OK, it’s a little late to be saying this, but there may be some providers who are on the fence about participating in the Medicare bundled payment initiative and need a little push. Many providers have looked at the data and decided that bundled payments aren’t right for them at the moment. Others may be still considering the alternatives. Here’s one more factor to consider – the Bundled Payment for Care Improvement initiative may be the best deal you’ll see for a long time – perhaps ever.
Here’s why. When the BPCI application was released, we were amazed at the flexibility that it allowed the providers in selecting the episodes, timeframes, “unrelated” services and other factors. The bundled payment pilot prescribed in the PPACA legislation was far more prescriptive, specifying that the episodes must include chronic diseases, medical and surgical DRGs and other limitations. The future of that pilot is unclear, but it’s likely to follow the legislative requirement more tightly than the BPCI and give providers significantly less flexibility in structuring the arrangement. CMS is clear that it hopes to learn from the BPCI in structuring future payment programs, which means that those future programs are likely to be more structured than the BPCI. If you’re looking for maximum flexibility in designing your episodes, the BPCI is highly likely to be preferable to any subsequent Medicare program.
Commercial payers are also creating bundled payment initiatives, but those seem to be significantly more complex than the BPCI. Commercial programs are generally based on ICD-9 diagnosis codes, which are more granular than DRGs and may create significantly more complexity and smaller sample sizes than the DRG-based episodes in the BPCI. And Medicare is a larger payer than most commercial payers, so the sample sizes in the BPCI would be larger than a similarly-structured program with an individual commercial payer. Larger sample sizes allow risk to be spread more widely, and a larger number of patients is more likely to engage the physicians who are critical to these programs’ success. Similarly, administrative costs that are largely fixed can be spread among more patients, and across a broader revenue base, with Medicare than with other payers.
Also, a major advantage of the BPCI is that there’s no “shared savings” component. CMS gets its cut off of the top – it gets a fixed percent of revenue and that’s all. Any reductions to provider payments as a result of care management activities remain in the provider system and can be allocated back to the providers. This is a significantly better deal than the shared savings arrangement in ACOs. But many commercial payer bundled payment contracts involve a shared savings component, which must be negotiated with the payer. This provides a disincentive for all providers – especially physicians – to participate in a program where they’re actively working to reduce their own revenue. The BPCI is clearly more attractive in this respect.
If you’re sure that bundled payments aren’t within your current capabilities, then it’s probably appropriate to decline participation. But if you’re waiting for a better deal, think again.