The Essential Guide to Bundled Payments

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How to understand and successfully participate in new CMS bundles

In 2015, the U.S. Department of Health and Human Services set an ambitious goal of tying 50 percent of traditional, fee-for-service Medicare payments to an alternative payment model by 2018. To reach that goal, the Centers for Medicare & Medicaid Services (CMS) continues to expand its episode payment models. Also known as bundled payments, these provide a single payment for an episode of care, incentivizing providers to take accountability for both the cost and quality of care.

In 2013, the CMS launched the Bundled Payment for Care Improvement (BPCI) initiative that included four voluntary bundled payment models for 48 different conditions. As of April 2016, there were 1,522 participants, concentrated in two models. That’s when the CMS launched its first mandatory bundled payment model—Comprehensive Care for Joint Replacement (CJR)—specific to total hip, partial hip replacement, and knee replacement surgeries with or without hip fracture, which are being performed at approximately 800 hospitals. At the end of 2016, it finalized rules for three new bundled payment models and one incentive-based payment model:

  • Acute Myocardial Infarction (AMI) Model
  • Coronary Artery Bypass Graft (CABG) Model
  • Surgical Hip and Femur Fracture Treatment (SHFFT) Model
  • Cardiac Rehabilitation (CR) Incentive Payment Model

Beginning Oct. 1, 2017, approximately 1,095 hospitals will participate in the AMI model, 1,096 hospitals in the CABG model, 865 hospitals in the SHFFT model, and 1,320 hospitals in the CR Incentive Payment Model. These mandatory bundles share many similarities, but they also have some important differences, as outlined in the chart on page 34.

“We don’t think providers are going to have much trouble understanding CABG patient population,” says April Simon, vice president of clinical consulting and analytics for HealthTrust. “We have been studying these patients for a long time, and we generally know what happens to these patients during their hospitalization and for 30 days post-procedure. The additional 60 days of follow-up is going to be new, but we don’t see any initial surprises.”

Navigating the Unknown

But Simon does highlight the challenges in managing the AMI model. “Many times providers don’t know what the next 90 days will hold,” she says. “HealthTrust has done some research to give our members an idea of what those 90 days currently entail; however, this is new territory and the readmission rates in this patient population is very high for both what appears to be planned and unplanned readmissions.”

The HealthTrust studies were presented at the American College of Cardiology annual scientific meeting. “Medicare Reimbursement Associated With AMI Hospitalization and 90-Day Post-Discharge,” found that a percutaneous coronary intervention increases the cost to Medicare of an AMI index hospitalization, but it is associated with lower post-acute care cost. The study also identified key comorbid conditions associated with higher total Medicare cost during an AMI episode.

Another study completed by HealthTrust and its physician advisors, “Understanding Readmissions in Medicare Beneficiaries During the 90-Day Follow-Up Period Following an AMI Admission,” found that heart failure, cardiac surgery, sepsis and respiratory illnesses are the four most common reasons for readmission, accounting for more than 35 percent of all readmissions. And, the following four conditions during the index hospitalization increased the likelihood of having a readmission by more than 30 percent: end-stage renal disease, not having a PCI during the index hospitalization, Type 1 diabetes and heart failure.

In addition to CJR, many hospitals are participating in the BPCI initiative that ends in 2018. In September 2016, the CMS published its second annual report detailing early outcomes from the voluntary program. According to the report, 11 clinical episode groups show potential savings to Medicare, including orthopedic surgery—likely due to a shift among participants from more expensive institutional post-acute care to less expensive home health care—and cardiovascular surgery—likely due to a reduction in readmissions and complications.

Succeeding at Bundles

To be successful under any bundled payment model, hospitals need to set up the right infrastructure that enables physician alignment and leadership; the availability of accurate, meaningful and actionable data; evidence-based standardization of care; patient engagement and navigation; care channel communication; and internal cost optimization, says Todd DeVree, director of bundled payment solutions at HealthTrust. It’s a significant but necessary undertaking that requires support and collaboration across the organization.

“It truly takes a redesign of the care model,” Simon says.

Simon and DeVree are currently working with several HealthTrust members to prepare them for the latest bundled payment initiatives. They collaborate on assembling the team, analyzing data, identifying opportunities for improvement, implementing the care redesign plan and providing feedback to keep the momentum going. After implementation, HealthTrust can also help track outcomes and recommend changes to the approach based on results.

“This program is most successful when we get administrators, nursing directors and medical staff all singing off the same sheet of music,” Simon says. “If we help them set up the right structure, they’ll be able to solve the next set of problems on their own.”

The process is unique for each member, but always starts with the same step—physician and administration alignment.

“You can identify areas of improvement to redesign care, but if physicians aren’t involved then execution of the plan will not be as successful,” DeVree says.

By starting with physician and administrative alignment, facilities can work with key stakeholders to establish shared objectives and identify leaders of the initiative. Gainsharing agreements are sometimes used to incentivize, especially if physicians are not employed by the hospital, but they should never be the primary tool, DeVree says.

“HealthTrust recommends aligning around clinical data, the patient experience, and analysis of outcomes such as readmissions and complications—not just implant costs,” he says. “If gainsharing is utilized, it should serve to focus physician attention on those areas.”

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