The new CMS innovation center, with unprecedented discretion and $10 billion, could lead the way in health system reform. HHS should develop bold, creative, and high-impact strategies, working with the health sector’s high-performance leaders. I suggest considering these five ideas.

First, the CMS Innovation Center should emphasize multi-payer strategies that leverage the purchasing power of major payers, HIT-EHR investments, and national quality measures. There is great potential to upgrade the health system’s performance—if major payers orchestrate their strategies. In most areas, a few large payers — Medicare, Medicaid, Blue Cross/Blue Shield, state public employees programs, large self-insured employers, and several large health plans — collectively dominate the health care market, e.g. 60-85% of third-party payments. What I’m suggesting is that CMS pursue initiatives, where: (1) major payers agree to use a common set of national quality and performance measures to address national reform priorities; (2) each of the payers independently uses pay-for-performance and “preferred provider” PPO arrangements to achieve these goals. The sum of these efforts could accomplish much more than what Medicare could accomplish alone.

A common set of payer strategies would gain attention from the provider community and create a new competitive dynamic for quality and economy. A multi-payer strategy would also generate a strong business case — which is now lacking — for health care providers to adopt EHRs and use them to improve their performance.

HHS leadership is critical to this strategy’s success. Government must be the convener for public-private collaboration to pursue the public interest, consistent with anti-trust laws.  HHS and CMS can start discussions at the national level and invite state and regional “multi-payer” pilot applications.

Second, the CMS Innovation Center should emphasize development of replicable, standardized delivery reforms. Ideal CMS pilots are ones that address key quality and cost areas and, if successful, could be “taken to scale” quickly. An example is Geisinger’s ProvenCare model, where factors proven to improve outcomes are identified and then wired into EHRs and HIT management systems. Such specifications can be readily translated into purchaser standards and provider implementation.

Third, priority attention is needed to an upgrade path for Medicare’s DRG and RBRVS payment systems, including bundled rates. When DRGs were first developed, they were thought of as the start of a quality-based payment system in which HHS would move beyond paying national average costs, identify “best practices”, and calibrate each DRG to pay for high-quality, economical care. Instead, there have been annual across-the-board updates in payment rates, without quality gains. The CMS innovation authority could be used to develop new best practices, and CMS could then translate these results into new payment rates.

Fourth, Medicaid should be an important part of new reform strategies. With health reform, Medicaid will become the nation’s largest insurer. HHS needs a strategy for Medicaid to become a leader in high quality, effective care, including participation in a national quality measurement system, EHRs/HIT, and the CMS innovation center. One of the key priorities for pilot projects is the dual eligible (Medicare-Medicaid) population who account for about 25% of Medicare spending, and up to half of Medicaid spending. A second major set of projects could pilot integrated healthcare systems for lower-income populations; a model could be Denver Health, which combines public financing and delivery into a well-managed, comprehensive system. With health reform’s large expansions in the community health centers (CHC) program ($11 B), there is an historic opportunity to create new integrated public delivery systems, combining expanded Medicaid and CHC funding, public hospitals, mental health, substance abuse, and other public health funding with HIT systems and quality measures. These initiatives could adapt the VA’s strategy to make its public delivery system a national quality leader. HHS could combine the innovation center’s authority with CHC funding — and break down the silos between all of its separate programs for lower-income populations — for these pilot projects.

Finally, CMS should aim for rapid, widespread – and enthusiastic – adoption of reforms. The new CMS pilot projects should set the benchmark for national best practices – and deliver much better patient outcomes, with savings.