A proven path to improve quality and reduce cost for Medicare patients

Cliff Megerian: ©University Hospitals

Patient care at our hospital, University Hospitals Cleveland, is nearly 30% cheaper than the national average. Hospitals around the country can do the same.

We’ve put Cleveland on the map thanks to our use of Medicare Shared Savings Plans (MSSPs) – an alternative Medicare plan that shrinks both patient and provider costs. Patients can save up to $1,000 compared to traditional Medicare.

It’s something that the current administration ought to prioritize nationwide.

As President Trump’s remaining health care nominees take the Senate floor in the coming weeks, they should embrace MSSPs as a cornerstone of their platform. Not just to bolster health care quality, but to fulfill the President’s goals of cutting out the waste.

Peter Pronovost: ©University Hospitals

The federal government, through the Medicare and Medicaid programs, is the largest payer of health care for health systems in the United States. More than 66 million Americans are currently enrolled in Medicare. It’s an egregious amount of money that is oftentimes spent on less-than-ideal outcomes.

But a better solution exists. Among the approximately 30 million patients in traditional Medicare, a third are in an MSSP. Through MSSPs, CMS incentivizes providers, usually hospitals or individual practices, to lower costs of care with the promise of increased payouts down the road.

Put simply, MSSPs reward Medicare beneficiaries and providers for improved health outcomes and deliver resulting care at lower costs.

Yet MSSP patients still cost the government far less than traditional Medicare. For example, in 2023, a traditional Medicare patient cost $13,845, while a patient in MSSP cost $11,939, 14% less. Some health systems in MSSP achieve even lower costs. The University Health System of Cleveland achieved $9,864 in annual costs in 2023, 29% less than traditional Medicare that year.

In 2023, the United States spent approximately $848.2 billion on Medicare. If traditional Medicare were run entirely through providers under the MSSP, all things being equal, the program would save $119 billion. If traditional Medicare was run as efficiently as the UH system, it would save $256 billion.

Therefore, it would seem there are enormous savings available to Medicare.

But not all health systems want to enroll in MSSP. Why? MSSP providers have to take “down side” risk and Medicare sets the benchmark retrospectively. This means that if a health system's per-member-per-year costs are above the benchmark, they have to pay money to Medicare and will not know it until a year or more after the fiscal year.

A more practical way is to maintain the traditional Medicare with “fee for service” payments and supplement that system with an incentive to reduce annual total cost of care, just as MSSP does. In its value-based purchasing, Medicare already has a cost measure: the 30-day cost after a hospital admission. But the time period of 30 days only includes a minority of annual costs, and the incentive for hitting the 30-day goal is too small to motivate most providers.

Enter the incentive. Modeled after the MSSP, Medicare could attribute patients prospectively to hospitals or physician groups and set a benchmark of spending based on risk-adjusted expected spending. For those groups below the spending benchmark, Medicare can provide additional payments. Those groups over the spending benchmark would be penalized and have their payments reduced.

As part of this, Medicare could make the annual total cost of care transparent by setting out data on hospital and physician performance publicly. Let’s say a hospital is below the benchmark by 5%; Medicare could increase that health system’s FFS payments by 2.5%. A health system that is 5% above the benchmark, say, could have its FFS payments reduced by 2.5%. This simple and transformative concept could be rapidly implemented with existing infrastructure and significantly reduce the costs for patients in traditional Medicare.

Health care needs to implement interventions that work to improve value. CMS, and its future leaders, have a shining model to look to in Cleveland–one that is just waiting to be scaled nationwide.

Peter Pronovost, MD, PhD is the Chief quality and clinical transformation officer of University Hospitals Cleveland. Cliff Megerian MD is the CEO of University Hospitals Cleveland.