James Hester, the Acting Director of the Population Health Models Group at the Innovation Center in the Centers for Medicare & Medicaid Services (CMS). The Innovation Center was created under the Patient Protection and Affordable Care Act Section 3021, to “test innovative payment and service delivery models to reduce program expenditures…while preserving or enhancing the quality of care” for those who get Medicare, Medicaid, or Children’s Health Insurance Program benefits (P.L. 111-148 [May 2010]). The Innovation Center’s mission is to be a trustworthy partner to identify, validate, and diffuse new models of care and payment that improve health and health care and reduce the total cost of care.

The Innovation Center: History and Organization

To begin, Hester posed the question, “Why should we innovate?” He suggested that innovation is a tool that can be used to decrease Medicaid and Medicare expenditures through improved care, thereby reducing the country’s budget deficit. Hester also pointed to statistics that show 20 percent of Medicare recipients discharged from the hospital (11.8 million people) are readmitted within 30 days (Jencks et al., 2009). Many of those are readmitted due to preventable hospital-acquired conditions. He noted, however, the ultimate reason for innovation is the medical community’s obligation to provide better health care.

The Innovation Center has $10 billion in funding through 2019 and has been given authority under the Patient Protection and Affordable Care Act that disables some of the constraints on Medicare demonstrations, particularly in regard to budget neutrality (P.L. 111-148, Sec. 2705). Hester explained that the budget neutrality requirement eliminated many promising innovations. If an innovation has been implemented, tested, and found to work effectively, “the Secretary can scale it up nationally” without having to return to Congress for new legislation.

The work of the Innovation Center is organized into three major model groups: (1) the Patient Care Model, (2) the Seamless Coordinated Care Model, and (3) Community and Population Health Models. The Patient Care Model focuses on what happens to a patient in a given episode of care at a given encounter. One initiative under this model is “bundled payments” in which multiple caregivers (e.g., from the surgeon to the postacute care facility) are reimbursed for treatment of a patient as a single episode with a single payment, thereby providing incentive for everyone to work together effectively. A second example of this model is Partnerships for Patients, a public-private partnership for a national patient safety campaign. (See below for further discussion of this initiative.)

The Seamless Coordinated Care Model involves coordinating care across the entire spectrum of the health community to improve health

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