ECONOMIC REPORT OF THE PRESIDENT

Woolhandler 2015). These analysts argued that some hospitals had tried to
circumvent the HRRP’s payment reductions by re-classifying some inpatient
readmissions as outpatient observation stays. As a result, they argued, the
observed decline in hospital readmissions rates substantially overstated the
actual decline in patients’ risk of returning to the hospital after discharge.
However, Zuckerman et al. (2016) demonstrate that no such shift to
observation status has occurred. Although there has been a decade-long
trend toward greater use of outpatient observation stays among patients
who return to the hospital, there was no change in this trend after introduction
of the HRRP, contrary to what would have been expected if the HRRP
had caused inpatient readmissions to be re-classified as observations stays.
Similarly, the authors find no correlation between the decline in a hospital’s
readmission rate and the increase in the share of a hospital’s patients who
experience an observation stay following discharge, which is also inconsistent
with the re-classification hypothesis.
Quality Performance in Alternative Payment Models
Early evidence from evaluations of the APMs being deployed under
the ACA also provides an encouraging picture of how these models will affect
quality of care. The evaluation of the Medicare Shared Savings Program that
was discussed in the last subsection found that ACOs improved quality of
care along some dimensions, while not worsening it on others, at the same
time as ACOs generated reductions in spending (McWilliams et al. 2016).
Evaluations of the first two years of the Pioneer ACO model found broadly
similar results: improvements on some measures of quality performance,
with no evidence of adverse effects on others (McWilliams et al. 2015;
Nyweide et al. 2015). Similarly, evidence from the first two years of CMMI’s
Bundled Payments for Care Improvement initiative, found that the savings
achieved under that initiative came at no cost in terms of quality of care
(Dummit et al. 2016). This evidence implies that APMs will be successful in
improving the overall value of the care delivered, not just reducing spending.
Economic Benefits of a Better Health Care Delivery System
Recent progress in improving the health care delivery system is
already having major economic benefits. Most visibly, slower growth in the
cost of health care generates large savings that are then available for other
valuable purposes, raising Americans’ overall standard of living. Recent
shifts in projections of aggregate national health expenditures illustrate the
magnitude of these savings. Relative to the projections issued just before
the ACA became law, national health expenditures are now projected to
be 1.7 percentage points lower as a share of GDP in 2019 than projected
Reforming the Health Care System | 289