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On July 25, the Centers for Medicare and Medicaid Services (CMS) proposed a new bundled payment model for heart attacks and bypass surgeries; it will be launched in 98 markets that have yet to be determined. The proposed model is scheduled to go into effect over a five year period, beginning in July of 2017.

“The extension of mandatory bundled payments to cardiac care provides further confirmation that CMS means to reshape healthcare delivery away from fee-for-service and towards value-based care,” says Michel Abrams, co-founder and managing partner of Numerof & Associates. “Practically speaking, it means that the profitability of two high utilization treatments in cardiology has likely peaked, and for many hospitals, these important revenue centers have leaner days ahead.”

The CMS proposal also extends the current Comprehensive Care for Joint Replacement (CJR) model to include other surgical treatments for hip and femur fractures beyond hip replacement. It also includes:

• 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.

How the proposal will affect continuity of care

Abrams says the fee-for-service model has, over time, encouraged healthcare delivery organizations to allocate fewer resources to activities that weren’t explicitly paid for, such as care coordination. “This has been one of the drivers of the high costs and mediocre results that characterize our current system of care,” Abrams says. “Making acute care providers accountable for the costs and outcomes of the total care experience is a logical path to reversing the current situation.”

“Bundles encourage care redesign by incentivizing gainsharing and risk taking among previously disparate provider groups,” says Christopher Donovan, partner at Foley & Lardner LLP. “This will produce better outcomes over the long term through IT investments and clinical practices that focus on care management and continuity/prevention.”

Do bundled payments keep costs down?

To make its case for mandatory bundled payments, CMS points to a number of pilot programs it claims have shown they can help providers work more closely together to provide better care at lower costs. These programs include:

• The Medicare Acute Care Episode (ACE) demonstration project tested bundled payments for cardiovascular and orthopedic care;
• The Medicare Participating Heart Bypass Center Demonstration project tested bundled payments for bypass surgery; and
• The Bundled Payments for Care Improvement Initiative included cardiac and orthopedic bundles.

“Data from these pilots and other state and private research initiatives all suggest that bundled payments encourage better care coordination and lower delivery costs,” says Abrams.

But according to Denise Burke, a partner in the Memphis office of Waller Lansden Dortch & Davis, LLP, official CMS studies show that bundled payments have had only limited success so far. For example, Burke says the CMS ACE pilot project, which included 28 cardiac and nine orthopedic procedures, reported a savings of only $319 per patient. “Preliminary results from the voluntary programs, however, show promise,” she says. 

Why make bundled payments mandatory?

CMS has set a goal of having 50% of traditional Medicare payments flowing through alternative payment models by 2018. According to Abrams, results of a recent company survey, which assessed U.S. hospital progress toward adopting value-based care models, “confirmed that hospitals, given the option of staying with the historical fee-for service model, won’t meaningfully change their approach to care delivery on their own.”

“CMS is in a unique position to reshape the industry, and it must do so if it is to connect payments with improved outcomes and avoid the sea of red ink that waits at the end of the current trend in healthcare cost inflation,” Abrams says.

What could be bundled next?

Jerrod Ullah, RN, BSN VP Product Management at ViiMed, says based on conversations with practitioners and experts, he believes the industry can expect to see similar models on the horizon for oncology and maternity care. “Each of these areas involves a significant amount of care coordination throughout the treatment process, and patients could see big benefits through a bundled payment approach,” he says.

According to Abrams, the industry can expect to see the subsequent expansion of bundled payments for chronic conditions within already established service lines. “For example, congestive heart failure is a likely candidate for expansion once the cardiology project is underway,” he says.

The proposed rule was published in the Federal Register on August 2. Comments will be accepted for 60 days after publication.

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