What to Watch for in the Next Era of Medicare Bundled Payments

The future of Medicare bundled payments was a hot topic at the seventh National Bundled Payment Summit, held this week in Arlington, Virginia. While delays earlier in the year for Medicare’s Episode Payment Model, which includes mandatory bundled payments for cardiovascular care, appeared to throw a wrench in the Centers for Medicare & Medicaid Services’ transition to value-based payments, Summit attendees expect the agency to move forward with EPM in 2018 and are eagerly awaiting details on future initiatives. Consequently, most sessions during the summit concerned the structure of Medicare’s new bundles and how providers will be challenged to cut costs and improve quality, as well as some speculation about the impact of future models.

It is well-known that Secretary of Health and Human Services Tom Price, M.D., opposes mandatory participation in bundled payments, and several summit attendees agreed with his sentiment. Voluntary bundles can be more forgiving by not forcing ill-equipped providers to shoulder risk, but other attendees argued voluntary models invite bias as poor performers can drop out of the program. On the other hand, mandatory bundles ensure widespread participation and motivate inexperienced physicians to cooperate with other providers.

The participation issue is made more complex by pricing methodologies. Historical pricing disadvantages high-performing hospitals by using cost benchmarks that trend lower as those hospitals improve. Regional average pricing, on the other hand, benefits high-performing hospitals with low costs but gives little incentive for poor-performing hospitals to participate.

Mandatory participation combined with regional pricing may, therefore, be one way to encourage poor-performing hospitals to improve, as they cannot drop out. Keep an eye on which direction CMS chooses for its upcoming bundles, as its decision will have long-term impacts on participation and performance.

Regardless of what structure Medicare’s new cardiovascular bundles take, physicians will encounter challenges unique to each episode. Summit panelists noted that joint replacement bundles, such as those in Medicare’s current Comprehensive Care for Joint Replacement model, offer a significant opportunity to cut costs through adjustments to post-acute care usage, such as using home health instead of high-priced skilled nursing facilities, but that same opportunity may not exist in heart attack episodes.

According to data presented by Jonathan Pierce of Singletrack Analytics and Lindsay Jubelt, M.D., of Mount Sinai Health System, heart attack cases drive costs through readmissions rather than SNF stays. Therefore, each episode carries its own cost “signature,” so look for physicians to form creative strategies that lower those costs.

Lurking in the background behind discussions about the future of EPM was the eagerly anticipated BPCI Advanced model. BPCI Advanced, as the name implies, is the next version of the popular Bundled Payments for Care Improvement initiative, a voluntary Medicare bundled payment model that will sunset in 2018. Summit attendees expect widespread interest and participation in BPCI Advanced because of its classification as an Advanced Alternative Payment Model under MACRA’s Quality Payment Program. This means physicians who participate will earn a 5 percent payment bonus, which can amount to millions of dollars for large organizations. Since few additional details are known about the model, discussion about BPCI Advanced during the summit was light; but expect CMS to release details on the program soon.

Despite the state of healthcare reform at the federal level, Summit attendees agreed that bundled payments will persist as the need for value-based care and new payment models in healthcare remain paramount. According to Susan Dentzer of the Network for Excellence in Health Innovation, the recognized need for value-based care is bipartisan, and shrinking reimbursements from payers make movement into alternative payment models unavoidable. It is clear Medicare bundles will be a key component of this movement.

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