Bundled-payment expansion brings providers more risk—and opportunity

Heart attacks strike about 735,000 people in the U.S. every year. For about 210,000 of them, it's not the first time. The Obama administration, with less than six months on the clock, is betting that changing the way Medicare pays hospitals and physicians to treat them can trim those numbers and save money.

The CMS announced a proposal last week to put three new episodes of care under mandatory experiments with bundled payments, potentially compelling hundreds of additional hospitals into becoming financially accountable for what happens to Medicare patients long after they leave the hospital. It was just one in a series of steps in an effort to move Medicare and the entire industry toward models that pay for the quality of healthcare rather than the quantity of services.

But the nature of the care in the new proposal—treatment for acute myocardial infarction (heart attack), coronary artery bypass grafts, and treatment for hip or femoral fractures—constitutes a bigger ask for the participants, which haven't been chosen yet. And for hospitals with limited experience with bundles, the brisk pace of the transition could pose additional challenges. Nonetheless, many are cheering the aggressive adoption of mandatory bundles because, they say, it gives them a framework to provide better care for patients.

“They are increasing the risk profile for the hospital and for the treating physicians who are falling within the bundled-payment program,” said Dr. James Caillouette, chief strategy officer for the Hoag Orthopedic Institute in Irvine, Calif. “All those involved in healthcare have always wanted the best for their patients. Providers now have a greater amount of skin in the game and risk in the outcome.”

In bundled-payment programs, the payer—in this case, it's Medicare—sets a target price for a medical or surgical episode, like a heart attack or a broken hip. Although it still pays providers on a fee-for-service basis, the total costs are then reconciled with the target amount. Hospitals either pocket or pay back the difference.

In previous bundled-payment programs, the scope of procedures covered has been narrower. Or they let hospitals choose which procedures were bundled. And, except in the case of the joint-replacement program launched April 1, those programs were voluntary.

But what the CMS proposed last week is different in another important way.

The care the CMS now wants to roll into mandatory bundles generally involves pools of higher-risk patients. Patients with hip fractures have a five- to eight-fold increase in mortality risk in the three months afterward, while those who have heart attacks are at increased risk for another. And the surgeries themselves are not elective, meaning that physicians have far less control over timing and planning them.

The five-year demonstration would start July 1, 2017, in 98 randomly selected areas.

“Whereas elective primary total hip or total knee replacement is a relatively controlled episode of care, now you have patients coming through the emergency room requiring acute intervention,” Caillouette said. Those cases posed a “much higher risk for postoperative complications,” he added.

Patients who suffer heart attacks or broken hips also tend to have underlying comorbidities that complicate care coordination. These are also particularly expensive episodes to treat.

A third of deaths in the U.S. are from heart attacks and strokes, and the annual costs eclipse $300 billion. In 2014, the more than 200,000 beneficiaries who were hospitalized after heart attacks or who received bypass surgery cost Medicare more than $6 billion.

“They require special attention,” said Dr. Catherine MacLean, chief value medical officer at the Hospital for Special Surgery in New York, which specializes in orthopedic surgery. “Patients who have hip fractures are high-risk patients,” she said, because of underlying conditions such as osteoporosis.

But at least some providers are embracing the proposal as an opportunity to tackle these complex challenges because it could lead to better outcomes for patients—and because they see Medicare and the industry in general moving in earnest toward value-based payment and not turning back.

“It really plays into both our business model and our mission,” said Dr. Christopher Stanley, the vice president for population health at Catholic Health Initiatives, a not-for-profit health system based in Englewood, Colo., that includes 103 hospitals in 19 states. CHI became involved early on in the voluntary Bundled Payments for Care Improvement initiative that launched in October 2013, when several of its facilities, such as St. Joseph Hospital in Lexington, Ky., started bundled payments for joint replacements of the lower extremities.

CHI has since learned a lot about developing partnerships with other community providers and health agencies, about analyzing data to find weak points, and about changing the broader institutional mindset of what doctors are actually responsible for, Stanley said.

That experience means CHI is better prepared as more mandatory bundled payments take effect. “We're not starting from scratch,” Stanley said.

Not all hospitals can make that claim.

“It varies across the country,” said Dr. Paul Casale, chairman of the American College of Cardiology's task force on the Medicare Access and CHIP Reauthorization Act, or MACRA. “Some have gained a lot of experience and are certainly ready for this,” he said. Casale is executive director of New York Quality Care, an accountable care organization that includes providers with experience under the voluntary Bundled Payments for Care Improvement initiative. “There are many others that haven't really participated.”

Institutional infrastructure and relationships, especially with post-acute care providers, are viewed as essential to success in a bundled system, but they take time to build, said Joanna Hiatt Kim, vice president for payment policy at the American Hospital Association. “It's a lot of human resources, human capital, coordination inside the hospital that makes this happen,” Kim said.

The fact that the CMS is already moving to expand the joint replacement bundles program suggests that it will continue this trajectory, said Dr. Susan Nedza, a former regional chief medical officer at the CMS who is now a senior vice president at Chicago-based MPA Healthcare Solutions. This pace leaves “the healthcare system very little time to adapt or plan in advance,” she added.

Others counter that hospitals should have seen this coming.

“They've had plenty of time to prepare,” said Josh Luke, a University of Southern California professor and founder of the National Readmission Prevention Collaborative and the National Bundled Payment Collaborative. “They should start preparing for the next bundle.”

Because the new bundled payments will not go into effect for another year, “That should provide time for systems to start putting the infrastructure together,” Casale said. If a patient has a heart attack, doctors are well aware that the patient could have a significant risk of returning to the hospital with chest pain or even another heart attack, he added. “The bundled program is an opportunity for enhancing care for patients with underlying cardiovascular disease.”

And now, rather than resisting, providers will be asking the CMS to create similar programs that involve other specialties. That's because the agency proposed last week that the programs would qualify as advanced alternative payment models under MACRA—meaning practices participating in them would be exempt from the law's quality-incentive framework and be eligible for an additional bonus on their fee-for-service payments.

“From a lot of the conversations I have with specialists and specialty societies, I can conceive that almost every surgical or medical area will want something here,” acting CMS Administrator Andy Slavitt told Modern Healthcare last week. (See our Q&A with Slavitt.) “We don't want to just push the market,” Slavitt said. “We want the market to pull us and show us when they're ready.”