Value-Based Care News

75% of Providers Drop Out of CMS Bundled Payments Model

Only 25 percent of those that showed interest and volunteered in the bundled payments program have actually moved forward once downside risk was introduced.

By Vera Gruessner

- The Innovation Center belonging to the Centers for Medicare & Medicaid Services (CMS) created the Bundled Payments for Care Improvement (BPCI) program, which consists of setting aside a previously agreed-upon set of funds for several healthcare services that a patient receives while hospitalized or during an episode of care.

Bundled Payments Model

Healthcare organizations make payment arrangements with insurers that will account for performance and financial accountability for these medical service timeframes, CMS reports. Specifically, the Bundled Payments for Care Improvement initiative is meant to bring more care coordination and high quality services at a lower cost for the Medicare program.

The bundled payments system is an innovative solution to the many complex problems of the fee-for-service payment model that CMS and many other health payers commonly employ. Fee-for-service allows providers to bill for each particular diagnostic service, treatment protocol, or preventive health measure they’ve conducted.

Little coordination among multiple medical facilities is gained from a fee-for-service payment model, but bundled payments may change this obstacle over time. Instead of reimbursement being based on the amount of services provided, bundled payment models allow insurers to base their payments on the quality of care.

Additionally, between Accountable Care Organizations and new reimbursement methods like bundled payments, multiple medical facilities including hospitals and primary care offices will have a greater incentive to coordinate care and improve quality across various healthcare settings.

The Bundled Payments for Care Improvement program was created by the Center for Medicare and Medicaid Innovation, which came around after the Patient Protection and Affordable Care Act became law and required its establishment to test new payment models in order to reduce spending in the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) while at the same time improving the quality of care.

Avalere Health, a strategic advisory organization, released findings that claim participation in the CMS’ Bundled Payments for Care Improvement initiative is maintaining high levels even though downside financial risk is now part of the program. In 2015, a total of 1,500 healthcare providers are taking part in the bundled payments program and testing about nine unique episodes of care in the new program for every 14,000 clinical treatment timeframes.

Starting in October 2015, CMS required all participating providers to take downside risk into their payment arrangement. A drop in participation was experienced after downside risk was introduced into the bundled payments program, according to the Avalere report.

“Strong participation in a voluntary program shows providers’ willingness to test new alternative payment models,” Josh Seidman, Senior Vice President at Avalere, said in a public statement. “However, the fact that many providers that entered the program decided it’s not currently in their financial interest to accept downside risk may cause CMS to consider additional mandatory programs in the future.”

In particular, only 25 percent of those that showed interest and volunteered in the program have actually moved forward once downside risk was introduced. The downside risk of the bundled payments program includes the fact that providers would be responsible for any spending above the contracted amount offered from the payers. As such, many dropped out of the bundled payment model set up by the CMS Innovation Center.

This type of drop is somewhat concerning because CMS is planning on moving forward with having half of their Medicare reimbursement in the form of alternative payment models over the next few years, specifically by the end of 2018.

“The BPCI program serves as an important foundation on which CMS can build toward its goal of shifting 50 percent of Medicare fee-for-service payments to alternative payment models by 2018,” Erica Breese, manager at Avalere, stated in the release.

The types of medical facilities that participate in the bundled payments model include mostly hospitals and skilled nursing establishments. Out of all participants of the Bundled Payments for Care Improvement program, hospitals make up 30 percent and skilled nursing facilities make up 50 percent of the whole.

Bundled payments have a timeframe of either 30, 60, or 90 days for an episode of care among each patient. The majority of providers participating in the program are testing only a couple of medical conditions under the new bundled payments model but about 15 percent of all providers taking up the initiative are testing the reimbursement method among more than 20 conditions.

Some of the most typical procedures and medical conditions providers focus their bundled payment models on include pneumonia, chronic obstructive pulmonary disease, joint replacement, and congestive heart failure.

Over time, healthcare providers will likely need to drop fee-for-service payment models and embrace alternative reimbursement solutions like bundled payments in order to meet the goals of reducing Medicare spending and creating a more cost-effective medical industry.

“The fact that many providers that entered the program decided it’s not currently in their financial interest to accept downside risk may cause CMS to consider additional mandatory programs in the future,” Seidman told Forbes.

“Since carrots have had only partial success in encouraging providers to enter into risk-bearing bundled payments, [the Centers for Medicare & Medicaid Services] likely will increasingly use sticks to achieve its goals around alternative payment models,” Seidman continued. “CMS likely will increasingly use mandatory bundles to hold all providers accountable for all costs associated with long-term episodes of care.”