News | Bundled Payment

Big Medicare bundled payment changes could cut participation, advisers say

News | Bundled Payment

Big Medicare bundled payment changes could cut participation, advisers say

  • Medicare has made changes to the Bundled Payments for Care Improvement Advanced model, including requirements for broader service line participation.
  • Mandatory participation is planned for 2024.
  • Some participants are likely to leave due to costs that the new requirements would impose on hospitals hit by the pandemic.

Medicare recently told participants in its largest bundled payments program about big changes that will go into effect in less than four months. The changes may lead some to drop out, advisers warn.

On Sept. 10, Medicare notified participants in the Bundled Payments for Care Improvement Advanced (BPCI-A) program about a slew of changes that will be effective Jan. 1, including:

  • Using a realized-trend adjustment (RTA)
  • Requiring participation in clinical episode service line groups rather than in individual episodes
  • Addressing the overlapping methodology of clinical episodes
  • Removing the physician group practice offset
  • Establishing additional risk adjustments for major joint replacement episodes

CMS also plans to implement a mandatory bundled payments model after BPCI-A ends in 2024.

The changes are designed to “improve target price accuracy for both CMS and model participants,” Brad Smith, director of the Center for Medicare and Medicaid Innovation (CMMI), wrote to model participants.

Impacts on BPCI-A participants could be mixed

Some of the changes, such as those involving risk adjustment, drew support from advisers to hospitals in the program.

The biggest concerns stemmed from the requirement for participants to select clinical episode service line groups (CESLGs) instead of clinical episode categories.

“This is a big change in this program,” said John Kalamaras, business intelligence analytics manager with DataGen. “It requires participants to be at risk for multiple episode categories.”

For instance, providers that previously were at risk for sepsis outcomes will have to add risk for four more clinical categories.

Concerns stemmed from the likelihood that the new requirement will necessitate expanding the number of clinicians and staff involved in the program, increase training and data collection needs, and raise participation costs.

A higher number of required categories also would increase the amount of money for which providers are at risk.

“Providers are still dealing with their response to the pandemic and to now say getting data in October [and] making decisions in November to take on additional episodes that they might not have taken on is just challenging to have in place by Jan. 1,” said Aisha T. Pittman, vice president of policy at Premier. “It’s going to ultimately be a bit of a deterrent on the model.”

Providers generally were planning to stay in BPCI-A before the latest changes, said Pittman, whose company advises about 120 organizations on bunded payments.

“For anyone who was on the fence about whether they will stay in, this might push them over,” Pittman said.

CMMI noted that the change will not require participation in episode categories within a CESLG that do not meet the minimum volume threshold during the baseline period.

Advisers were less surprised that Medicare opted to adjust final target prices at reconciliation using peer-group trends in clinical episode spending during the performance period. The change was mitigated by the inclusion of a 10% cap on the difference between the realized and preliminary peer-group trend factors.

CMS cost concerns drive changes

Changes are needed because CMMI paid $567 million in BPCI-A bonus payments when using prospective trends instead of the actual trends that occurred during the first two performance periods, Smith wrote to participants.

“We estimate that without changes, the model is on pace to lose close to $2 billion over the model’s ten performance periods,” Smith said. “This amount of loss is unsustainable, especially in a second-generation model such as BPCI Advanced.”

Kalamaras agreed that the lack of an RTA likely benefited providers during the first two years but said it’s unclear whether the change will adversely affect financial performance in BPCI-A. But added to the requirement to take on risk for CESLGs, the RTA may sour providers on the program.

“People are going to look at that and say, ‘CMS is going to give us a harder target,’” Kalamaras said. “With those combined factors, we may see a drop-off in participation.” 

Smith cited statutory requirements for CMMI models to cut spending or hold spending flat.

“Given BPCI Advanced’s current performance, we feel it is necessary to modify the model to achieve these objectives,” Smith said.

The next bundled payment model likely will be mandatory

Smith said CMMI anticipates establishing a new mandatory bundled payment model after BPCI-A ends.

“By being mandatory, we are optimistic this future model will mitigate many of the selection effects we have seen in both BPCI and BPCI Advanced,” Smith wrote.  “Given the lessons we have learned from bundled payments over the past eight years, we view a mandatory model as the logical next step on our journey towards value-based care.”

Premier has urged CMS to default to voluntary models so providers can gauge their ability to succeed. But Premier has long warned providers that more mandatory models are coming.

“Given the budget pressures we’re going to face post-COVID, it’s likely that there are going to be additional mandatory models,” Pittman said.  

The plan to introduce a mandatory model may give leery providers a reason to stay in BPCI-A, Kalamaras said.

“They would have an advantage, compared to other facilities in the mandatory [model] — meaning all of their hard work wouldn’t be lost,” Kalamaras said.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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