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CMS Includes Rich History of Healthcare Bundled Payments

The way healthcare bundled payments work is by ensuring a set amount of funds for a periodic, clinical episode of care including a hospital stay and physician visits.

By Vera Gruessner

- Recent news shows that the Centers for Medicare & Medicaid Services (CMS) have made real strides in spreading the use of healthcare bundled payments. Not long ago, CMS announced its final rule for the Comprehensive Care for Joint Replacement model. By April of this year, the first performance period is expected to start for these particular healthcare bundled payments.

Bundled Payment Models

“I would say it’s probably the Center for Medicare and Medicaid Innovation that’s the most promising [at reducing healthcare spending]. Particularly, now we’ve seen what they’ve done with bundled payments and the chronic care joint program that they’ve rolled out mandatorily nationally,” Jeremy Earl, Associate at McDermott Will & Emory, told HealthPayerIntelligence.com.

“The Medicare penalties for hospital readmissions and other efforts from CMS to alter its payment methodologies, particularly through the work of the Center for Medicare and Medicaid Innovation, has made providers more accountable for the quality of care they provide,” Earl explained. “CMS’s authority to implement these payment reforms is from the Affordable Care Act, so it definitely has played a part in the shift to paying providers for value.”

The American Hospital Association (AHA) released a brief last week outlining the steps CMS is taking as well as reviewing a history of healthcare bundled payments. First, in October 2015, CMS declared that 1,600 providers had joined its Bundled Payment for Care Improvement (BPCI) program. The providers ranged from physician practices and acute-care hospitals to skilled-nursing facilities.  

When it comes to hip and knee-replacement surgeries, CMS released a bundled payment program called the Comprehensive Care for Joint Replacement (CJR) initiative. A total of 789 hospitals will be participating in these healthcare bundled payments when providing joint replacement surgeries.

READ MORE: Humana Expands Orthopedic Bundled Payment Program to NC, VA

The way healthcare bundled payments work is by ensuring a set amount of funds for a periodic, clinical episode of care including a hospital stay, physician visits, home health aide, and post-acute rehabilitation facilities.

Both the Department of Health and Human Services (HHS) and CMS are encouraged by the potential of healthcare bundled payments because they are a guaranteed way of ensuring cost savings for many public medical insurance programs including Medicare, Medicaid, and the Children’s Health Insurance Program.

Currently, HHS is planning on moving at least half of Medicare payments into alternative reimbursement models by 2018, which means that healthcare bundled payments may very well become even more common throughout public health insurance programs.

History of bundled payment models at CMS

In 1983, the inpatient prospective payment system was created, which was essentially the first step toward developing bundled payment models. This new reimbursement system allowed Medicare to pay a fixed amount of funds for a patient’s hospital stay based on the diagnosis of each beneficiary.

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This was a major change for hospitals but did not affect the way other medical providers were paid in any way. The next transformative move toward incorporating healthcare bundled payments took place in 1991 when CMS introduced bundled reimbursement for coronary artery bypass graft (CABG) surgery, which included the immediate hospitalization and any readmissions that occurred within a 90-day period of time.

The program was instituted in only seven hospitals but was found to reduce health complications and rates of death as well as generate approximately 10 percent of Medicare savings. The next program that allowed providers to share in cost savings was developed in 2009 when “CMS began a three-year physician-hospital collaboration demonstration with 12 New Jersey hospitals,” the AHA brief explains.

The Acute Care Episode (ACE) program was implemented in 2009 as well to create a bundled payment model for cardiac and orthopedic surgery. Five hospitals were included in this particular program and cost savings of $585 were gathered per medical case when utilizing these healthcare bundled payments.

One of the latest CMS bundled payment programs took place on October 1, 2013 when the federal agency introduced the Medicare Bundled Payment for Care Improvement (BPCI) initiative. This program involves hospitals, physician groups, post-acute facilities, and more. These providers take on the bundled reimbursement amounts for clinical episodes of care that begin with an acute-care hospital stay.

“On Feb. 12, 2015, CMMI announced a voluntary Oncology Care Model (OCM) that is slated to begin in spring 2016. OCM will establish bundled payments for six-month episodes of cancer treatment that begin at the start of chemotherapy,” the brief from the American Hospital Association stated.

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“Participating oncology practices will receive a $160 monthly care management payment and will be eligible for performance payments based on the practice’s achievement and improvement on selected quality measures. CMS’s new CJR [Comprehensive Care for Joint Replacement] initiative builds on the components and lessons learned in BPCI. CJR hospitals will be accountable for the cost of episodes of total hip and total knee replacements – from the time of the surgery through 90 days after discharge.”

Bundled payments show true cost savings

The reasoning behind CMS and HHS supporting bundled payment models revolve around the real potential to reduce rising medical costs throughout the healthcare industry. Health Affairs reported on a bundled payment system implemented by Blue Cross and Blue Shield of North Carolina (BCBSNC) and CaroMont Health for knee-replacement surgeries that led to an average of 8 to 10 percent cost savings for each episode of care.

Geisinger Health System also implemented a bundled payment model called ProvenCare that led to a 10 percent decrease in hospital readmissions, shorter hospital stays, and reduced medical fees. Additionally, the Bundled Payments for Care Improvement (BPCI) Initiative has saved Medicare $42.3 million on heart bypass patients.

“When designed to improve value, bundled payment should include clear quality metrics focused on desired clinical outcomes that providers must achieve to maximize their payment,” Health Affairs stated. “Bundled payment has real potential to improve care coordination and quality and reduce costs.”

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