Navigating Bundled Payment Models in 2017

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Fred Bentley fills you in on the core components of the EPM final bundled payment rule and the future of bundled payment models.
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“A big chunk of episode spending is tied to post-acute care services, so effectively managing your post-acute care network will be essential.” Fred Bentley, Avalere


Fred Bentley , Managing Director, Center for Healthcare Transformation

Fred Bentley advises clients on health delivery and payment innovation, providing analytic and strategic insight on issues related to the delivery of care.

This interview was originally published as a podcast. The audio is no longer available, but you can read the transcript below. For updates on our newly released content, visit our Insight Subscription page.


Fred: Welcome to today’s podcast on the latest round of bundled payment models proposed for Medicare. My name is Fred Bentley, and I serve as a vice president in our Center for Payment and Delivery Innovation.

In this session, I want to focus not only on what the Obama Administration proposed but on the likelihood that any of the new models survive in a Trump administration. And I’ll touch on the essential things that hospitals and their partners need to do to prepare for any and all eventualities related to the new bundled payment options.

First, the basics. CMS intends to launch 2 new cardiac episode payment models for cardiac bypass surgery and heart attack episodes in 98 markets starting in July this year. The agency also plans to add hip and femur fracture repair episodes to the Comprehensive Care for Joint Replacement (CJR) program that’s already live in 67 different markets.

The key elements of the new bundles are similar to the existing CJR program. Hospitals can earn a bonus or penalty based on the cost and quality of care delivered to patients during the hospital stay and 90 days of post-discharge care. Participation will be mandatory.

Here’s something you might have missed: CMS also announced that it will launch the next version of the voluntary Bundled Payments for Care Improvement program (BPCI) in 2018. I’ll focus on the mandatory episode payment models for this podcast, but contact me if you want more details on the new BPCI program. We do a lot of work in this space and can help you think through whether your organization should apply for the next round of voluntary bundles.

It’s no secret that Congressman Tom Price, the man tapped by Trump to lead HHS, views mandatory bundled payment programs as Exhibit A for government overreach. But instead of walking through all of the ways in which these models may be scaled back or scuttled, let me cut to the chase. The cardiac and hip and femur fracture EPMs may not survive in their proposed form. That said, given the broad bipartisan support for bundled payments, it’s a big mistake to ignore this important milestone in Medicare’s transition to value.

So, what do you do if you’re an executive at one of the impacted hospitals? First and foremost, you need a detailed understanding of your cost performance and quality scores relative to the market. This will provide critical insight into (1) how much you stand to gain or lose; and (2) where you need to focus your performance improvement initiatives.

While the specific areas of focus will vary by condition and by facility, our extensive analytic work points a few common themes for maximizing profitability and improving outcomes:

  • For medically managed heart attack patients, over 20% of total costs for a typical episode are associated with readmissions, and there’s a lot of variation in readmission rates across hospitals, so that should be your first area of focus.
  • You’ll also want to focus your efforts on post-discharge care if you’re a hospital that will be on the hook for hip and femur fracture repair costs. A big chunk of episode spending is tied to post-acute care services, so effectively managing your post-acute care network will be essential.
  • In contrast, 60–70% of costs for cardiac bypass and PCI-based episodes are associated with the initial inpatient stay. This underscores the need for tighter management of implant costs and standardizing the use of cardiac ICU and other high-cost inpatient resources.

The reality is that hospitals alone can’t control the entirety of their patients’ care over a 90-day episode. They will need to collaborate with physicians, skilled nursing facilities, home health providers, and others to ensure seamless, high-quality care—and in some cases, this will entail forming gainsharing arrangements. I would also argue that device manufacturers can and should play a constructive role in managing total episode costs and optimizing patient outcomes.

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