If you have or are considering entering into a bundled payment agreement then Congratulations! You are among a growing number of savvy providers who are taking the lead in the implementation of the government’s policy changes in healthcare reimbursement. The fact that some of these policy changes could have the effect of narrowing provider networks and therefore challenging revenue reliability means providers who do not adapt to this new environment, are at risk of not surviving the inevitable implementation of these new payment models. The providers who said “yes” or “maybe” to the government’s bundled payments proposal now need to determine how to take the best posture to survive the union.
Let’s start with a background check!
Lately, attention has turned to bundled payment arrangements for entire episodes of care with healthcare payers such as Medicare leading the charge. This policy shift reflects the belief that bundled payment arrangements will create an incentive for providers to collaborate and control costs along the continuum of care versus the current fee-for-service model which is believed to encourage overutilization. A bundled payment arrangement is where a provider or group of providers agrees to accept a predetermined single payment for an episode of care which includes all the care a patient receives in the course of treatment for a specific illness, medical condition or medical event.
Bundling is not new and demonstrations testing episode of care payments have been ongoing in different communities but with varying degrees of success due to the limited scope and participation of key stakeholders. The increased chatter surrounding bundled payment arrangements stems from the Patient Protection and Affordable Care Act (2009) which mandates the testing and implementation of these alternate payment models including bundled payments to cut the government’s healthcare spending in general. In keeping with this mandate the statutorily created Center for Medicare and Medicaid Innovation (Innovation Center) announced the Bundled Payments for Care Improvement (BPCI) Initiative which seeks to test four models of care designed to shift the risk of cost control to the provider community by establishing a predetermined dollar figure to selected episodes of care.
The federal BPCI program is implemented by the award of bundled payment contracts with CMS where the “Awardee” agrees to take financial responsibility and risks associated with a defined episode of care. The profile, roles and responsibilities of the awardee is dependent on the model of care at issue. In Model 1, a hospital awardee agrees to provide a standard discount to Medicare from the usual Part A hospital inpatient payments. The episode of care under this model is defined as the inpatient acute hospital stay only.
In Model 2 and 3 actual expenditures are reconciled against a target price for an episode of care which includes the anchor hospitalization and all concurrent professional services and other post acute care services delivered within the designated episode length which can be up to 90 days. Unlike Models 1 to 3 which uses a retrospective bundled payment system, Model 4 uses a prospective bundled payment model where a lump sum is made to the awardee for an episode of care which includes the hospitalization, concurrent professional services, readmissions and all other services not excluded from the bundle within 30 days post discharge. The awardee is then responsible for paying all other providers for that episode of care.
An important distinction in each model is who can be the “Episode Initiator”. An episode initiator is a provider where a BPCI episode is initiated and it is also an Awardee or affiliated with an Awardee. The hospital is the risk bearing entity under Model 1 and is responsible for the episodes of care triggered by any Medicare Severity Diagnosis Related Group (MS-DRG). Whereas under Model 2, either the hospital or physician group practice can be the episode initiator, under Model 3, the physician practice group or post acute care provider is the episode initiator where admission occurs within 30 days following discharge from an acute care hospital. Under Model 4, the hospital is the episode initiator. In Models 2 to 4 the episode of care is defined by an inpatient hospitalization for one of 48 selected clinical episodes as designated by the patient’s MS-DRGs.
The BPCI program relies on the use of “Convenors” which are organizations that perform various services to facilitate the participation of providers in a bundled payment program and may or may not be a risk bearing entity. Post acute care providers may come in contact with an “Awardee Convenor”. This entity brings together healthcare providers including the episode initiators but they may bear the entire financial risk for the model. Awardee convenors such as Remedy Partners tout their ability to provide a comprehensive suite of services which include program development, contract management, clinical care coordination and data management and analytics for providers who they convene.
While the BPCI is currently a voluntary program, other CMS initiatives, such as the Comprehensive Care for Joint Replacement (CJR) model, is mandatory in selected areas of the country. Under the CJR retrospective bundled payment model, providers agree to a target price for all acute and post acute services related to a hospital stay for a lower extremity joint replacement (MS-DRGs 469 and 470). This model includes all payments made under Medicare Part A and B and ends 90 days post discharge. The Final rule to implement the CJR model was announced November 16, 2015. This move can be considered a reflection of CMS’ growing confidence in the ability of bundled payment arrangements to be an effective cost control measure and should be a signal to the provider community that this may become the new reimbursement reality.
Now that we’re caught up on the nature and operation of bundled payment arrangements, join us in Part 2 for additional tips on entering in and surviving a bundled payment arrangement.