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Researchers Fire Bundled-Payments Warning Shots

Analysis  |  By Christopher Cheney  
   September 26, 2016

Regulators should guard against unintended consequences linked to bundled payments and post-acute-care providers should brace for revolutionary change, says the chief of The Dartmouth Institute for Health Policy.

Bundled payments research published last week fires a double-barreled shot across the bows of federal policymakers and post-acute-care providers, the author of an editorial accompanying the research says.

In the Journal of the American Medical Association study, lead author Laura Dummit, MSPH, and 13 other researchers examined hip and knee joint replacement data from the Bundled Payments for Care Improvement (BPCI) initiative, Medicare's largest bundled-payments voluntary demonstration program.

Behind Bundled Payments, Unintended Consequences Lurk

Although the researchers found that reduced skilled nursing facility utilization among BPCI-participating hospitals cut episode-of-care spending without sacrificing quality, the data also indicates significant risk of negative unintended consequences, says Elliott Fisher, MD, MPH.

Fisher was interviewed by HealthLeaders Media last week.

The BPCI research, which included a control group of 841 nonparticipating hospitals, can be interpreted from polar opposite perspectives, according to Fisher, director of The Dartmouth Institute for Health Policy and Clinical Practice, in Lebanon, NH, and a professor at Dartmouth College's Geisel School of Medicine in Hanover, NH.

Beware of Unintended Consequences

"In one interpretation of the study, if the comparison groups were identical, it would suggest that you can improve care and lower cost without compromising quality," he says.

"The other interpretation of the study is that in a bundled-payment initiative it is possible to save money, especially if you select patients who will be cheaper to treat. That is a mechanism to reduce the cost within the bundle, but it undermines value because value is about delivering services that are needed to people who want them," Fisher says.

In addition to the temptation to cherry-pick healthy patients in the BPCI initiative, another potential unintended consequence of the bundled-payments model is perpetuating fee-for-service financial incentives that spur service volume, he says.

"The move to bundled payments may require a major correction, where they must be embedded within some form of accountability for the total cost of care. That could be accountable care organizations or primary-care-focused care payment models that hold primary-care physicians accountable for the total cost of care."

Policymakers at the Centers for Medicare & Medicaid Services bear an enormous responsibility as they launch and regulate mandatory bundled-payments models such as the Comprehensive Care for Joint Replacement (CJR) program, Fisher says.

"CJR will allow a much better evaluation because of its mandatory nature, but we should be looking carefully to see whether what happens is that fewer people who really need joint replacements end up getting them."

Post-Acute-Care Providers Face Business Model Disruption

As bundled-payments and other value-based payment models spread across the country, revolutionary change is bearing down on post-acute-care providers, he says.

Acute-care facilities are eager to have post-acute-care providers shoulder a share of the cost-cutting burden associated with bundled payments, Fisher says. "In hospitals, they are looking for ways to reduce costs within the episode that will not adversely affect the hospitals and physicians themselves but look to achieve the savings elsewhere."

A growing body of evidence shows post-acute-care is a prime area to cut total cost of care, he says.

"We know from lots of research, our own and others, that there are remarkable variations across the country in utilization of hospital services and post-acute care. The Institute of Medicine has claimed that regional variations in facility-based post-acute-care utilization are the major driver of regional differences in per capita healthcare spending… There is no question in my mind that there are opportunities to reduce discretionary utilization in the post-acute-care sector."

Post-acute-care providers need to embrace a business model that emphasizes value rather than volume, Fisher says.

"If I were managing a post-acute-care facility, I would be thinking carefully about how I could partner effectively with hospitals so that for those patients who do need post-acute care—whether it is higher level or lower level—I would be seen as the preferred partner within my market as relationships are built and hospitals and the physicians who are managing patients work to manage the total cost of care for an episode."

Christopher Cheney is the CMO editor at HealthLeaders.

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