While last week’s announcement that CMS plans to cancel two bundled payment models and reduce the geographic area required to participate in a third is not necessarily a surprise, it’s an unfortunate miscalculation by the current Administration. We know this for two reasons:
- Bundled payments work (and we have extensive data to prove it).
- Bundled payments save American taxpayers money.
A brief history of bundled payment models
The idea behind bundled payment models is to incentivize more efficient spending and better care coordination between providers, which ultimately reduce costs. Traditional payment models reward the quantity of services providers offer rather than the quality of care, as Medicare payments are made separately to providers for the individual services rendered to patients. This approach often results in fragmented care with minimal coordination across providers and care settings. Research has shown that bundled payments align incentives for providers allowing them to work closely across all specialties and settings.
The Bundled Payments for Care Improvement (BPCI) initiative was developed by the Center for Medicare and Medicaid Innovation (CMMI). CMMI was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while enhancing the quality of care for patients.
For certain procedures, CMS adds up the costs for the entire episode, from the hospital stay and medical supplies to rehabilitation. If the total is below a target set by CMS, the hospital keeps the savings. If not, the hospital pays Medicare the difference.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Bundled payments: The impact
A recent study in JAMA revealed significant cost savings in total spending per episode, up to $5,577, in addition to reduced readmissions, complications, emergency department visits, and length of stay under bundled payment models. Hospitals and health systems across the country have witnessed better bottom lines and, more importantly, satisfied patients who receive more coordinated care at lower costs.
Additionally, commercial payers are overwhelmingly incorporating value-based design into their plans for 2018, according to a report published by the National Business Group on Health. As traditional approaches to lowering costs and improving quality have fallen short, employers are increasingly looking to value-based care to reduce premiums, enable access to quality care, and encourage employees to manage chronic conditions.
Given the overwhelming data and momentum among employers and private insurers, this latest announcement might just be the tipping point for many providers across the nation. For hospitals and health systems, now is the time to take a long, hard look in the mirror and ask: Is it time to move forward and go all in on value-based care, or risk falling behind and miss an opportunity to see a lasting impact on outcomes?
The case for the cardiac rehabilitation model
While the Comprehensive Care for Joint Replacement (CJR) Model has been underway since 2016, the Cardiac Rehabilitation (CR) Incentive Payment Model was slated to start in 2018. This latest announcement canceled CR, which presents perhaps the greatest missed opportunity for improving care delivery and saving lives.
An important component of CR allowed more patients to gain access to cardiac rehabilitation programs that have been shown to improve quality following a cardiac episode. Traditionally, only 11 percent of Medicare recipients are enrolled in these rehabilitation programs. CR sought to incentivize providers to increase enrollment, thereby improving outcomes for patients. Without this incentive, not only will costs remain high since costs and care won’t be coordinated among providers, but patients’ outcome scores will decrease, as will their likelihood of a successful recovery.
Ramping up or slowing down?
This latest decision by the administration might indicate that forward momentum in payment reform is coming to a grinding halt. While we appear to be lacking the leadership to move this initiative forward, we’re certainly not moving backwards. The administration knows that bundled payments work — research indicates that if every hospital in the nation employed these payment models, Medicare would save $2 billion annually — which is why they’ve made the decision for providers to participate in voluntary bundles, as opposed to mandatory.
Additionally, private insurers, employers, and providers have all expressed interest in sticking with value-based care as they’ve seen the results first hand, and they believe that the reduction in costs and improvement in quality are reason enough to push ahead.
Leading the pack
It’s going to come down to the providers who believe in innovation, progress, and better patient care to lead the pack on bundled payments. The findings have revealed substantial cost savings and better quality outcomes. There’s an opportunity for providers to accept the challenge and willingly participate regardless of whether they’ve been mandated to or not. Our partners have shown better financial performance under bundles vs. traditional fee-for-service and see this as another way to further differentiate from their competitors (and we applaud them for their innovative thinking!).
Having the guidance, leadership, and support from the administration would certainly be more effective, and would undoubtedly result in reduced costs for all stakeholders and lasting impacts on a healthcare system that is far too costly and wasteful.
However, if you are one of the pioneering providers that have seen this work firsthand, what’s stopping you from continuing to deliver better care at lower costs? And if you have yet to venture down the path of value-based care, do you not want to explore a new, proven approach to reducing costs, delivering better care, and transforming healthcare?
Photo: Yuri_Arcurs, Getty Images
