If we thought that change was accelerating in the last couple of years, we may be in for a “You ain’t seen nothing yet” moment. In the past several days, President-elect Trump nominated personnel to lead the Department of Health and Human Services (Rep. Tom Price, a Republican from Georgia) and CMS (Seema Verma, a health policy consultant). Not surprisingly, both are allies, and have their eyes on “repealing and replacing” the Affordable Care Act. Repealing is the easy part, but replacing it will be much more difficult. The two of them have actively spoken out against value-based payment programs, including the bundled payment initiatives, and Price previously has introduced legislation specifically to dismantle those programs. He also has criticized the Comprehensive Care for Joint Replacement (CJR) program, saying that CMS has overstepped its authority in rolling it out.
With the changing of the guard come January, we’ll likely see some changes in the world of CMS payment mechanisms for acute care. Before we get to discussing what we might have in store, let’s quickly review how things have evolved up to this point.
In the “old days,” payments were based almost purely on services rendered using a cost-plus model. This led to rampant increases in the cost of care and provided no incentives for efficiency improvements. That fee-for-service mechanism evolved into the first prospective payment system using diagnosis-related groups in the early 1980s, which put some degree of constraints on the system. It served its purpose better, although it still contained a variety of loopholes and work-arounds in the overall care of a patient. The past few years have brought in the next wave of updates and an accelerated pace of change as CMS has tested a few versions of potential future models.
The common thread with these newer models is an increased level of bundling payments, ostensibly to align financial incentives among the various stakeholders, as well as to control the overall program costs. The definitions of both the breadth (acute and post-acute) and length (up to 90 days) of these new models has forced a variety of stakeholders to rethink their long-term success strategies. In 2007, the Institute for Healthcare Improvement developed the “Triple Aim” effort to describe the desire of health systems to strive for an optimal combination of improving the patient experience (including quality and satisfaction), improving the health of populations, and reducing the per capita cost of healthcare. Beginning in 2013, CMS launched its first major initiative, the Bundled Payments for Care Improvement (BPCI), which tested the concept of motivating behaviors toward that “Triple Aim” effort.
Then in 2016, the Comprehensive Care for Joint Replacement (CJR) model rolled out to 67 metropolitan statistical areas (800 hospitals), representing about 30% of the Medicare hip and knee replacement procedures.
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How well are these new payment models working? Are they accomplishing their objectives? CJR has only been in place for a few months, so detailed quantitative data are not yet available. However, early indications are that it could be saving Medicare up to 20% for those procedures. The qualitative feedback from a variety of sources—including dozens of ZS interviews with decision makers within provider organizations—is also consistent with the intentions. That is, providers are creating processes and choosing products and services that are intended to maintain or improve outcomes and access while reducing costs.
BPCI has had a bit more time in the market, and published studies report some savings, although those data are already more than two years old, so the more recent quantitative results will shed more light when published. Early results from BPCI show some modest impact on costs. The largest behavior change thus far seems to be a reduction of the post-acute care delivered at provider facilities such as skilled nursing facilities and rehabilitation centers. Instead, more patients are being funneled directly to home health agencies.
Winners and Losers
Who’s winning and losing with the new value-based payment models? Hospitals and home health agencies are winning. The hospitals control the patient and have significant sway in the post-acute planning. Home health agencies are happy about the nudge toward patients transitioning home more quickly. On the losing side, skilled nursing facilities are caring for fewer patients and are under tremendous pressure, as evidenced by the recent announcement from once-dominant Kindred reporting that it will completely exit that business. Physicians and medtech product manufacturers are somewhat on the losing end, too, given the increased pressures on costs and utilization. Ultimately, we hope that patients will be added to the winners list, and we’ll be observing and analyzing the progress as more data become available.
As with any new government program, the various measures associated with BPCI and CJR are probably imperfect. The providers, therefore, need to use some degree of judgment to balance the various stakeholders and incentives. That, in my opinion, is fine. There should be judgment applied, and the incentive scheme just helps to make sure that a balance exists. In short, though, BPCI appears to be having the intended effect of training the providers about the potential rewards, seemingly without inducing significant disasters. In that way, BPCI is acting as a Trojan horse to establish the concept that, in theory, CMS and private payers could use to apply additional cost pressures in the future.
In that sense, the bundled payments are indeed effective at steering providers toward value rather than just activity. Providers can and should apply their judgment when assessing the appropriate path for each patient. In addition to the clinical assessment, providers are assessing the patient’s family and personal support network, and even the patient’s own attitude. Providers tend to divert those patients to skilled nursing facilities or rehabilitation centers who they believe lack the internal drive to complete the required post-acute regimen on their own. Other patients, though, can handle it from home. As a personal example, one of my family members had a hip replaced and he was sent home the same day. He was given a straightforward set of instructions and exercises to do at home, and he was diligent in following them. As a result, he had a full and speedy recovery, never stepping foot inside a post-acute facility. The challenge for physicians in the acute setting is to place their bets on which patients will be diligent and which ones won’t.
Keeping a Close Eye on the New Guard
The next generation of bundles, which are slated to go live in the near future, are focused on cardiac issues, including coronary artery bypass grafting, acute myocardial infarction and percutaneous coronary intervention. Those are very clearly in jeopardy with the new administration coming on board. Regardless of your political preferences, it will be unfortunate if value-based payments and the BPCI/CJR experiments don’t get the chance to play out further, even if just to create a more definitive answer around whether or not they work(ed).
These topics will likely provide fodder for the Pacemaker for many posts to come, so stay tuned.