Could HHS and CMS Shift Direction on Mandatory Bundled Payments? It’s an Intriguing Prospect

Jan. 11, 2018
Alex Azar’s comments in his Senate Finance Committee confirmation hearings were highly intriguing; only time will tell what might happen to mandatory bundled payments under his direction, at Health and Human Services

From time to time, something happens in the healthcare policy world that really is surprising. Such was the case this Tuesday (Jan. 9), when Alex Azar, President Trump’s nominee for Secretary of Health and Human Services, made comments indicating his openness to mandatory bundled payments, during a Senate Finance Committee hearing on his nomination. That openness to mandatory bundles would represent a strong about-face in administration policy, as Associate Editor Heather Landi noted in a news story that day, as former HHS Secretary Tom Price, M.D. had strongly opposed mandatory bundles, going so far as to direct the end of two mandatory bundled payment programs—one existing and one previously announced.

Here’s an excerpt of the Jan. 9 exchange between Azar and Senator Mark Warner (D.-Va.), as seen on C-SPAN:

“Warner: I’d like to get to two other items [after a lengthy discussion between the two on federal drug pricing issues]. In your statement, you said, part of the power of Medicare[is] to shift the focus in our system is to shift from paying for procedures and sickness, to paying for health and outcomes… One of the things that came out of the Affordable Care Act is CMMI [the Center for Medicare and Medicaid Innovation]. And I hope that, while it’s not been as productive as I would like to have seen at all times, I think it is still a tool that is useful, and would like to hear your comments about the role of CMMI going forward.

Azar: I completely agree with you, and believe that CMMI is going to be one of the very important legs we have to drive this type of transformation in our healthcare system, through Medicare. We need to ideate, to pilot, to test, and then generalize.

Alex Azar testifying to the Senate Finance Committee on Jan. 9

Warner: And I would hope that we would realize that some of those pilots may—and I know you might have a disagreement on this one—might include mandatory pilots, because, too often, those who are in the voluntary system, are the ones who have already been able to bring about efficiencies, and we need to force more [innovation] into the system.

Azar: Senator, we actually don’t disagree there. I believe that we need to be able to test hypotheses, and if we have to test a hypothesis, I want to be a reliable partner, I want to be collaborative in doing this, I want to be transparent, and follow appropriate procedures; but if to test a hypothesis there around changing our healthcare system, it needs to be mandatory there as opposed to voluntary, then so be it.”

So, that was quite a moment, when it comes to the already-long saga around CMMI and its history of bundled payment model development.

You’ll recall that on November 30 of last year, CMS (the Centers for Medicare and Medicaid Services) announced the cancelling of two mandatory bundled payment programs—one already in existence, the other, which had been previously announced. As Managing Editor Rajiv Leventhal noted in an article on that date, “The Centers for Medicare and Medicaid (CMS) has finalized a rule that will cancel mandatory hip fracture and cardiac bundled payment models. In August, the Department of Health and Human Services (HHS) issued a proposed rule that would cancel these mandatory bundled payment models—initiatives that were delayed twice before that point in time by then-HHS Secretary Tom Price, M.D.—once in March and again in May. Now, in a Nov. 30 press release, CMS officials said it is finalizing the cancellation of the Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) Incentive Payment Model that were to begin on January 1, 2018 and will also implement changes to the Comprehensive Care for Joint Replacement (CJR) Model. The motivation behind the ruling, CMS senior officials said, was to ‘offer greater flexibility and choice for hospitals in providing care to Medicare patients.’”

Already prior to the Nov. 30 announcement, Leventhal noted, “CMS Administrator Seema Verma has said in the past that she doesn’t think these bundled payment models should be mandatory. Verma added in a statement today, ‘While CMS continues to believe that bundled payment models offer opportunities to improve quality and care coordination while lowering spending, we believe that focusing on developing different bundled payment models and engaging more providers is the best way to drive health system change while minimizing burden and maintaining access to care. We anticipate announcing new voluntary payment bundles soon.’”

So what Mr. Azar said on Tuesday could potentially represent a sweeping volte-face of White House policy around mandatory bundled payment programs… or perhaps not. Only time will tell.

But the reality is that many provider leaders support the advancement of some mandatory bundled payment programs, most notably senior leaders at the Charlotte-based Premier Inc. On the same day that CMS had announced the cancellation of those two programs last November 30, Blair Childs, senior vice president of public affairs at Premier, said in a statement that his organization was unhappy with that ruling. The statement read, “Premier and its members are extremely disappointed with CMS’ decision to eliminate Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) Incentive Payment Model without contemporaneously offering voluntary alternatives to replace them. Current bundled payment models are actively transforming care, driving improved patient outcomes and reducing healthcare costs. Approximately two-thirds of CJR participants in Premier’s Bundled Payment Collaborative improved care for their joint replacement patients by achieving excellent or good quality scores, and also reduced Medicare costs. Yet, CMS is pulling the rug out from underneath providers without offering another avenue to participate and apply their significant investments to the benefit of patients.”

Childs added in that statement that “We urge CMS to quickly release its promised new episode payment model for 2018 to ensure there is not a similar gap for Bundled Payments for Care Improvement (BPCI) participants breaking their momentum in moving into a follow-on initiative. The new model is essential for advancing alternative payment models and qualifying eligible clinicians to earn the five percent bonus under the MACRA Quality Payment Program (QPP).”

What’s more, there is a logic to retaining mandatory programs around joint replacement procedures and cardiac care, as those are among the most common areas of care in U.S. hospitals and post-acute care organizations. That is particularly true given that the chances of cuts to provider payments under Medicare are rising by the day, in the wake of Congress’s passage (supported only by Republicans, and not Democrats) of a tax bill that has added nearly a trillion and a half dollars to the federal deficit. And if the passage of that bill, which President Trump signed into law on Dec. 22, puts more pressure on federal budgets, then the pressures to cut Medicare provider payments increase proportionally.

And that means that mandatory bundled payment models, which could further help bend the cost curve around Medicare spending, could once again become attractive to federal healthcare officials, even as they once (rather recently!) disparaged such vehicles.

A key question will be, once Azar is confirmed, how CMS Administrator Seema Verma might weigh in on these issues. Verma’s statements appeared to be in lockstep with those of Price, prior to Price’s resignation from his position as HHS Secretary on Sept 29, after just seven-and-a-half months in the post. If Azar is confirmed, as expected, he could potentially shape HHS in a direction quite different from that promoted by Price, who had been an orthopedic surgeon and a conservative Republican congressman. Azar, who served first as General Counsel of HHS and then Deputy Secretary of Health and Human Services, under George W. Bush, during the 2001-2005 timeframe, most recently served as president of USA, LLC, the largest division of Eli Lilly and Company, where he was responsible for the company's entire U.S. operations.

While most of the questions posed to him during the Senate Finance Committee hearings were understandably around drug pricing issues, the moderate views that Azar expressed regarding mandatory bundled payments appeared surprising. We’ll see what happens next—and what that means for the direction of bundled payments under Medicare more broadly.

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