CMS Bundled Payment Changes Untenable?

Recently, the Centers for Medicare & Medicaid Innovation (CMMI) announced changes to its Bundled Payment Care Improvement Initiative that could make pursuing its model untenable and even cause some applicants to drop out of the program, according to a CMS reviewer of bundled payment applications.

But is dropping out really an option? Bundled payments are multifaceted, and regardless of the payer—commercial or governmental—it is the payment model of the future. So what did CMS change that's cause for consternation?

Although some of the CMS changes will ease bundled payment execution, such as standardizing episodes, discounts, and readmission exclusions, others will shift more risk onto participants, such as the broader definition of related readmission to include all medical DRGs. The latter may prove too much for some providers, says Deirdre Baggot, MBA, RN, who is vice president with healthcare consultancy The Camden Group and an expert panelist for CMS bundled payment applications.

"Payment reform is actually care reform, so to make it work you have to first reform the way you deliver care. But you also need to understand the risk," says Baggot.

Baggot explains that CMMI has proposed not only a standardized approach to discounts based on episode condition, but the program's design now includes a standardized approach to defining conditions for which it will test bundling under the improvement initiative. Additionally, CMMI proposed 48 standardized or converged episodes which comprise 70% of hospital admissions. It also issued a new definition for related readmissions that blankets inclusions and exclusions at both a DRG and diagnosis level.

For healthcare providers, there are several downsides to the changes, according to Baggot:

• Discount requirement. CMMI has standardized its discount requirements based on clinical condition ranging from 2% to 3.25%. Previously it allowed applicants to propose their own discount amount.
• Related readmission. For nearly all of the 48 converged episodes, CMMI elected to impose a broad definition of a related readmission to include all medical DRGs, regardless of whether the readmission conditions are related to the index condition or take place in- or out-of-network.
For some episodes of care, historical readmissions may be low, so this change would pose a small risk, Baggot says, but for other episodes, such as with congestive heart failure, readmission rates may exceed 20%.
• Gainsharing. In order for the revised program to be financially viable, healthcare organizations will need to use gainsharing. Baggot believes without an approved gainsharing program in place, providers are unlikely to participate in the Bundled Payment Care Improvement Initiative.
She notes that gainsharing can promote better alignment within organizations and improve care transitions, as well as decrease overutilization and out-of-network utilization. Moreover, a shared savings approach could reduce internal hospital costs such as length of stay, supplies, drugs, and medical devices, all of which will offset program costs and the cost of discounts required under new BPCII design. But many healthcare leaders have been wary of embracing gainsharing because of the legal stickiness.
• Beneficiary incentives. CMS' bundled payment pilot included beneficiary incentives that were dropped from the initial BPCII model. These incentives have been added back into the model, but it's up to the applicant to develop, test, and fund this feature. Any beneficiary incentives would need to be factored into the financial model and gainsharing expectations of providers, Baggot explains.

"Applicants need to understand the risk that some of these changes can cause for their organization," she says.

Consider the example of a cardiac patient receiving treatment at Hospital A 80 miles from his or her home. Upon returning from the hospital, the patient fails to take medication. The patient starts having some mild pain and calls the primary care provider. The PCP knows the history of heart problems and immediately directs the patient to go to the nearest hospital—Hospital B. If this episode occurs within 30 days of the first admission, then Hospital A is responsible for the effects of any care given at Hospital B.

"Asking hospitals to take on risk for things like this where they have no control is going to be a non-starter for applicants," believes Baggot.

Baggot says a positive change to the CMS bundled payment program is the ability to preview the financial impact before signing an agreement to participate. CMS has agreed to collect six months of data for applicants, from January to June 2013. The data will help the applicants see their financial and readmission rates based on the new CMS guidelines, and allow the applicants to decide if this type of payment model is a viable option for their organizations.

That's a considerable plus for the many healthcare organizations that don't know where their patients go after they leave their building. Now hospitals will be able to see data on how different physicians would influence reimbursements.

"A big concern applicants have is that they don't have access to the physician's billing data—unless they own the physician practice. So the hospitals have the Part A information but not the Part B ... but that data is going to have an impact on [the hospital's] level of risk for readmissions and on the amount of the discount," says Baggot. "Managing across the continuum of care is new for many hospitals, so many hospitals still don't have much of an idea on what's happening with physicians outside of their own four walls—but with [Medicare] bundled payments it will affect them."

The bottom line is that CMS' revised CMMI bundled payment model has increased the level of risk for provider organizations, Baggot says. However, it is still one of the most advanced payment models for a provider organization to participate in. She notes that CMS has spent several years consolidating fiscal intermediaries so that all providers in a region are on a single fiscal intermediary for Part A and B billings. That means CMS is more prepared to make a single bundled payment to an organization than perhaps many commercial payers.

"Some people think it will be easier to work with a commercial payer. I don't think it's easier. What's challenging there is that many payers aren't prepared to execute on this [payment model]. They have the data but they can't figure out how to get at it. And the commercial payers' readiness is so variable across the country," says Baggot. "Regardless of these changes, I don't believe hospitals and physicians can do nothing [with bundled payments]. However, they need to scale their level of participation in bundling logically. Don't jump into it with both feet, but don't do nothing either."