Experiences with the ongoing voluntary payment program that Medicare used as a model indicate challenges, as well as areas where hospitals could find savings and improve care.


July 26—Another large group of hospitals will be required to participate in a Medicare payment bundle now that the Centers for Medicare & Medicaid Services (CMS) has proposed creating models for cardiac care and cardiac rehab.

Most hospitals in as-yet-unselected 98 metropolitan statistical areas (MSAs) where patients are admitted for care for a heart attack or bypass surgery would be accountable for the cost and quality of care for Medicare patients, from admission through 90-days post-discharge, under a proposed rule. Medicare would pay those hospitals a fixed target price for each care episode, with hospitals that deliver higher-quality care receiving a higher target price.

At the end of each year of the model’s five-year duration, CMS would compare actual spending for an episode of care to the target price, according to a CMS fact sheet. Hospitals that deliver needed care for less than the quality-adjusted target price, while meeting or exceeding quality standards, would be paid the savings they achieved. Hospitals with costs exceeding the target would be required to repay Medicare.

To ease pressure heading into the July 2017 start of the new model, hospitals required to participate would face no downside risk in the first two years and would have losses capped at 5 percent of the target price for the episode in the third year, 10 percent in the fourth year, and 20 percent in the fifth year.

Payments from Medicare to hospitals would be capped at 5 percent in the first two years, 10 percent in the third year, and 20 percent in the fourth and fifth years.

Another provision would create a payment bundle for surgical hip and femur fracture treatment within the 67 MSAs of Medicare’s Comprehensive Care for Joint Replacement (CJR) model. About 800 hospitals began participating in that model, Medicare’s first mandatory bundle, when it launched in April.

Medicare also proposed a two-part retrospective incentive payment for cardiac rehabilitation. CMS would offer $25 per cardiac rehabilitation service for each of the first 11 services paid for by Medicare for a heart attack or bypass surgery during the care period and would increase payments to $175 for each subsequent service.

CMS planned to offer the cardiac rehabilitation payments to hospitals in 45 of the geographic areas included in the cardiac care bundled payment models, as well as in 45 other geographic areas.

A final provision in the proposed rule would allow physicians in some tracks of the heart attack or bypass surgery treatment models—and in the CJR model—to qualify as advanced alternative payment models (APMs) under the Medicare Access and CHIP Reauthorization Act (MACRA). Participating in qualifying APMs would allow physicians to avoid dealing with the extensive quality measures and potentially significant pay cuts under MACRA.

Reaction Cool

Hospital and healthcare finance experts were cool to the proposed expansion of mandatory payment models in Medicare.

For instance, Chad Mulvany, director of healthcare finance policy for strategy and development at HFMA, noted that the new bundles raise concerns similar to the first mandatory bundle, including disparate impacts on hospitals with larger shares of low-income patients.

CMS officials noted in the rule that the agency is in the middle of a two-year study of the impacts of patients’ socioeconomic status on providers participating in such models, and plans to recommend payment adjustments if needed.

Others worried that scientific backing was lacking for the proposed heart attack bundle.

“Whereas the evidence continues to mount in support the efficacy of bundled payments for elective procedures, the evidence to support bundled payments in emergency procedures is nonexistent,” Deirdre Baggot, PhD, bundled payments leader at ECG Management Consultants, said in an interview. “Bundling emergency procedures warrants a complex economic model to support the inherent complexity of this population.”

Francois de Brantes, executive director for the Health Care Incentives Improvement Institute, agreed that such bundles for emergent care enter uncharted waters because heart attacks are usually understood to be complications from the care of patients with certain cardiac conditions and associated co-morbidities. The assumption then would be that heart attacks would be included in the costs of coronary artery disease, for example, but not carved out as a separate bundle.

“This becomes even more complex because in many instances patients who have an [acute myocardial infarction] are treated with a [coronary artery bypass graft surgery] or [percutaneous coronary intervention] and it's not clear at all at this point how these intersects will be dealt with,” de Brantes said in emailed comments. “If CMS is relying on the DRG system to decide which patients ultimately get slotted into which DRG, this will be a mess for those who take financial risk.”

Although the feasibility of bundling payment for emergent procedures is “a definite maybe,” the concept needs to be tested, said Baggot, whom CMS appointed as an expert reviewer for the voluntary Bundled Payments for Care Initiative (BPCI).

The proposed rule cited experience with BPCI as informing many aspects of the proposed models. However, final evaluation results for the BPCI models are not yet available, CMS noted.

Interim evaluation results from the BPCI models found statistically significant declines in skilled nursing facility (SNF) use and increases in home health agency (HHA) use, “which could indicate substitution of the lower-cost HHA care for the higher-cost SNF stays,” noted a preliminary analysis for CMS by the Lewin Group. Readmissions declined among many BPCI participants, although emergency department visits without a hospitalization increased compared with another group.

More recently, individual participants have noted challenges. For instance, James Garnham, director, contract and payment innovation, University of Rochester Medical Center (URMC), noted at an April briefing in Washington, D.C., that his organization was unable to bend the cost curve or reduce readmissions among its congestive heart failure population.

What Works

Clay Richards, president and CEO of naviHealth, a convener for more than 50 hospitals in BPCI, found that much of the cardiac-related spending was managed post-discharge. His hospital partners were able to reduce costs through “robust” discharge management plans, care transition plans, and use of a post-acute model.

“For both of these conditions, a significant portion of the spend occurs post-hospitalization,” Richards, said in an interview, referring to acute myocardial infarction and coronary artery bypass graft.

URMC reached a similar conclusion, finding that readmissions occurred among 47 percent of patients discharged home with no care, 43 percent of patients discharged home with a non-partner HHA, and 17 percent of patients discharged to partner HHAs that used services such as telehealth.

“So there is a glimmer of hope here,” Garnham said.

de Brantes agreed that for most surgeries or acute hospitalizations paid in Medicare bundles, the potential for reduced costs is “almost exclusively” contained in management of post-acute care.

“That has been true for BPCI is will be true for this new initiative,” de Brantes said.

Richards expects more CMS bundles to come, including some outside of surgical care.

“Bundled payment is a big piece of how CMS and HHS [the U.S. Department of Health and Human Services] are looking at progressing towards their value-based goals,” Richards said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C. office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, July 26, 2016