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Francois de Brantes, executive director of the Health Care Incentives Improvement Institute
De Brantes

Bundled payment attracts providers—but will they sign?

By Melanie Evans
Posted: July 31, 2014 - 10:00 pm ET

The fast-rising number of healthcare providers joining a trial run of bundled Medicare payments signals widespread thirst to explore risk-based reimbursement models, but the success of the initiative will depend on how many take the leap.

Roughly 4,100 providers will join 2,400 hospitals, nursing homes and medical groups as candidates for Medicare's Bundled Payment for Care Improvement initiative, the CMS Innovation Center said Thursday. At this stage, providers vet their performance under the possible bundled payments to see whether they can stomach the risk.

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Not all of the candidates will agree to actually enter into bundled-payment contracts. In the first crop, 86 did not and 236 went ahead.

“I think the attrition rate is going to be important,” said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute. A large percentage backing out should raise questions about what prompted the exit “so that ultimately we can try to stimulate the right type of market answer to those issues,” he said.

The next wave of candidates was originally supposed to decide before the end of the year. The CMS, however, notified them Thursday that the agency is pushing back the release of Medicare spending data that's needed to assess bundled-payment options, said Brian Fuller, director of post-acute care for consulting firm Avalere Health. As a result, according to the CMS letter, candidates will have up to four additional months to decide whether to join the program. They can enter into contracts in January as scheduled but can wait until April 2015, and they can expand contracts through October 2015.

A CMS spokesman said the agency could not immediately comment on the delay.

Organizations that lack clinical depth to prevent hospital readmissions—a major source of expenses—won't proceed, said Rick Grindrod, CEO of National Post-Acute Healthcare, a year-old company that contracts with payers and providers to develop risk-based contracts and is working with 150 providers among the new cohort of candidates.

“The strength of the case-management team is essential to implementing this effectively,” said Rich Roth, vice president of strategic innovation for San Francisco-based Dignity Health. The not-for-profit health system is seeking to expand its participation in the program from two hospitals included in the first wave to nearly all its 37 hospitals.

De Brantes said the surge in interest suggests growing comfort among providers with reimbursement that comes with heightened financial risk. The Medicare initiative's four models give providers the opportunity to test bundled payments on a limited scale, unlike contracts that require a more global budget, he said. “There is a pent-up demand; this is a manifestation of that pent-up demand,” he said.

The initiative, launched in January 2013, is one attempt under the Patient Protection and Affordable Care Act to test incentives for providers to more closely control costs. Broadly speaking, the program “bundles” payments for multiple services connected to some or all of 48 episodes of care. Participating providers profit when their spending on that care falls below Medicare's savings target. With some exceptions, they must beat Medicare costs by 2% to 3.5% before they're rewarded.

Hospitals and doctors can test any of four bundles that include some or all medical expenses for care provided throughout a hospital stay; one to three months after patients leave; or both.

CMS officials said in a statement that they were pleased with the growing list of candidates and expect to see some eventually agree to enter into contracts: “Through the Bundled Payments for Care Improvement initiative, CMS is taking another step forward in identifying models that will provide better quality of care and improved health for Medicare beneficiaries, at lower costs for our nation's taxpayers.”

Follow Melanie Evans on Twitter: @MHmevans

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