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CMS Bundled Payment Changes Untenable?

Karen Minich-Pourshadi, for HealthLeaders Media, December 10, 2012

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.
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1 comments on "CMS Bundled Payment Changes Untenable?"


Maria K Todd,MHA Phd (12/10/2012 at 5:04 PM)
As a long time advocate and successful expert in bundled payment methodology, I can state with the courage of my conviction that the methodology for this bundled payment from CMS is fatally flawed. IF I were a provider, I would drop out if forced into this nightmare of politics and fantasy. I have published extensively on how to do it correctly, I've published case studies, and disasters. Bundled payment methodology is alive and well all over the world, and successful too. The problem here is the way the policy makers set up the system. It needs a complete overhaul to work. If I say more, it is going to sound like I am selling consulting from the pulpit, so I'll stop here. And no, hiring me won't "fix" what's broken. Maria K Todd, MHA PhD Author The Managed Care Contracting Handbook, 2nd ed., IPA, PHO, MSO Development Strategies The Physician Employment Contract Handbook, 2nd ed., and Physician Integration and Alignment: IPAs, PHOs, MSOs, ACOs and Beyond.