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A New World of Bundled Payments is Upon Us: Are Hospitals Ready?

November 1, 2016
by Rajiv Leventhal
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A value-based care expert says the world of bundled payments is here to stay and hospitals must be open to participation

In July, the Department of Health and Human Services (HHS) continued its bold endeavor into the world of value-based healthcare with an announcement that introduced a mandatory bundled payment for care for heart attacks and for cardiac bypass surgery.

As reported by Healthcare Informatics at the time of the announcement, from HHS Secretary Sylvia Mathews Burwell, the proposal contains three new significant policies:

  • 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, within the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Indeed, the July 25 announcement of the mandatory bundled payment program for heart attack care and for cardiac bypass surgery stated, “The hospital in which a Medicare patient is admitted for care for a heart attack or bypass surgery would be accountable for the cost and quality of care provided to Medicare fee-for-service beneficiaries during the inpatient stay and for 90 days after discharge. The proposed cardiac care policies would be phased in over a period of five years, but would begin July 1, 2017 for hospitals located in the 98 metro areas participating in the model (about one-quarter of all metro areas in the nation).” These new bundled payment models for cardiac care, in addition to the extension of the existing bundled payment model for hip replacements to other hip surgeries, are yet another major step in forcing reimbursement forward into value-based purchasing.

This new initiative followed a declaration of mandatory bundled payments for total hip and knee replacement procedures, which was imposed on providers in 67 metropolitan statistical areas (MSAs) just last November. As such, one signal from federal healthcare leaders has become increasingly clear: the shifting of Medicare payments from fee-for-service to alternative payment models. Coming just as the aforementioned Comprehensive Care for Joint Replacement (CJR) initiative gets underway, the new models are, according to HHS, intended to reward hospitals that work together with physicians and other providers to avoid complications, prevent hospital readmissions, and speed recovery.

But a key question is, are the hospitals ready to comply? Joel Splan, former director of information services, chief security executive and director of technology and infrastructure management at Northwestern Memorial HealthCare in Chicago, and current CEO of PinPointCare, also a Chicago-based company, which develops technology to aide with care coordination, says hospitals will face several challenges in this new world of bundled payments. Splan, who not long ago ran two companies simultaneously that were in the value-based care vendor space, says that while fee-for-service has its benefits, it “has gone astray, and value-based care can help straighten that out to help healthcare become a more sustainable sector.” More excerpts of the discussion between Splan and Healthcare Informatics can be read below.

What was your reaction to the proposed new models that expand mandatory participation in bundled payments?

Well, I am excited since I am in the business. When the CJR mandatory bundled payment model was announced last July, that was exciting because everyone was feeling the downward [shift] from the Bundled Payments for Care Improvement [BPCI] initiative, and was wondering what was next. People were too excited though; what people thought would be a bull rush into CJR was more of a slow trickle. For organizations trying to help providers with value-based care, they thought there would be all this activity due to the penalties that would be in place, but providers haven’t really latched onto it. In some cases with large academic organizations, you’re talking about a million bucks here or there, and I just don’t know if it has hit their radar.

But with the cardiac announcement this summer, we’re seeing a decided shift into the amount of attention that people are paying to value-based care and bundles. Cardiac [surgery] isn’t something you can opt out of or send these procedures down the street; you’ll have to deal with them as part of your business. Now, as far as the urgency level? We think it will take more time to play out but it’s here [to stay] and will expand.

Some skeptics say there should be more room for negotiation within these models, as hospitals under Medicare have relied on cardiac care and total joint replacement procedures as revenue “cushions.”

Well, I would say there is always an argument to be made around the particulars, the timing, and the pooling. You have an opportunity to get out there and voice an opinion, but when the ruling comes in the most important thing you can do is jump in with both feet. Right now, your pricing is primarily being dictated by your past performance, which may be good or bad, but the smaller fraction is based on your geography or your peers’ geography. That percentage will only increase, and the longer you wait, the more your pricing will be dictated by your competitors. So if you haven’t started yet, you are probably behind.


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