Rulemakers in outgoing administrations usually end their tenures with a bang, not a whimper. President Barack Obama's appointees at the CMS are no exception.
Over the objections of most healthcare provider trade groups, the agency last week proposed expanding its mandatory bundled-payment program to include heart attacks and coronary artery surgery in 98 markets. It also extended the purview of the orthopedic joint replacement bundles, just getting started in 67 markets, to include hip and femur fractures.
As Modern Healthcare's Elizabeth Whitman notes in her cover story, this expansion will force hospitals in these markets to focus greater attention on post-acute care, where there is substantial variation in quality. It's also an arena plagued by overutilization, underutilization and fraud.
Bundled payments will force hospital administrators to take those problems seriously. In essence, it puts them in charge of rooting them out.
The agency last week also released its first hospital star ratings, whose methodology has come under criticism from major hospital groups. The American Hospital Association complained the composite scoring of 64 quality variables, already reported on the Hospital Compare website, unfairly penalized teaching hospitals and those serving the poor.
Yet the average 2.88 star rating for safety net hospitals was only marginally lower than the average of 3.09 stars for non-safety net hospitals. What should be of greater concern to the AHA and everyone engaged in improving the quality of America's healthcare system was the scant 102 of 4,599 hospitals nationwide that earned five stars.
Is this too much too soon? No doubt the administrative burden on hospitals whose internal accounting systems are still firmly rooted in fee-for-service medicine is growing sharply.
In addition to the expansion of mandatory bundled payments, hundreds of hospitals are also involved in the CMS' voluntary bundled-payment and accountable care organization programs. Just as burdensome are the growing number of value-based payment arrangements between private insurers and providers.
But let's not lose sight of the larger goal. Payers, led by the government sector, which is already about half of all payments, are moving inexorably toward putting providers at risk for excessive cost growth. Moving to mandatory bundled payments in key service lines will force providers to develop the accounting systems they need. Indeed, true cost-accounting in healthcare is long overdue.
It also will give hospitals and systems incentives to expand their care coordination infrastructure. Experts at the AHA Leadership Summit in San Diego last month claimed post-acute care accounted for one-fifth to one-third of total costs of any episode of care. The ACOs that made money under the CMS' Pioneer program did so by reducing those costs by 20% on average—by far the largest source of savings.
Yet there is a two- to three-fold difference in post-acute care use in different areas of the country with no noticeable impact on outcomes. Mandatory bundles will encourage hospitals and systems to make better use of this key component of care.
For years, the CMS was criticized for initiating payment reform demonstration projects that never led to systematic change. Now that it is pushing mandatory changes, it is getting attacked for overreach.
If healthcare leaders' commitment to value-based payment is real, why wait? As the movement to adopt quality indicators proved, the gap between good and poor performers narrowed considerably once the data on performance went public. Benchmarking against your peers is a powerful motivator. We can expect the same on bundled payments, because providers' bottom lines are at stake.
And as for the star ratings for hospitals, they will no doubt become a frequently used tool in the coming era of consumer-driven medicine that will inspire the laggards to figure out how to become a four- or five-star hospital.
