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Ready For the New World of Mandatory Bundles? Because the Federal Payment Reform Train Is Clearly on a High-Speed Track Now

July 28, 2016
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The July 25 announcement of the mandatory bundled payment program for cardiac care was an important one

The news out of the Department of Health and Human Services (HHS) on Monday was momentous for healthcare providers—both hospitals and physicians—even if it didn’t receive as much attention as it might have. Perhaps it’s because it’s the middle of the summer, and many healthcare professionals are distracted by a variety of both work- and non-work-related things?

In any case, coming on the heels of mandatory bundled payments for total hip and knee replacement procedures being imposed on providers in 67 metropolitan statistical areas (MSAs) just last November, this new mandate, this new mandate announced this week, to be imposed on 98 MSAs, amounts to a double-whammy. Why? Well, let’s look at what just happened, and then at its implications for hospitals and physicians.

As we reported on Monday, on that day, Health and Human Services Secretary Sylvia Mathews Burwell announced on the HHS website that Medicare-participating hospitals and doctors in MSAs will be subject to bundled payments for care of patients who have suffered heart attacks (myocardial infarctions) and who undergo coronary artery bypass graft (CABG) surgery. The announcement said that “Today, the Department of Health & Human Services proposed new models that continue the Administration’s progress to shift Medicare payments from quantity to quality by creating strong incentives for hospitals to deliver better care to patients at a lower cost. These models would reward hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions, and speed recovery.”

The three “new significant policies” the July 25 announcement highlighted were the following:

“New bundled payment models for cardiac care and an extension of the existing bundled payment model for hip replacements to other hip surgeries; a new model to increase cardiac rehabilitation utilization; and a proposed pathway for physicians with significant participation in bundled payment models to qualify for payment incentives under the proposed Quality Payment Program.”

Secretary Burwell was quoted in the announcement as saying, “Having a heart attack or undergoing heart surgery is scary and stressful for patients and their families. Today’s proposal,” Ms. Burwell said, “is an important step to improving the quality of care Americans receive and driving down costs. By focusing on episodes of care and rewarding successful recoveries, bundled payments encourage hospitals to coordinate care to achieve the best outcomes possible for patients.”

And Patrick Conway, M.D. Principal Deputy Administrator and Chief Medical Officer in the Centers for Medicare & Medicaid Services (CMS), was quoted in the announcement as saying, “Patients want the peace of mind of knowing they will receive high-quality, coordinated care from the minute they’re admitted to the hospital through their recovery. The variation in cost and quality for the same surgery at different hospitals,” he added, “shows there are major opportunities for hospitals included in today’s models to reduce costs, improve care, and receive additional payments by improving patient outcomes.”

This cardiac care bundled-payment mandate was really no surprise; indeed, its coming had long been rumored. Nonetheless, it could prove to be a “shock to the system” for both physicians and hospital leaders once it becomes fully implemented—and, as with the joint replacement bundled-payment mandate (which was also slightly expanded upon in this proposed rule), it will almost certainly be expanded geographically beyond the initial 98 MSAs—perhaps to all or nearly all Medicare program MSAs.

Why is it so important? Crucially, because cardiac care and total joint replacements had until recently been revenue lifesavers for hospitals under Medicare. Even as participation in Medicare’s value-based purchasing program, its avoidable readmissions reduction program, and its healthcare-acquired conditions reduction program, had all been mandated under the terms of the Affordable Care Act (ACA) going back to 2010, cardiac care and joint replacement procedures had been areas of relative “cushion” for hospitals, helping many hospitals that might otherwise be in real financial trouble already, to stay afloat.

It was very helpful to speak about this subject this week with Clay Richards, the president and CEO of the Nashville-based NaviHealth. NaviHealth is a post-acute care transitions management company, and is owned by the Dublin, Oh.-based Cardinal Health. “This is pretty indicative of CMS’s continued approach to and belief in, bundling as a pretty significant mechanism to help them achieve their value-based payment goals,” Richards told me. He added, “Remember, in addition to these mandatory bundles, CMS also announced this week that they’re going to open up a voluntary bundle program again in 2018. When you add this to the April 1 mandate implementing the hip and knee replacement bundle, it’s pretty clear this is how CMS will implement payment reform.”