Industry Voices—The future of bundled payments

payment
Despite delays and potential changes to the federal program, bundled payment models are likely here to stay.
Miranda Franco

Since the passage of the Affordable Care Act, value-based payment models have rapidly proliferated. New initiatives and trends have revolutionized the way that healthcare systems receive payment for patient care and are emphasizing the ongoing shift away from traditional fee-for-service to value-based payments.

Value-based payment models will continue to rise as organizations begin implementation of the Medicare Access and CHIP Reauthorization Act. MACRA encourages eligible clinicians to participate in alternative payment models (APM) and advanced alternative payment models.

Under MACRA, clinicians that qualify to participate in an advanced APM may bypass the Merit Based Incentive Payment System (MIPS) reporting requirements and receive a 5%  bonus from 2019-2024. Clinicians that participate in an APM that does not qualify as an advanced APM will have their reporting requirements under MIPS eased.

The potential of bundled payments

Bundled payments can be a first step into APMs as they present a vehicle for payers to shift financial risk to providers, creating a platform of shared accountability. Bundled payment differs from other payment reform models, like pay-for-performance, because they require providers to assume financial risk for the costs of services for a particular treatment or condition. Bundled payments replace individual fee-for-service payments with a single lump sum payment designed to reimburse a complete episode of care.

To date, Medicare has been the primary driver of bundled payment initiatives. The Centers for Medicare and Medicaid Services Innovation Center’s (CMMI) Bundled Payments for Care Improvement (BPCI) initiative, a voluntary program encompassing a variety of conditions and risk-sharing arrangements, is the first bundling model CMMI has tested. In the first 21 months of the BPCI initiative, an independent study (PDF) conducted by The Lewin Group concluded the program was associated with a greater reduction in Medicare per-episode payments, with no decline in care quality, when compared to providers not participating in BPCI.

Long before BPCI, CMS began testing bundled payment models in the early 90s with the Heart Bypass Center Demonstration. Under the Heart Bypass Center Demonstration, Medicare saved $42.3 million on bypass patients treated in the demonstration hospitals.

In the last few years, CMS has continued to expand bundled payment programs. To date, these programs have been small in scope and voluntary in nature. However, CMS is now looking to expand to larger, mandatory bundled payment programs that include cardiac care, surgical hip and femur fractures and comprehensive care for joint replacement (CJR). These programs will qualify, in future years, as advanced APMs under MACRA.

The mandatory nature of these new bundled programs has likely compelled the new administration to take action on bundled payments as CMS recently delayed (for a second time) the effective date of the bundled payment programs for cardiac care and surgical hip and femur fracture treatment from July 1 until Oct. 1. This delay, CMS said, is necessary to allow stakeholders to provide comments regarding the programs and ensure participants have a clear understanding of the governing rules.

Potential changes to bundled payments

The delay is not surprising as HHS Secretary Tom Price repeatedly expressed concern about CMS’ mandatory bundled payment programs. Price, M.D., is an orthopedic surgeon and former Republican congressman who served as the chairman of the House Budget Committee and as a member of the health subcommittee of the House Ways and Means Committee. In that capacity, Price opposed mandatory value-based payment models, such as the CJR model.

Some in the industry said the delay raises questions about the future of value-based payment and in particular mandatory bundled payment models. At the very least, the delay creates uncertainty—Many hospitals have already implemented CJR and must now prepare to adjust their programs and other hospitals will prepare to implement new programs without knowing whether the program will be in place as of its intended effective date or whether the programs will remain mandatory.

The delays could simply be indicative of potential minor adjustments to the programs, such as refinements to quality scores, or they could yield more significant change like moving from mandatory to voluntary bundled payment programs.

Despite the potential changes, bundled payment models are likely here to stay. Given the importance of cost containment in healthcare and the desire to expand APMs and Advanced APMs under MACRA, bundled payment models will likely continue to expand in some form. The continued development of these models is largely due to the promise bundled payments show in reducing costs, while maintaining high-quality care.

In addition to Medicare, the ACA also pushed insurers, physicians, hospitals and employers to launch their own bundled payment reforms, and they too are expected to continue. We will likely see more of these models developed in the coming months and years, the only question is for what conditions and whether they be mandatory or voluntary.

Miranda Franco is a senior policy advisor at Holland & Knight in the District of Columbia and a member of the firm’s national Healthcare & Life Sciences Team.