Authored By Brian Ellsworth, Director, Payment Transformation, Health Dimensions Group

In case you thought that election year politics would bring a slowdown in value-based transformation by the Medicare program, think again. On Monday, July 25, 2016, the Centers for Medicare and Medicaid Services (CMS) announced proposals for two new mandatory bundles for cardiac episodes (heart attacks and bypass surgery), a new cardiac rehabilitation incentive payment model, and an expansion of the recently implemented mandatory Comprehensive Care for Joint Replacement (CJR) model by adding hip and femur fractures to the already included lower joint replacement bundles. Episodic payment is here to stay!

These proposals will take effect July 1, 2017, if finalized as proposed. It is important to note that the mandatory joint replacement model went from proposal to implementation in just nine months. CMS is accepting comments on its proposal for 60 days, ending September 24, 2016.

Perhaps most interesting of all of these developments is that CMS indicates that another round of voluntary bundling under the Bundled Payments for Care Improvement (BPCI) program will be scheduled to start in CY 2018. The size and scope of this opportunity is unclear, but many providers were kicking themselves for not participating in the last round of voluntary bundling initiated in 2014.

Proposed Cardiac Bundles

Many of the key payment features of the newly proposed cardiac bundles are based off the joint replacement model, including:

• Hospitals as the required risk-bearing entity;
• Mandatory markets (98 regions in the proposed rule);
• 90-day episodes starting from the end of the hospitalization;
• Explicit linkage of shared savings amounts to attainment of quality metrics;
• Use of waivers of certain payment rules; and,
• Ability of other providers to share in gains achieved by making an episode of care more efficient.

The target pricing methodology, incorporating phase-in to regional prices and assumption of greater risk over time, is also similar in structure to CJR. Thus, it is clear that many of the payment features enacted in the joint replacement model are paving the way for expansion of episodic payment.

Proposed Cardiac Rehabilitation Payment Model

The proposal includes a new payment model for cardiac rehabilitation. Under this new approach, incentive payments over and above normal payments would be made to hospitals to promote the provision of cardiac rehabilitation for heart attack and bypass surgery cases. This incentive structure would be tested in 45 markets outside of the 98 proposed mandatory regions, as well as within 45 of the mandatory markets.

Proposed CJR Expansion

Also of note is the proposal to expand CJR to include hip and femur surgeries, which has been a popular diagnostic category under the existing voluntary bundled payments program (over a quarter of hospital-initiated bundlers and one-third of post-acute–initiated bundlers have elected this category). This proposed expansion gives hospitals even greater incentives to redesign orthopedic surgeries and the subsequent post-acute care.

Physician Payment Incentives

A new aspect of these proposals is the articulation of how these models will fit into the physician value-based payment incentives proposed in this year’s physician payment rule. CMS is proposing a pathway in these mandatory bundles that will permit them to qualify as advanced alternative payment models (APMs) under the physician payment rule, meaning that participating doctors will qualify for additional payments over and above any shared savings obtained through these new payment models—giving physicians a stake in ensuring their rapid adoption. The opportunity to qualify as participating in advanced APMs is part of CMS’ efforts to drive payment models that explicitly link payment and quality and to encourage active participation by doctors in risk sharing.

What Does This All Mean?

CMS clearly intends to meet its goals of 50 percent of fee-for-service payments in alternative payment methods by 2018. This, combined with the growth of Medicare Advantage and accountable care organizations, means that most Medicare payments will be subject to value-based payment incentives within two years. Episodic payment is here to stay and will increase in size and scope as new mandatory and voluntary payment models are rolled out. At-risk entities will be tuned into the cost and quality of the entire episode of care, including preventing readmissions and managing post-acute care.

Providers that are nimble and understand how to create value (lower costs at higher quality) will be positioned for success, while others that cannot move the needle will be left out as networks are narrowed and performance expectations increase. It is not too early to position your organization to succeed in this brave new world. For additional information please contact Brian Ellsworth, MA, Director of Payment Transformation at 860-874-6169 or bellsworth@hdgi1.com