payer at CMS and the scientific regulator at FDA,” he added. “The agencies themselves don’t really talk very much to each other, and they build out on their own goals and their own missions.”

Hargan acknowledged that reimbursement decisions made by CMS in the past have only hampered and “dis-incentivized” innovation, adding that a “tortuous path has been laid down” for innovators who “are left to figure out what are we going to approve before we approve it—that’s not where we think is the long-term good model to be in.”

“If we pay for outcomes, then it’s up to the system generally to say ‘here’s the outcome that’s needed, you all decide how to get there,’ ” noted Hargan. “You all decide how you’re going to bring new care models into being, new devices, and new drugs. That’s the way we’re going to have to build the health system going forward.”

Hargan-Eric-CROP.jpg
Eric Hargan, acting U.S. secretary of Health and Human Services (HHS), speaks during a White House press briefing in Washington, D.C., U.S., on Thursday, Nov. 30, 2017. The White House is weighing a plan to replace Secretary of State Rex Tillerson with CIA Director Mike Pompeo, three administration officials said, amid frustration with the top diplomat's slow pace of hiring and repeated clashes with President Donald Trump. Photographer: Al Drago/Bloomberg

Nonetheless, Hargan pointed out that the Trump administration is the third U.S. administration that’s embraced value-based care—a complicated system that he said is going to take time to implement. “It’s not a case where tomorrow we’re going to re-engineer the entire healthcare system,” Hargan said.

“The value proposition (for inventions) that you have to come up with has to kind of bob and weave around regulations,” commented Frank Papay, MD, as an inventor and chairman of the Cleveland Clinic’s Dermatology and Plastic Surgery Institute. “Besides the FDA, you’ve got CMS, whose payment models have to follow.”

Papay complained that these regulations change from year to year, making it difficult for innovators and entrepreneurs looking to bring new technology solutions to the marketplace. He added that stakeholders are cautiously “watching what the government does” next to foster innovation and alleviate regulatory burdens.

Hargan is actively pursuing high-level dialogue between HHS and the private sector to accelerate innovation and investment in healthcare. Over the course of a year, he wants industry experts and agency staff to meet quarterly to discuss emerging opportunities for innovation and investment in the health sector and how the federal government can help serve as a facilitator.

The quarterly Deputy Secretary’s Innovation and Investment Summit (DSIIS) meetings will focus on emerging innovation opportunities and whether public sector policies are supporting or impeding these innovations. Hargan notes that HHS has not previously formally engaged with industry this way.

Also See: HHS wants private sector input on healthcare innovation, investment

“There’s innovation that’s going to have to happen on a lot different fronts—the area of digital health, health IT, as well as payment systems,” added Hargan. “What we have to avoid, as the government, is to be the elephant in the room. We don’t want to maneuver around and really squash any of this innovation because we’re not being thoughtful about how we’re regulating or reimbursing.”

As the regulatory environment currently stands, it is a “big gamble” for healthcare investors that want to fund product development, according to Hargan. At the same time, he observed that the stakes are particularly high these days given that “so many companies that aren’t traditionally involved in healthcare now getting involved in this area—in some cases, just because the digital and health IT areas are so much on fire.”

By adopting particular value-based payment models, Hargan emphasized that HHS can reward or dis-incentivize innovation. He also said that the agency’s reimbursement and regulatory system ultimately “molds the adoption of technology.” Hargan commented that he can’t imagine how much venture capital “would be pouring” into the healthcare sector if the regulatory risks were reduced.

“There would actually be a lot more investment if we had a system that allowed there to be more prediction,” he added.

Tom Mihaljevic, MD, president and CEO of the Cleveland Clinic, observed that the healthcare industry must “evolve to meet the medical, technological, and social challenges ahead of us.”

“Disruption can sometimes have an unsettling tone but reimagining healthcare is really where we would like to focus,” said Pete O’Neill, executive director of the Cleveland Clinic Innovations, the health system’s development and commercialization arm.

Under Mihaljevic’s leadership, the Cleveland Clinic plans to leverage digital platforms such as telemedicine, data analytics, and artificial intelligence as the $8 billion organization looks beyond its core electronic health record system capabilities.

Also See: Cleveland Clinic lays out its health IT strategy for future

In his remarks to the conference, Hargan blamed EHRs for causing the widespread problem of physician burnout.

“You look back 10 or 15 years ago, people thought that electronic health records were going to prevent physician burnout,” he told the Cleveland Clinic Medical Innovation Summit. “And, it’s the exact opposite. The answer is not to go backwards but I think we have to know what the key drivers are.”

When it comes to the explosion of patient-generated data through mobile devices and wearables, the Cleveland Clinic’s Papay said he is worried that clinicians will be even more overloaded with information gathered from these devices.

“There’s a lot of burnout already with physicians, and you’re going to data overload them,” Papay concluded. “That increases burnout and loss of control as a healthcare provider.”

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