GE Healthcare Camden Group Insights Blog

The Bundled Payment Imperative: CMS Moves Closer to a Mandate

Posted by Matthew Smith on Jul 13, 2015 6:41:46 PM

Rapidly following on the heels of its oncology bundles announcement, the Centers for Medicare and Medicaid (“CMS”) announced on July 9 a new proposed mandate for a 90-day retrospective bundled payment model. This model impacts Medicare beneficiaries receiving lower extremity joint replacement or reattachment of lower extremity procedures, in the 75 designated geographic areas. Modeled after the Bundled Payments for Care Improvement (“BPCI”) program and evidenced by the Acute Care Episode (“ACE”) demonstration project, CMS puts forth that the Comprehensive Care for Joint Replacement (“CCJR”) model aims to improve cost efficiencies, patient outcomes, and collaboration among various types of providers for an episode of care.

Key Program Components

  • Only hospitals and health systems are eligible to “own” the bundle. Physicians and physician groups are not eligible to “own” the bundle. Financial liability for the 90-day episode is assigned to the hospital.
  • 90-day retrospective bundle
  • Joint replacements only
  • Gainshare waiver is available
  • No downside risk in year one
  • Five-year term (as compared with a three-year term for BPCI)
  • No lengthy or costly application process (relative to CMS bundled payments pilots)
  • BPCI participants are excluded from mandatory participation
  • Similar to the Medicare Shared Savings Program, there are minimum quality performance measures that must be achieved in order to be eligible for payment reconciliation.

Defining the Impact on Providers

The overall impact of bundled payments will be demand destruction related to unnecessary testing and treatments. Providers should expect to see:

  • reduced inpatient diagnostic testing
  • shorter lengths of stay
  • reduced avoidable readmissions
  • significant decline in inpatient rehab and SNF utilization
  • closer scrutiny related to supply cost and physician preference items

Bundled payments motivate a new set of behaviors for physicians aimed at giving patients exactly what they need in the most cost effective setting and nothing more.

This is a retrospective bundle so the impact on day-to-day claims processing operations will be minimal. All hospitals participating in the CCJR program will continue to be paid Medicare fee-for-service payments under the Inpatient Prospective Payment System, and subject to yearly reconciliation against a set target price. The proposed rule states that hospitals that perform better than the target price will only be eligible for a positive reconciliation payment if the mandatory quality metrics are achieved, such as complications, readmissions, and patient experience measures. Similarly to BPCI, in the first year of CCJR, participating hospitals will not face any downside risk.

Other features of the CCJR model are similar to BPCI in terms of permissible waivers and the alignment of care redesign with potential gainshare payments to physicians. The 439-page proposed rule is open for public comment, which closes September 8, 2015.

Determining the 75 Markets

The selected markets were chosen because they represent a high density of Medicare recipients. CMS excluded regions that did not have sufficient volume of DRGs 469 and 470, as well as regions with very high BPCI penetration. CMS was left with just under 200 regions, from which they selected 75 of those 200. In addition, CMS differentially selected higher cost regions more often than lower cost regions (in terms of the average hip replacement episode cost). The 75 markets represent approximately 800 hospital providers.

Start Date and Eligible Providers for Mandatory Joint Replacement Bundles

The initiative is proposed to begin January 1, 2016, and would be in place for 5 years. The CCJR model will target lower-extremity joint replacement (“LEJR”) episodes for Medicare Severity-Diagnosis Related Groups 469 and 470. Similar to Model 2 in the BPCI program, the episodes of care will be initiated upon inpatient admission to an acute care hospital and include all related post-acute care for 90 days post-discharge. Only acute care hospitals will be eligible to be episode initiators under the CCJR program, as compared with other types of entities participating in BPCI such as physician group practices and post-acute providers. Given that this is a proposed mandate, there will be no enrollment or application process involved for eligible hospitals to participate. CMS has stated in the proposed rule that the CCJR is not an extension of BPCI itself, and will not impact hospitals that are currently live with LEJR episodes in the BPCI program.

Required Minimum Quality Reporting to be Eligible for Savings Pay Out

There are two quality aspects that are important to payment under this initiative:

  1. Hospitals must meet a certain threshold on three specific quality measures (30th percentile in years 1-3 and 40th percentile in years 4-5) in order to qualify for a reconciliation payment. If they do not meet the threshold, they are not eligible to receive a reconciliation payment. The National Quality Forum (“NQF”) measures are as follows:
    • NQF 1551: Hospital-level 30-day, all-cause risk-standardized readmission rate following elective primary total hip arthroplasty (“THA”) and/or total knee arthroplasty (“TKA”)
    • NQF 1550: hospital-level risk-standardized complication rate following elective primary THA and/or TKA
    • NQF 0166: HCAHPS survey
  2. If hospitals elect to submit THA/TKA voluntary data (a patient-reported outcome-based measure) as requested by CMS, the discount percentage applied to calculate their target will be reduced by 0.3%

For acute care hospitals within the 75 MSAs, especially those not currently participating in a payment reform initiative of this kind, this proposed rule represents a clear signal regarding CMS’s commitment to using bundled payments as an alternative to fee-for-service reimbursement.  Very consistent with CMS’s approach to policy change—carrot first and then the stick—all prior bundled payments pilots were voluntary whereas this initiative is mandatory. Last week’s announcement will press providers to accelerate their efforts to lock into a post-acute network.

Topics: Bundled Payments, BPCI, Medicare Bundled Payments, CCJR

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