The Centers for Medicare & Medicaid Services (CMS) has too many new payment models for a practicing doctor to keep up with them all. But there are three that I think are most important for hospitalists to know something about: hospital value-based purchasing, MACRA-related models, and bundled payments. Here, I’ll focus on the latter, which unlike the first two, influences payment to both hospitals and physicians (as well as other providers).
Bundles for Different Diagnoses
Bundled payment programs are the most visible of CMS’s episode payment models (EPMs). There are currently voluntary bundle models (called Bundled Payments for Care Improvement, or BPCI) across many different diagnoses. And in some locales, there is a mandatory bundle program for hip and knee replacements that began in March 2016 (called Comprehensive Care for Joint Replacement, or CCJR or just CJR).
These programs are set to expand significantly in the next few years. The Surgical Hip and Femur Fracture Treatment (SHFFT) becomes active in 2017 in some locales. It will essentially add hip and femur fractures requiring surgery to the existing CJR program. New bundles for acute myocardial infarction, either managed medically or with percutaneous coronary intervention (PCI), and coronary bypass surgery will become mandatory in some parts of the country beginning July 2017.
How the Programs Work
CMS totals all Medicare dollars paid per patient historically for the relevant bundle. This includes payments to the hospital (e.g., the DRG payment) and all fees paid to physicians, therapists, visiting nurses, skilled nursing facilities, etc., from the time of hospital admission through 90 days after discharge. It then sets a target spend (or price) for that diagnosis that is about 3% below the historical average. Because it is based on the past track record of a hospital and its market (or region), the price will vary from place to place.
If, going forward, the Medicare spend for each patient is below the target, CMS pays that amount to the hospital. But if the spend is above the target, the hospital pays some or all of that amount to CMS. Presumably, hospitals will have negotiated with others, such as physicians, how such an “upside” or penalty payment will be divided between them.
It’s worth noting that all parties continue to bill, and are paid by Medicare, via the same fee-for-service arrangements currently in place. It is only at the time of a “true up” that an upside is paid or penalty assessed. And hospitals are eligible for upside payments only if they perform above a threshold on a few quality and patient satisfaction metrics.
The details of these programs are incredibly complicated, and I’m intentionally providing a very simple description of them here. I think that nearly all practicing clinicians should not try to learn and keep up with all of the precise details. They change often! Instead, it’s best to focus on the big picture only and rely on others at the hospital to keep track of the details.
Ways to Lower the Spend
These programs are intended to provide a significant financial incentive to find lower-cost ways to care for patients while still ensuring good care. Any successful effort to lower the cost should start by analyzing just what Medicare spends on each element of care over the more than 90 days each patient is in the bundle. For example, for hip and knee replacement patients, nearly half of the spend goes toward post-hospital services such as a skilled nursing facility and home nursing visits. So the best opportunity to reduce the spend may be to reduce utilization of these services where appropriate.