Is HHS’ Proposal to Scale Back Mandatory Bundled Payments a Step Back from Value-Based Care? Many Healthcare Experts Say No

Aug. 21, 2017
Does HHS’s proposal to eliminate mandatory bundled payments signal that CMS is taking its foot off the accelerator in the movement to advanced alternative payment models? Some healthcare experts say no, as value-based payment models continue to drive forward.

Last Thursday, the Department of Health and Human Services (HHS) posted a rule title that proposed eliminating mandatory bundled payment programs in several areas of healthcare including cardiac care and joint replacement. The Centers for Medicare and Medicaid (CMS) then followed up that rule posting with a press release Tuesday that provided more details regarding its proposal to change the Comprehensive Care for Joint Replacement Model and cancel the mandatory Episode Payment Models and Cardiac Rehabilitation Incentive payment model.

The proposed rule would cancel the mandatory bundled payment programs for heart attacks and bypass surgeries as well as expansion of the existing Comprehensive Care for Joint Replacement model (CJR) to include surgical treatments for hip and femur fractures. CMS officials said the proposed rule aims to provide “greater flexibility and choice for hospitals in orthopedic care for Medicare beneficiaries.”

As background, back in July 2016, during the administration of former President Barack Obama, HHS announced the introduction of a mandatory bundled payment for care for heart attacks and for cardiac bypass surgery and an extension of the existing bundled payment model for hip replacements to other hip surgeries. HHS announced the mandatory bundled payments for total hip and knee replacement procedures, which was imposed on providers in 67 metropolitan statistical areas (MSAs), in November 2015.

These bundled payment models for cardiac care, in addition to the extension of the existing bundled payment model for hip replacements to other hip surgeries, were perceived as a major step in forcing reimbursement forward into value-based purchasing.

Now, with this latest proposed from CMS under the Trump Administration, the agency is proposing to reduce the number of mandatory geographic areas participating in the Center for Medicare and Medicaid Innovation’s (Innovation Center) CJR model from 67 to 34. In addition, CMS proposes to allow CJR participants in the 33 remaining areas to participate on a voluntary basis. In this rule, CMS also proposes to make participation in the CJR model voluntary for all low volume and rural hospitals in all of the CJR geographic areas.

CMS also is proposing through this rule to cancel the Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) incentive payment model, which were scheduled to begin on January 1, 2018. “Eliminating these models would give CMS greater flexibility to design and test innovations that will improve quality and care coordination across the in-patient and post-acute-care spectrum,” CMS said in a press release.

Moving forward, CMS says it expects to increase opportunities for providers to participate in voluntary initiatives rather than large mandatory episode payment model efforts. “The changes in the proposed rule would allow the agency to engage providers in future voluntary efforts, including additional voluntary episode-based payment models,” CMS said.

Some healthcare organizations immediately voiced concerns that the proposal from HHS, under Secretary Tom Price, M.D., signals that CMS is taking its foot off the accelerator when it comes to pushing providers to move to advanced alternative payment models (APMs).

Blair Childs, senior vice president of public affairs for Premier Inc., said in a statement,” While we appreciate CMS making an effort to address stakeholder concerns about large-scale mandatory models, we are disappointed with the proposal to cancel EPM and CR models without offering alternatives to replace them. We believe CMS needs to be a strong leader and create more incentives for providers to move to advanced alternative payment models, including bundled payment. We hope that the promise for a future program that builds on the Bundled Payments for Care Improvement (BPCI) program is quickly followed up on with a fuller, specific proposal. These new models are essential for providers to earn the five percent physician payment bonuses under the MACRA Quality Payment Program (QPP).” 

What’s more, Childs said, “Members of Premier have been steadfast advocates in favor of moving away from the perverse incentives in Medicare’s micro-managing fee-for-service system in favor of more accountable, coordinated alternative care models. Through 15 years of experience, we know these models improve quality, reduce costs and enhance the overall care experience. We hope to work with CMS to continue to advance APMs and bundled payment’s uptake in the market.”

However, many in the industry say the proposed changes and cancellations are not surprising given that Secretary Price, and even CMS Administrator Seema Verma, have voiced skepticism about mandatory bundled payment programs. As previously reported by Healthcare Informatics, last fall, when Price still served as a Congressman from Georgia, he was one of 200 federal lawmakers who sent a letter to Andy Slavitt, acting administrator for CMS, calling out CMMI for overstepping its authority by proposing mandatory healthcare payment and service delivery models. In the letter, the legislators state that the proposals would negatively impact patients. "We ask that your cease all current and future planned mandatory initiatives under the CMMI,” the legislators wrote. Verma, during her first Senate confirmation hearing back in February, also voiced similar thoughts about mandatory bundled payment programs.

“I’m frankly not surprised by it; it’s been relatively consistent with what Sec. Price and others have been advocating for in terms of their lack of interest in any mandatory program,” Chris Garcia, CEO of Remedy Partners, a Darien, CT-based software and services company that helps hospitals and physicians with bundled payment programs, says. “They question the authority that CMMI has in terms of being able to take demonstrations for projects and turn them into permanent payment policy. I don’t think anybody questions the need for innovation and the work that CMMI is doing is nothing short of outstanding, but to be able to make that permanent, I think they, they meaning the legislators, want more say in those things before they ever move into a permanent payment policy.”

Michael Abrams, co-founder and managing partner of St. Louis-based consulting firm Numerof and Associates, also says he was not surprised with the proposal to eliminate mandatory payment models. “Secretary Price has made clear his feelings about this mandatory program being driven by CMS. He has said that he feels that they were overly intrusive in hospital operations and contrary to the patient-physician relationship. Be that as it may, I think that if CMS feels that it’s in the industry’s interest to not impose these programs on hospitals, but rather have them volunteer and opt in as many did with BPCI (Bundled Payments for Care Improvement), as long as they can make that work and get enough data to evaluate the effectiveness of bundled payments as an approach to improve quality of care and reducing cost, then, I’m okay with that,” but he adds, “We do need to move forward on this issue. I don’t think any of us can forgot that we are hurdling toward the point of spending 25 percent of GDP (gross domestic product) on healthcare. I don’t think we can afford the time it may take us to get there at a pace that makes everyone comfortable.”

Michael Abrams

Abrams also noted, “From what I ‘ve seen and the rationale for this rule, the Administration is squarely behind the move from volume to value and Secretary Price was supportive of MACRA and still supportive of it as well. I don’t see this abandoning that change.”

What’s more, Garcia doesn’t see the proposed changes and even cancellations of certain mandatory bundled payment programs as an indication that CMS is scaling back on bundled payments as an alternative payment model. “The voluntary bundled payment program has been extremely successful to date,” he says.

According to a CMS analysis of the Bundled Payments for Care Improvement (BPCI) initiative published in September 2016, and as reported by Healthcare Informatics, the voluntary programs have shown promising results to reduce Medicare spending in 11 out of 15 clinical episode groups. CMS stated that more than 1,400 Medicare providers are currently participating in bundles through the BPCI initiative, and that early results are encouraging, with orthopedic surgery bundles, in particular, showing promising results on cost and quality in the first two years of the initiative.

Abrams says, “The truth is that the mandatory programs that are driven by CMS, on the one hand, they do tend to force business discipline associated with bundled pricing into the marketplace, even among organizations that would not otherwise adopt it. That’s a good thing. The truth is it’s heavily bureaucratic, and arbitrary and may be unfair to those organizations that come into the program and already have moderate or low pricing.”

“I think there were some flaws in the mandatory programs,” Garcia says, in contrast to the voluntary BPCI initiative. “First, the success of the bundled payment program has largely been in creating systemic change. If we really want the way that healthcare is delivered to change, we have to do it systemically, not in these little micro bursts. For example, like the mandatory program for lower joints, it was such a specialized area; it allowed people to change one thing and one thing only, without changing their process in its totality.”

He continued, “The mandatory program, because it was sort of forced on people, they become very defensive early in the process. On a voluntary basis, folks signed up in a voluntary way, they signed up for risk and they signed up saying, ‘I want to change the way we coordinate care, after the acute episode, and into the post-acute recovery period.’ And so, it’s not too hard to understand that if you’re going to create systemic change, you want to bring people in that are interested in that and want to see that happen and that will slowly pull all the others along who are sort of watching it.”

What’s more, Garcia added, “Value-based payments are not going away. The commercial market has already begun to adopt it and will continue to adopt it as one of their payment mechanisms. The bus has left the station. I think it’s time for folks to get on.”

Healthcare industry experts contend that it’s likely that the latest proposed rule won't entirely cancel the models, but instead make them voluntary. CMS may also roll it into the upcoming BPCI Advanced initiative, which is expected to move on full steam ahead.

Abrams agrees, noting, “It would be a mistake for hospital executives to preclude that the pressure is off, in terms of the move away from fee-for-service and the move toward more market-based approaches. The only sensible thing for hospital administrators to do is to start moving their own organizations toward market-based approaches, ones that can point to transparency of pricing and quality data, ones in which that hospital willingly takes accountability for cost and quality and that’s the essence of a bundled price approach.”

Even without mandatory programs, the introduction of bundled pricing has changed the conversation in the healthcare industry, Abrams contends. “We’re seeing new conversations compared to even five or seven years ago. Self-insurance and large employers are in a position to push delivery systems for innovations like bundled pricing that have the potential to drive down cost and improve quality. I think that will continue to drive reform in healthcare delivery.”

Leveraging IT and Analytics for Bundled Payment Models

Moving forward, as more hospitals consider participating in voluntary models and as CMS will likely advance the BPCI program, senior healthcare executives and IT leaders need to focus on the tools and the resources they will need to successfully participate in bundled payment models.

“One of the first things they need to think about is technology that will enable them to follow the patient throughout the patient’s episode of care, so when they leave those four walls of the hospital,” Garcia says. “So, I would say technology is first, and second is analytics. They need to spend a lot of time with the data and understand where the large variances in spending occur. And the third piece is creating networks of downstream providers. So, I think having networks of post-acute providers, whether skilled nursing facilities, inpatient rehab facilities or home health care companies that are willing to participate in the bundled payment effort.”

And CIOs at healthcare provider organizations need to be thinking about the role that IT and technology will play in all of this, many healthcare industry experts say. “As a CIO in a hospital system, I think finding ways to integrate some of the external technology solutions that exist that could help them to identify these bundled payment patients and then help them track these patients would be something that as a hospital-based CIO, I would be thinking about immediately and pursuing,” Garcia says, adding, “If I’m the CIO of a large skilled nursing facility chain or the owner of a home health care chain, I would be thinking about how do I get connected to these technology solutions out there, so that I can be a participant in that data exchange.”

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