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Shrinkage of Mandatory Bundle Program a Blow to Value

Analysis  |  By Philip Betbeze  
   August 25, 2017

Hospitals and health systems that made preparations to participate in CMS's bundled payment programs are left in the lurch, but those who failed to prepare will be rewarded.

Want to see a battleship turn on a dime?

You're about to get your chance, because by proposing to cancel its mandatory cardiac and expanded joint replacement bundles, the Centers for Medicare & Medicaid Services expects many hospitals and health systems to do just that.

After months of preparation, hospitals and health systems must scale back their plans to participate in what were formerly mandatory bundled payment programs.

Related: Docs, Hospitals Respond to CMS Retreat on Bundled Payments

Some may be happy to do so, because they recognize the potential to undermine profitable service lines and will be glad to jettison the expense associated with preparing for an unfamiliar way of paying for complex medical care.

Moody's Investor's Service calls the decision a "credit positive" for most nonprofit hospitals.

But others that have expended time, effort, and investment into preparing will find many of those efforts wasted.

Nearly no one will say that they don't want to achieve more value-based reimbursement in healthcare, partly because it's obviously the right thing to do, but mainly because healthcare costs too much and isn't of high enough quality.

There are legitimate disagreements on how to achieve better value, however.

The idea behind mandatory bundles was that bundled payments for specified conditions would incentivize doctors, hospitals, and post-acute providers to make better, more economic decisions regarding patient care. Because low quality begets higher costs.

Related: Hospitals Eye Continued Red Ink for CJR Bundles

Bundled payments are more than an idea, though. Some forward-thinking organizations have been using them for years to cut costs and improve care quality. And many commercial plans aren't backing off from them.

Yes, the jury is still out on whether all forms of bundled payment work as they are intended, and whether doctors and hospitals need more flexibility or risk adjustment in the way bundles are constructed and administered, but we already know how fee-for-service affects care costs and quality.

That is, negatively.

Which is why Moody's sees the rollback of mandatory bundles as positive for hospitals and health systems.

"Most hospitals still receive payments from insurers based on volume of services," Moody's said in a press release. "Under a bundled payment program, hospitals would take financial risk for costs in excess of a fee paid by Medicare for all care provided from time of admission to 90 days post-discharge."

As a U.S. congressman, Health and Human Services Secretary Tom Price opposed the mandatory bundles.

Now, under his leadership and that of CMS Administrator Seema Verma, CMS has first delayed, then, as of Aug. 16, proposed to cancel or reduce, the three mandatory bundled payment programs that were set to roll out July 1, 2017.

First they delayed them until Oct. 1, 2017; then to Jan. 1, 2018. Now, when January rolls around, even the one CMS bundle program that remains, comprehensive joint replacement bundles, will be curtailed severely (reduced from 67 mandatory geographic areas to 34).

If the new administration has a problem with the method of injecting value into government healthcare purchasing, that's one thing.

But to do away with promising programs to add value without offering alternatives smacks of pandering to the healthcare lobby, and of opposing something just because it came out of a previous administration.

If nothing replaces the mandatory bundles—and nothing seems forthcoming—this decision extends protection of the sacred cow of fee-for-service healthcare and wastes the time and effort some forward-thinking organizations have already put into preparing for more value-based reimbursement.

Not a single individual will come out and say that they don't want value-based reimbursement.

But actions speak louder than words, and CMS's decision to pull back from mandatory bundled payment programs speaks very loudly about where this administration stands on value-based reimbursement at this juncture.

It pays it lip service.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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