CMS Proposes New Mandatory Bundled Payment Models: 4 Observations

On July 25, 2016, CMS announced a proposed rule to provide additional incentives for hospitals to provide higher quality care at a lower cost. The proposed rule seeks to increase coordination of care and decrease costs for heart attack and bypass surgery patients, creates a new Surgical Hip/Femur Fracture Treatment model (SHFFT), and outlines a path for individual participants to qualify for Advanced Alternative Payment Model (APM) status through MACRA. The proposed rule is significant for the following reasons:

  1. This is CMS’ second round of mandatory bundled payment arrangements. CMS is quickly expanding value-based payments, with the goal of 50% of all payments tied to APMs by the end of 2018. The agency is also showing a pattern of shifting bundled payments from voluntary-to-mandatory participation when there is compelling financial reasons or data to do so, as evidenced by the previously-announced CJR Model and the newly-announced cardiac care bundled payments.
  1. CMS is expanding Episode Payment Models (EPMs) into chronic health conditions. In the announcement CMS notes that chronic conditions which result in hospitalizations, regardless of the reason for the hospitalization, often represent a common pathway that includes failure of outpatient care management and care coordination for the beneficiary with that chronic condition.Bundled payments tend to be associated with a clear beginning and end for an acute episode of care, such as a surgical procedure, but with this cardiac care bundle we’re seeing CMS apply an EPM to a chronic condition through the use of cardiac rehabilitation services. Beginning on p.39, Medicare notes that despite evidence from multiple studies that Cardiac Rehabilitation (CR) services improving outcomes, only 35% of acute myocardial infarction patients 50 or older receive this indicated treatment. CMS is sending a clear message that evidence-based CR services are essential in keeping patients out of the hospital.
  1. Physicians now have a pathway to receive qualification as Advanced Alternative Payment Models (APMs) through the proposed Quality Payment Program in MACRA. This proposed pathway would allow for the newly announced bundles as well as other Medicare bundled payment models to qualify as Advanced APMs as they meet nominal risk criteria, use required quality measures, and implement a certified EHR.This is a change from the proposed MACRA rule, where CJR did not qualify as an Advanced APM, and illustrates that CMS endorses bundled payments as effective models in bringing about care transformation.
  1. Care coordination continues to be a high priority. CMS proposes allowing participating hospitals to enter into financial arrangements with other providers and participants of the Medicare Shared Savings Program Accountable Care Organizations (MSSP ACOs). Medicare is similarly giving a clear signal of its strong endorsement of care coordination as evidence in the upfront payments for care coordination in Comprehensive Primary Care Plus (CPC+) and Oncology Care Model (OCM) programs.

Providers who develop robust care coordination systems stand a better chance to thrive in a value-based payment environment. It will be interesting to see the crossover of cardiac care coordination among multi-specialty practices which are both engaged in the cardiac care bundle and CPC+. Look for increased partnerships between acute care hospitals, physicians, and post-acute providers to share financial risk and collaborate on care redesign strategies.

Leavitt Partners actively tracks the growth of Accountable Care Organizations and the transition to value-based payments. To review on our most recent research, please refer to the American Journal of Managed Care article entitled “Hospital Participation in ACOs Associated With Other Value-Based Program Improvement” here. We will continue to monitor developments on the proposed Bundled Payment Models as CMS finalizes the rule.