It’s here! The government-led transition from fee for service to value based reimbursement in health care is moving along ahead of schedule, according to former HHS Secretary Michael Leavitt. Speaking on March 15 at the American College of Healthcare Executives 2016 Congress, Leavitt warned healthcare executives not to ignore the change.

Ahead of Schedule

Leavitt told attendees the federal government is 11 months ahead of schedule shifting 30% of Medicare payment to alternative payment models. Executives who prepare their organizations for improved service quality and outcomes will be in better shape to succeed under the new models, he said.

He compared healthcare leaders to Cinderella at the ball. They have been told fee for service is fading. Midnight strikes. “We have a new piece of information,” he said. “Everyone in the room is Cinderella and there is a great collision at the door and not everyone is going to get out of the door safely.”

Leavitt urged readiness. “You can fight it and die, you can accept it and have a chance or you can lead it and prosper,” he said.

Medicare Tests Outcomes-Based Pay

Leavitt knew it was coming, but his warning seemed prophetic nonetheless when CMS announced that in April 2016, Medicare will begin paying 800 hospitals for knee and hip replacements based on outcome assessments made three months after surgery. The goal is to encourage healthcare professionals to coordinate care and monitor patient recoveries more closely to help avoid post-surgery complications and re-hospitalization.

An Avalere Health study suggests that the value-based model would put 60% of hospitals at risk for penalties. CMS has conducted pilots based on outcomes data before, but this is the very first application of the value-based model on such a large scale. It may provide a better indication of what really happens.

“Most past CMS initiatives have stimulated activity among early adopters, but the mandatory programs are CMS’ attempt to bring the remaining hospitals into a value-based payment world,” said Josh Seidman, senior vice president at Avalere Health.

Seidman then echoed Leavitt’s warning. “For many of those providers sitting on the sidelines of alternate payment models, this new initiative will be a wake-up call,” he said.