HHS Positions Bundled Payment Models Toward Cardiac Care

August 17, 2016 - On July 25, the Department of Health & Human Services (HHS) announced further investment in bundled payment models within the healthcare industry. According to a news release from the Centers for Medicare & Medicaid Services (CMS), the new bundled payment model would incentivize hospitals to prevent readmissions, reduce complication rates, and quicken recovery times.

The new bundled payment model proposed by HHS is looking to move into cardiac care and other types of hip surgeries along with the current bundled payment program for joint replacement operations. When it comes to cardiac rehabilitation needs, the bundled payment program will also apply.

It is expected that bringing bundled payment models into the treatment of cardiovascular disease will go a long way in improving the quality of care and patient outcomes of one of the most debilitating medical condition around the country.

Both heart attacks and strokes have a 33 percent chance of death and cost the healthcare industry more than $300 billion annually, according to the news release. The way bundled payments work is by positioning more responsibility onto healthcare providers to coordinate care more effectively and improve patient outcomes across the healthcare continuum. In an episode of care, bundled payments are made across multiple months of medical services such as a hospitalization, a surgery, and rehabilitation.

“Under the proposed episode payment models, the hospital in which a patient is admitted for care for a heart attack, bypass surgery, or surgical hip/femur fracture treatment  would be accountable for the cost and quality of care provided to Medicare fee-for-service beneficiaries during the inpatient stay and for 90 days after discharge,” the CMS website stated.

“Participating hospitals will receive a separate target price for each MS-DRG under the model. All providers and suppliers would be paid under the usual payment system rules and procedures of the Medicare program for episode services throughout the year. At the end of a model performance year, actual spending for the episode would be compared to the Medicare quality-adjusted target episode price that reflects episode quality for the responsible hospital. Hospitals that work with physicians and other providers to deliver the needed care for less than the quality-adjusted target price, while meeting or exceeding quality standards, would be paid the savings achieved. Hospitals with costs exceeding the quality-adjusted target price would be required to repay Medicare.”

Past bundled payment models have proven that there is a clear benefit to utilize this value-based care reimbursement system since it can reduce healthcare spending. For example, the Medicare Acute Care Episode demonstration has shown that hospitals and participating physician practices were able to achieve savings for the Medicare program while maintaining the quality of care.

Additionally, back in the 1990s, CMS used bundled payment models for covering the costs of bypass surgery. The results showed that physicians could coordinate care more efficiently, improve quality, and reduce spending by implementing bundles in bypass surgery.

The proposed bundled payment model allows the public payer to position more financial incentives for providers who deliver better quality care and reach higher levels of performance benchmarks, the CMS release stated.

CMS will implement the cardiac care bundled payment models across 98 randomly-selected metropolitan areas. Rural counties won’t be part of this program as well as any hospitals outside the geographic area set by the federal agency.

The news release further stipulates that collaboration among hospitals and physician practices is the major goal of bundled payment models. Coordination and collaboration are common by-products of bundled payments since this type of reimbursement is based on an entire episode of care involving rehabilitation and follow-up appointments.

Some other bundled payment programs that CMS has managed include the  Medicare Bundled Payment for Care Improvement (BPCI), which began in 2013, and the more recent  Comprehensive Care for Joint Replacement (CJR) model.

Since hip and knee replacement surgeries have been some of the more expensive procedures conducted throughout the nation’s hospitals, it made sense for CMS to invest in a new payment structure that could reduce these costs.

Additionally, it is important to note that the federal programs aimed at bringing more attention toward value-based care reimbursement has spurred investment among private, commercial payers in their own bundled payment initiatives. The health payer Humana, for instance, has pursued bundled payment contracts.

In an interview, Chip Howard, Vice President of Payment Innovation at Humana, provided some advice for health payers searching for ways to successfully negotiate a bundled payment contract within their provider network.

“It is important to make sure that you’re partnering with providers when doing a bundled payment arrangement. It is not going to be successful unless both the payers and providers are successful. From a contract perspective, I would suggest  looking at a glide path to what I would term provider full-accountability,” Howard began.

“In other words, this would mean the provider sharing in the ups and downs of the financial results. I think you should take a measured approach to that and not go immediately to a full-value accountability type of arrangement with a provider,” he explained. “Also, making sure that the responsibility of the payer and the provider are clearly outlined in the bundled payment contract so that there aren’t any hiccups down the road that are unanticipated.”

As the healthcare industry continues to focus their energies on value-based care and transition away from fee-for-service payment systems, bundled payments are likely to continue growing in popularity with more payers positioning their reimbursement strategies toward bundles.

Dig Deeper:

Why Maternity Care Needs Episode-Based Bundled Payments

How to Prevent Healthcare Underuse in Bundled Payment Models