Challenges ahead for next generation of bundled payments

In late 2016, HHS announced the final models for the next group of mandatory episode-based payments. Researchers at the University of Pennsylvania in a Journal of the American Medical Association (JAMA) suggested that the next generation of bundled payments should align with population health by (1) extending the duration of the bundles, (2) expanding the accountable entities beyond hospitals, and (3) integrating bundled payments with global budget models within accountable care organizations (ACOs). All hospitals accepting Medicare patients in over 90 metropolitan areas will be required to accept new bundled payments, which include a fixed payment for hospital care plus services for the 90 days following discharge of patients with acute myocardial infarction and coronary artery bypass graft surgery (see Final rule puts quality at the heart of new Medicare payment models, Health Law Daily, December 21, 2016).

In the JAMA article, the authors noted that current bundled payment models have limitations. Namely, these models retain the fee-for-service incentive to do more, especially for conditions without well-defined criteria for intervention, and to select healthier patients, potentially increasing low-value care use that offsets efficiency savings. The researchers believe bundled payments would be more efficient if restricted with defined starting points that limit physician and patient discretion.

Bundle duration

According to the authors the central challenge of current bundles is their short duration. Most cover services up to 90 days after hospital discharge; extending the bundled payments to a year or more would allow for a broader set of conditions to be included. Extending the bundle duration could also mitigate undesirable effects, such as decreasing the incentive to avoid more complex patients who may be at higher risk for poor outcomes in the short term. The authors stressed that more importantly, bundles with a longer duration could encourage greater coordination of care between specialists and PCPs.

Bypassing hospital-centric procedures

Medicare ACOs have primarily generated savings by reducing avoidable hospitalizations. Bundled payments could generate savings in a similar manner, shifting care to non-hospital-centric procedures, such as allowing outpatient clinicians such as PCPs, outpatient health centers, and ambulatory surgery centers to take on financial accountability for performance.

ACO integration

The authors suggested that for next generation bundled payments, care should be coordinated along with ACO programs by aligning incentives and proactively disseminating information on shared beneficiaries. The current policy penalizes care organizations by attributing the high historical baseline payments for patients with poor outcomes within the bundle to the ACO’s global budget rather than the actual payments, which could be lower if an ACO improves efficiency.

Future

Regardless it was unclear to the authors whether bundles which build up the degree of financial risk a hospital or other health care organization bears is better than moving to global budgets in one step. Using bundle payment models to transition to global budgets may be the preferred strategy, giving clinicians several years to adapt and transform care delivery.

CMS delays implementation of bundled payment models

CMS has further delayed the implementation date of the Cardiac Rehabilitation (CR) Incentive Payment model and modifications to the Comprehensive Care for Joint Replacement (CJR) model by three months. This additional delay, CMS said, is necessary to allow time for additional review, to ensure that the agency has adequate time to undertake notice and comment rulemaking to modify the policy if modifications are warranted, and to ensure that in such a case participants have a clear understanding of the governing rules and are not required to take needless compliance steps due to the rule taking effect for a short duration before any potential modifications are effectuated.

CMS issued a final rule on the two models January 3, 2017. Pursuant to the Trump Administration’s “Regulatory Freeze Pending Review” memorandum, on February 17, 2017, CMS issued a final rule that delayed the effective date of the January 3, 2017 final rule, for provisions that were to become effective on February 18, 2017, to March 21, 2017. CMS’ March 21, 2017, interim final rule postponed the effective date of the January 3, 2017 final rule from March 21, 2017, until May 20, 2017. The applicability date of the new regulations at 42 C.F.R. Part 512 and specific CJR regulations are delayed from July 1, 2017, until October 1, 2017. CMS sought comments on a longer delay of the model start date, including to January 1, 2018.

Under the CJR model, which began April 1, 2016, acute-care hospitals in certain areas receive retrospective bundled payments for episodes of care for hip and knee replacements. All related care within 90 days of hospital discharge from the joint replacement procedure is included in the episode of care. The January 3, 2017, final rule made several changes to the model.

Under the CR Incentive Payment model, acute care hospitals in certain geographic areas will receive retrospective incentive payments for beneficiary utilization of cardiac rehabilitation/intensive cardiac rehabilitation services during the 90 days following hospitalization for an acute myocardial infarction or coronary artery bypass graft surgery.

The American Hospital Association criticized the pace of these mandatory demonstration projects as “too much, too soon” and said, “We will continue to urge that any new bundled payment programs be of a voluntary nature.” In addition, HHS Secretary Tom Price has asserted that CMS exceeded its authority with bundled payment initiatives like the CR and CJR models.

New cardiac rehab incentives model could hit high spenders hard

On July 25, 2016, HHS announced a bundled cardiac rehabilitation incentive payment model to test the impact of providing an incentive payment to hospitals where beneficiaries are hospitalized for a heart attack or bypass surgery. The model (81 FR 50793), which officially published on August 2, 2016, would be based on beneficiary utilization of cardiac rehabilitation and intensive cardiac rehabilitation services in the 90-day care period following a hospital discharge.

Experts at Avalere Health contend that the financial impact will be modest for most hospitals who are required to use this model or those that use the model voluntarily. The Avalere analysis found that 85 percent of hospitals would not experience gains or losses that exceed $500,000 per year. Avalere notes, however, that some institutions could face significant penalties if their current spending far exceeds the average spending for their region.

The model

Under the model, hospitals will use the incentive payment to coordinate cardiac rehabilitation and support beneficiary adherence to the cardiac rehabilitation treatment plan. The new cardiac bundled payments will be phased in starting July 1, 2017, and will apply to three types of cardiac care:

  • coronary artery graft (bypass) surgery (CABG);
  • heart attack patients who are medically managed with drugs and other non-interventional therapies; and
  • heart attack patients receiving percutaneous coronary intervention (PCI), such as stents, angioplasty, or other interventions.

The payments would be available to hospital participants in 45 geographic areas that were not selected for the cardiac care bundled payment models, as well as 45 geographic areas that were selected for the cardiac care bundled payment models.

The payments will be made as follows: (1) an initial payment of $25 per cardiac rehabilitation service for each of the first 11 services paid for by Medicare during the care period for a heart attack or bypass surgery; and (2) after 11 services are paid for by Medicare for a beneficiary, the payment would increase to $175 per service.

The number of cardiac rehabilitation program sessions would be limited to a maximum of two one-hour sessions per day for up to 36 sessions over up to 36 weeks, with the option for an additional 36 sessions over an extended period of time if approved by the Medicare Administrative Contractor. Intensive cardiac rehabilitation program sessions would be limited to 72 one-hour sessions, up to six sessions per day, over a period of up to 18 weeks.

Further findings

Avalere believes that hospitals could achieve savings under the payment model by targeting both device spending and care management for surgical and medically-managed patients. Avalere’s analysis also found that:

  • 60 to 70 percent of spending for CABG and PCI episodes are incurred during the initial hospital stay;
  • only 35 percent of spending for heart attack patients who are managed with drugs are related to the inpatient stay; and
  • 47 percent of spending on medically-managed heart attack patients is linked to post-discharge care, including post-acute services and readmissions to acute care settings.

Avalere’s analysis was based on a review of Medicare Part A data from 2013 and 2014.

Comments on the proposed payment model may be submitted until October 3, 2016.