Condition based bundled payments – The wave of the future?

Practice Management

Ever since Donald Trump won the Presidential election in November, with one of his main campaign themes being the repeal of the Affordable Care Act (ACA), there has been a great deal of uncertainty about the future of health care reform.

As of the date of writing this article, Representative Tom Price is the nominee for Secretary of the Department of Health and Human Services and is expected to be confirmed despite much opposition. Representative Price has also opposed the ACA and has been a leading Republican voice in opposing mandatory bundled payment programs promulgated by the Centers for Medicare and Medicaid Services (CMS) under the ACA such as the Comprehensive Care for Joint Replacement program (CJR) and the Episode Payment Model program (EPM). This has led many to wonder if these mandatory programs will continue, be discontinued, or converted into voluntary programs. In my view, and in the view of every other commentary I have read on the topic, whether these CMS programs remain mandatory or become voluntary, bundled payments will continue to expand.

There are a number of reasons for this, including the incentives that physicians have under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) to join Advanced Alternative Payment Models (APMs). These reasons include the fact that physicians can avoid the reporting requirements and reimbursement reduction risks under the Merit-Based Incentive Payment System (MIPS) and the expansion of bundled payments by commercial payers. The EPM Rule created a risk track for EPM and CJR that created bundled payment Advanced APMs and also announced a new voluntary Bundled Payment for Care Improvement program (BPCI) in 2018. Another type of Advanced APM, the Accountable Care Organization (ACO), has not been as successful as the CMS bundled payment programs. While there have been less than 400 participants in the CMS ACO programs, the voluntary BPCI Program has over a thousand participants and has generated greater savings. A number of commentators have questioned whether the ACO model, in its current form, will survive.


ACOs and bundled payment programs have strengths and weaknesses. Patients are usually assigned to ACOs based on their Primary Care Physician (PCP). This has led hospitals to employ more PCPs than any other type of physician in order to increase their ACO patient populations in an attempt to achieve greater efficiencies. In view of this, ACOs are generally effective at incentivizing PCPs but are not effective at incentivizing specialists. One strategy for ACOs is to use disease management and improved care coordination techniques to detect health care issues early. Another strategy is to direct resources to the patient that will help keep the condition from progressing and resulting in an inpatient admission for surgery or other treatments. Eliminating avoidable hospitalizations and operations can cause dramatic cost savings while improving the quality of care.


Bundled payment episodes are typically triggered by an inpatient admission for an operation or other treatment. Since PCPs generally do not have a primary role in providing care during the episode, bundled payment structures typically do not incentivize PCPs. If structured properly, however, bundled payment programs can be very effective at incentivizing specialists. While the strategy under bundled payment programs is to improve quality and reduce costs, once the decision to operate is made or the inpatient admission for treatment occurs, this misses the greater opportunity that ACOs have to avoid the operation or admission in the first place. Condition based bundled payments are an opportunity to engage specialists (and potentially PCPs) to capture this greater opportunity.


Rather than being triggered by a decision to operate or an inpatient admission, a condition based bundled payment can be triggered earlier by the first visit to a specialist, such as a visit to an orthopedic surgeon for knee pain. In a condition based bundled payment, the specialist is incentivized to consider less invasive and expensive treatments that could avoid the need for a hospitalization. The savings achieved could be far higher than under traditional bundled payment programs, although under the CMS bundled payment programs the share of savings physicians can receive is capped at 50% of their normal fee-for-service charges for the procedure. This restriction does not apply to bundled payments with commercial payers, where there is an opportunity for even greater savings since commercial reimbursement rates are higher than Medicare. Either way, savings can be significant enough that both the PCP and the specialist can be incentivized, encouraging the PCP to refer to the specialist at an earlier date when the condition may be easier to treat.


As bundled payment programs continue to spread, new models will be developed and tested. It is interesting to note that when it proposed the EPM Rule, CMS specifically asked for comments on condition-based bundled payments:


“….we seek comment on model design features for potential future condition-specific episode payment models that could focus on an acute event or procedure or longer-term care management…. that emphasize outpatient care and, like the proposed AMI and CABG models, could incentivize the alignment of physicians and other eligible professionals participating in the Advanced APM through accountability for the costs and quality of care. Such condition-specific episode payment models may provide for a transition from hospital-led EPMs to physician-led accountability for episode quality and costs, especially given the importance of care management over long periods of time for beneficiaries with many chronic conditions.”


I expect to see bundled payments continue to spread and to see new models emerge. We are likely to see more condition based bundled payments as providers gain more experience with risk contracts. If proved more effective than other models, condition based bundled payments may well be the wave of the future.


About the author:
Paul Jawin, JD, Vice President, Stryker Performance Solutions brings more than 30 years of legal, business, financial and capital markets experience to his role developing physician alignment and payment reform programs that help caregivers collaborate to deliver better patient care at lower costs. As co-founder of Comprehensive Care Solutions (acquired by Stryker Performance Solutions in 2012), he has helped many physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACOs) and bundled payments. Paul also works with hospitals and physicians to create organizational structures, such as Clinically Integrated Organizations (CIOs), and strategies, such as gainsharing and Co-Management, to align the interests of the physicians and hospitals as they strive to achieve the triple aim of health reform: better health, better patient care and lower costs. Paul is a regular speaker at industry conferences and a frequent contributor of articles to industry publications. Paul also co-founded Secured Independence, Inc., the first long-term care insurance risk management firm focused on pre-claim risk mitigation, where he served as Senior Vice President and General Counsel. Paul has held senior executive positions—including General Counsel, Chief Financial Officer, Chief Operating Officer, and member of the Board of Directors—in several public and private companies involved in real estate and senior housing.


About Stryker’s Performance Solutions:
Keeping up with the rapid pace of change that is reshaping the Healthcare industry is time consuming. Performance Solutions partners with hospitals and physician practices to understand the unique needs of each customer to develop and implement customized solutions aimed to improve quality outcomes, patient satisfaction and profitability.


Performance Solutions brings decades of expertise in care redesign, service line development, surgical services optimization and alignment strategies to our partnerships. Guided by our Performance Intelligence data analytic platforms, we help customers understand and benchmark data to guide critical decision making. As hospitals and physicians strive to develop broad clinically integrated networks to support bundled payments, MACRA/MIPS legislation and focus on the future of population health, Performance Solutions is the leader to turn to. In an era where healthcare is focused on quality and patient satisfaction, it is important to have a trusted partner to help navigate healthcare transformation initiatives.


Contact us at 1.800.616.1406 or to learn more.


The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.

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