Healthcare strategist: Bundled payment delay is a step backward for value-based care

Although the Centers for Medicare & Medicaid Services delayed the expansion and implementation of major bundled payment initiatives by only three months, one healthcare strategist says the move is a step backward for the movement from volume to value.

Michael Abrams

“I was somewhat disheartened by the announcement to put it off,” Michael Abrams, cofounder and managing partner of Numerof & Associates, told FierceHealthcare in an exclusive interview, noting that even a three-month delay raises questions on whether the federal government will continue to be committed to moving toward a value-based delivery approach.

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In an interim rule published last week, CMS postponed the implementation of the mandatory cardiac bundle and cardiac rehabilitation programs, and delayed the expansion of the mandatory joint replacement bundled program. The agency also pushed back the effective date of a final rule to implement the joint replacement bundle initiative, the cardiac rehabilitation incentive payment model and the initiative to advance care coordination through episode payment models.

The agency is also seeking comment on a potential further delay of the programs to the beginning of next year.

Abrams views bundled pricing as the first step toward value-based payments because it forces healthcare organizations to take stock of what they are doing, determine their costs and then put in place the necessary infrastructure to control those costs.

Historically, he says, most healthcare organizations didn’t know what it actually cost them to do a knee replacement. But bundled payments forces them to figure out the underlying cost of delivery. “Bundled payments is a necessary next step in many respects to get away from fee-to-service toward a value-based delivery model,” Abrams says.

However, the future of the program is now uncertain as newly appointed Health and Human Services Secretary Tom Price has opposed mandated bundled payments. But a voluntary program would not push the needle far enough, says Abrams.

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“A lot of hospitals across the country have been watching on the sidelines to see if they really need to do this. And it [the delay] raises question marks to them whether they need to do this. Most won’t do it unless they need to do it…so if it’s not mandatory, they won’t go there.”

While it’s possible that the temporary pause on the programs may just give Price and the new administration time to review the initiatives and make some changes, Abrams says it also could mean the delay is the first step toward moving away from a mandatory program. “At this point there is no way to tell but if it’s the latter, that would be an enormous mistake," he says.

His advice for hospitals: Continue to build the infrastructure needed to deliver on a bundled price basis. “First and foremost many of the things they need to create can help them do better in a fee-for-service environment.”

In addition, he says, bundled payments aren’t just about costs. Instead, they are meant to eliminate unwanted variation in cost and quality.

“I think implementing bundled payment pricing is a step toward capitation because you need to understand your costs for delivering a certain service. Until you do that, you can’t tackle the bigger challenge of capitation. You need to learn how to control unnecessary, non-value added variation in costs and quality and that’s what organizations have to do to delivery on a bundled pricing program.”