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An Industry Expert Shares Insights on the Challenges and Opportunities around Bundled Payments

January 24, 2018
by Mark Hagland
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Charlene Frizzera, a former senior CMS official, has been on the front lines in helping providers succeed in bundled-payment models

Bundled-payment contracting—whether between public payers or private payers—is an enormous subject of interest in hospitals, medical groups, and health systems these days—and for good reason. Not only have a lot of developments been evolving forward with regard to bundled payment models under the Medicare program—just two weeks ago, senior officials at the Centers for Medicare and Medicaid Services (CMS) announced the launch of a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced (BPCI Advanced)—bundled-payment contracting is taking off in a big way now, too, between private health insurers and providers.

Meanwhile, policy shifts at the highest levels of the Department of Health and Human Services (HHS) have left many provider leaders feeling uncertain as to where things are headed right now at the federal level. On the one hand, CMS at the end of November finalized a rule that will cancel mandatory hip fracture and cardiac bundled payment models (HHS had issued a proposed rule for that cancellation back in August of last year). On the other hand, earlier this month—in fact, just before the announcement of the BPCI Advanced model—Alex Azar said during a Senate Finance Committee hearing on his nomination as HHS Secretary, that he was open to mandatory bundled payment models, in principle. That stance appeared to be a reversal of the position of Tom Price, who, during his relatively brief tenure as HHS Secretary, from February through September 2017, had expressed very strong reservations about mandatory bundled-payment models.

Meanwhile, “BPCI Advanced” will qualify as an advanced alternative payment model (advanced APM) under the Quality Payment Program (QPP) under the MACRA (Medicare Access and CHIP Reauthorization Act of 2015) law; under the Advanced APM track in MACRA, providers take on financial risk to earn the Advanced APM incentive payment.

So things are moving forward, even if not evenly. But industry leaders and observers in the know agree: the bundled-payment phenomenon is moving ahead. Among those leaders is Charlene Frizzera, a former acting administrator of CMS, with over 30 years of experience in federal healthcare. Frizzera is currently president of the Washington, D.C.-based consulting firm CF Health Advisors, where she advises corporate, government and not-for-profit organizations about health care policies and reform like bundled payments and joint replacement. Frizzera spoke recently with Healthcare Informatics Editor-in-Chief Mark Hagland regarding the ongoing developments in this area. Below are excerpts from that interview.

Let’s start at a 40,000-foot level. How do you see the U.S. healthcare system’s journey into bundled-payment contracting right now?

Based on 30 years at CMS, it’s important to keep in mind that bundling is not a new concept; it’s been around forever. And at CMS, how did we come up with bundled payments? We looked at claims, and when we started looking at claims for ESRD (end-stage renal disease) patients—that was probably the first bundle. We found that the services were pretty consistent across providers. And so instead of paying separately, we felt it would be more effective to pay for a bundle, rather than for separate delivery of services. That’s the same concept even now. But the more CMS gets into patient-centric payment issues, the more they’ll be looking at specific disease states, both to save money, but even more importantly, to give the controller of the bundle the ability to more effectively manage care for that patient. Where the controversy comes in is around what gets bundled. How specific, how generic, should the bundle be? And CMS has published the 48 disease states they’d like to bundle. It’s on the website of the Innovation Center [the Center for Medicare and Medicaid Innovation, or CMMI].


Charlene Frizzera

The joint replacement bundle was made mandatory, of course.

Yes, but it had actually started out as a voluntary bundle. When it started to show success, they made it mandatory. And to date, the Innovation Center has the ability to write a regulation to change a payment system, without going through legislation, as the result of a successful demonstration. And that cuts a pretty big step out of the process. What CMS tried to do that some in healthcare didn’t like is making a demonstration mandatory from the beginning. The drug pricing demonstration was what created so much furor. That was back in 2016; it was one of the last regulations that the Obama administration tried to issue.

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