Hospitals in dozens of U.S. markets are now cramming for a compulsory test of Medicare payment reform. The hardest part may be that their success relies on the work of partners they aren't used to collaborating with.
Hospitals in 67 metropolitan areas learned this week they have no choice but to accept a single sum for the cost of care during and 90 days after patients visit the hospital for hip and knee replacement surgery, a strategy known as bundled payments. (See the areas and hospitals included.)
The mandatory initiative, proposed in June, is widely viewed as evidence of federal officials' impatience with the industry's shift away from charging Medicare for each visit, test and procedure. While many providers have signed up for one or more of several payment reform programs launched under the Affordable Care Act, the Obama administration has expressed an ambition to move much more quickly.
The new bundled-payment program also clearly signals an expectation by federal officials that hospitals will do more to coordinate care after patients leave, said Robert Mechanic, executive director of the Health Industry Forum at Brandeis University. “It's a push to start to change the culture inside of hospitals,” Mechanic said. “What they do can't stop at the hospital wall.”
Home-care and post-acute care providers such as skilled-nursing facilities are large expenses for Medicare joint replacement patients, and the cost and quality of that care varies significantly.
“That's actually where a lot of the significant cost reduction can occur,” said Dr. Michael McKenna, executive vice president and chief medical officer of McLaren Health Care. McLaren's hospital in Flint, Mich., will have to participate in the experiment.
McLaren and the other hospitals subject to the program will be on the hook to control those costs, and the CMS projects that their efforts in the five-year program will save Medicare $343 million.
After the CMS unveiled the proposal, hospitals argued that the CMS was making a mistake to make the program mandatory, and that the agency should at least give affected providers another year to prepare for it. The CMS agreed to push the start date back three months to April 1, 2016.
Hospitals say that still gives them little time to analyze data and coordinate the multiple services related to the joint-replacement surgeries they perform.
Next month, Catholic Health Initiatives will hold a two-day training session for doctors, managers and other clinical staff from 19 of the system's hospitals that will switch to bundled payments next year, said Tamara Cull, national director of population health for CHI.
The Englewood, Colo.-based health system has a head start because it already accepts bundled Medicare payments at another dozen of its hospitals that in 2013 volunteered to test the payment model under an earlier CMS initiative called the Bundled Payments for Care Improvement, or BPCI, initiative. Readmissions for joint-replacement patients have dropped by 50% at those hospitals, Cull said.
For some organizations, the new mandatory bundled-payment initiative has raised questions about how to coordinate planning with existing voluntary efforts such as the BPCI initiative. Some complained it would be unfair to compel them to divide their efforts across multiple incentive programs, but the agency disagreed. The systems already made the business decision to straddle different payment models when they signed up for another program, the CMS said in the final regulations.
Summa Health System's hospital in Akron, Ohio, which will be among the hospitals in the new mandatory program, already participates in one of Medicare's tests of accountable care, which also rewards participants for cost control and quality performance.
Summa officials consider accountable care, which includes spending targets for all healthcare services delivered to a group of patients, a more comprehensive strategy than paying for bundles of services related to single procedure, said Ben Sutton, senior vice president of strategy and performance management. Summa considered volunteering for BPCI but instead chose accountable care under the Medicare Shared Savings Program.
“We view the bundled models as too much akin to the fee-for-service model that we're trying to move away from,” Sutton said. Hospitals continue to be paid for each new hip or knee under bundled payment, but are paid less to for each procedure. That creates an incentive to do more to make up for lost revenue, he said.
Martha Leclerc, vice president of revenue management for Sanford Health, said the system studied the proposed regulations and is prepared to complete an implementation plan based on the newly published final rule.
The system's Sanford Medical Center in Bismarck, N.D., will be included in the mandatory test, and Leclerc said the hospital is well-positioned to succeed. “We feel confident our continued work to manage the cost of care and aligning services by building relationships across our community is in sync with what Medicare is trying to achieve.”
