Bundled Payments are Gaining Momentum. Are You Ready?
Gary Clifton, Vice President, Terumo Business Edge: Mr. Graver, you have worked on a hospital service line that entered into a commercial bundled payment contract back in 2006, and today you work with programs across the United States; what do you see as the current environment surrounding bundled payment programs?
Ryan Graver, President, MedAxiom Ventures: We certainly have seen bundled payments gain increased prominence through several large-scale pilots by the Center for Medicare & Medicaid Innovation (CMMI) Center, as well as several large private payers entering the bundled payment arena in recent years. I believe the appeal of bundled payments is in the ability to align incentives for managing the cost, quality, and patient outcomes associated with an identifiable clinical episode under a single provider, and giving that provider a financial incentive to coordinate a patient’s care during the episode.
Dave Terry, Founder and CEO, Archway Health: That’s absolutely correct. Since 2011 we have seen Medicare launch six bundled payment programs: four models under the Bundled Payment for Care Improvement Initiative (BPCI), as well as the Oncology Care Model (OCM) and the Comprehensive Care for Joint Replacement Model (CJR). Further, over the last twelve months, we have seen multiple rules released, as well as several delays associated with the Episode Payment Model (EPM).1
As 2016 ended, we began to see evidence of the effectiveness of bundled payments. Dummit et al published findings in JAMA2 showing that during the first 21 months of the BPCI initiative, Medicare payments declined more for lower extremity joint replacement episodes provided in BPCI-participating hospitals than for those same procedures provided in similar facilities. They also found that the decrease in total cost was seen without a significant change in quality outcomes.
Clifton: So under a bundled payment arrangement, one physician or hospital is held responsible for the entirety of a patient’s care during an episode and different bundled payment arrangements designate different coordinators. What is your perspective on the role cardiovascular-related care has played in the voluntary bundled payment programs up to this point?
Graver: Actually, physician-driven, cardiovascular-related bundles up to this point have been somewhat limited. When Medicare initially opened BPCI back in 2013, MedAxiom worked with nearly one hundred cardiovascular groups who submitted letters of intent to Centers for Medicare and Medicaid (CMS) to explore the program. What we found was that the BPCI program attributed patients to the admitting physician, which, in many cases, was the hospitalist and not the cardiologist. Thus, very few cardiovascular programs exploring BPCI in 2013 moved forward with the program, as there was not a means for the cardiologist to play the role of the episode initiator.
Terry: At Archway Health, we are actively involved in all bundled payment programs and work with orthopedists, oncologists and hospitalists. We are also now preparing to work with a number of cardiovascular providers under the EPM program, which will go live January 1, 2018, and will focus on acute myocardial infarction (AMI) and coronary artery bypass graft surgery (CABG). Ryan is correct; we have seen relatively few cardiovascular physician groups pursue bundles in the initial wave of BPCI programs and agree this is primarily due to the issues of attributing patients to the hospitalists rather than the cardiologists.
Most of the 1,350 providers in the BPCI program reconciled for the first time in early 2016. While the data has not been fully released by CMS, our informal market survey indicates that most hospitals in the program have earned savings, as have skilled nursing facilities (SNFs) with sizable programs. In our experience, some hospital systems are earning hundreds of thousands of dollars per quarter. The physician group practice (PGP) market has been mixed. Many orthopedic groups have earned significant savings, but hospitalist programs have been hampered by major patient attribution issues, causing CMS to forgive downside for PGP participants for most of 2015 and 2016.
These problems have cast doubt on the hospitalist-driven bundled payment model going forward, creating the expectation that the Advanced BPCI model will be more oriented toward traditional specialists. With EPMs going live next year in 98 Metropolitan Statistical Areas (MSA), we anticipate approximately 1,200 hospitals to be actively managing cardiovascular bundles within six months. Anticipating Advanced BPCI opening in mid-2017, we also expect many private cardiology group practices to pursue the next wave of BPCI.
Clifton: So you anticipate CMS will correct the patient attribution issue for specialists and with that, you expect many private groups to pursue this risk-based program?
Graver: Frankly, we don’t know exactly what CMS will do regarding patient attribution, but we have been active in both engaging CMS and Congressional leaders in Washington, D.C., through the Cardiology Advocacy Alliance. Given the savings that have initially been noted with the BPCI program, we believe the desire is to align incentives with the specialists who are actively managing the patient’s condition, such as congestive heart failure (CHF) or coronary artery disease (CAD), and not just the providers managing the admission process.
Terry: That is correct. We don’t know how CMS will manage the issues of attribution; we have heard it could be mechanisms such as frequency of claims associated with a specific provider, in which case, the cardiologist with the most touch points around a given patient would be responsible for managing that patient. I did want to clarify that under the Advanced BPCI program individual physicians and or physician groups can enter the program. In the initial wave of BPCI, we are seeing specialty physician practices earn significant savings. These include both small and large practices.
Clifton: In your collective experience, how are cardiovascular programs preparing today for bundles?
Graver: First, programs are educating themselves on the nuances of the CMS programs. There are many specific rules around EPM or BPCI that will impact the ultimate performance of a given provider under any bundled payment arrangement. Next, programs are looking at their historic Medicare data to understand how they have performed up to this point. We are working with providers around EPM readiness and have organized the last five years of CMS data for every hospital in the country. In this case, we can run the what-if scenarios such as the 1.5% to 3% quality adjustment, or examine a hospital’s 90-day AMI or CABG costs per case versus their regional benchmark (Figure 1). Programs are also looking at their post-acute spend; in many cases, it is an opportunity for programs, for the first time, to understand where their patients are going after discharge and what happens next.
Once programs have a handle on their data, they are also looking internally and assessing to what degree they are aligned, how much variation within their program exists, and how much waste can they take out of their own processes along with aligning post-acute providers. Finally, programs are preparing for the new day-to-day management that will be necessary to optimize performance around bundled payments. Tracking patients post discharge, looking for opportunities to proactively manage patients before they become readmissions, or giving your SNFs benchmarks for length of stay (LOS) are all things programs are now undertaking as a result of CMS’ announcement that EPM will go live January 1, 2018. The flow chart in Figure 2 describes a three-phase approach taken by many of the providers getting ready for the EPM program.
Terry: Through rulemaking for the cardiac bundles program, CMS also added an option for clinicians in the CJR or cardiac bundle to qualify for the 5% bonus as an advanced alternative payment model (APM) under the Medicare Access and CHIP Reauthorization Act (MACRA). Of course, as providers prepare for and look at bundled payments, they can also fold this assessment and readiness into their MACRA program strategy.
Clifton: MACRA is obviously a significant program impacting providers this year. What about commercial payers? Where do you see the market moving within the private payer segment?
Terry: We have been engaged with several major commercial carriers and self-insured employers exploring the opportunity to expand their value-driven strategy to include bundled payments. Commercial payers such as United Healthcare, Aetna, and Anthem all report that today, nearly 50% of all payments are tied to a value-based program such as bundles and or shared savings programs. It will be important for programs to assess their patient populations and determine the opportunity to engage their commercial payers. In cardiology, we are seeing pursuit of commercial bundled strategies in interventional cardiology related to percutaneous coronary interventions (PCIs) specifically and in electrophysiology, both of which have higher commercial payer mixes than other areas of cardiovascular medicine. For groups in an EPM market, they may also look at their non-acute PCIs where a large percentage of patients are covered by commercial carriers, and thus decide to pursue a strategy that wraps bundled payment or episode management around their entire PCI population.
Graver: This is exactly right and to further highlight the opportunity, CMS has also included commercial risk programs such as bundled payments as part of the MACRA APM track qualification. I also want to point out an important aspect of preparing for and optimizing bundles; PCI procedures offer an excellent illustration. As we examine the EPM program, which pays for 90 days of total care, the actual PCI procedure makes up approximately 64% of the 90-day costs. If CMS adjusts a hospital’s target based on regional costs and then further adjusts the target pricing tied to quality, the largest component of the bundle that will be affected is the PCI procedure itself. Thus, programs are proactively looking at their total cath lab program operations and are seeking to streamline their clinical pathways while also striving for more internal consistency in their clinical care. More efficient and predictable care pathways will help programs prepare to manage the financial uncertainties of bundled payment programs, as well as improve their operating margin under traditional fee for service payments.
Clifton: The nuances of bundled payment programs are extremely complex and it appears to me that the rules are being written literally as we go — and to top it off, providers are being put in a position to figure these out in relatively short order. What should providers do to educate themselves?
Graver: There are many resources available in terms of program summaries, conferences focused on bundled payments, and even work groups that are bringing together programs to share learnings and best practices, and take a cardiovascular community approach to succeeding at these programs. I would also say that programs should not try to go it alone into bundles. Find a partner who has experience, tools, and knowledge of the bundled payment programs. The value-driven market is absolutely accelerating. With MACRA, EPMs, and Advanced BPCI all coming into play in the next 6 to 12 months, programs need to understand their risk and opportunity, as well has have strategies and tools in place to pursue these opportunities.
- See Bundled Payment Program Summary – Table 1.
- Dummit, et al. Association between hospital participation in a Medicare bundled payment initiative and payments and quality outcomes for lower extremity joint replacement episodes. JAMA. 2016 Sep 27; 316(12): 1267-1278.
