Over the summer the Medicare bundled payment model gained momentum as the primary vehicle for next-generation provider payment. This was due to two factors. The first was the unexpectedly high participation rate in the third wave of participation in the Bundled Payment for Care Improvement (BPCI) program. According to this Modern Healthcare article more than 6,000 providers have signed up to receive data to evaluate participation in BPCI, or are already at risk in this program. This is far greater than the number of MSSP ACOs or any other demonstration program in place, and CMS has indicated a strong possibility that this program may be the blueprint for future Medicare payments.
The other significant factor was the Health Affairs article (with a follow-up evaluation by RAND Corporation researchers here) describing the “failure” of the Integrated Health Networks attempt to “grow their own” bundled payment system. This article described the difficulties in surmounting legal and regulatory boundaries, and in defining the episodes that would contain the bundled services. The compound effect of these issues caused one participant after another to terminate participation in the program, and few contracts ended up being signed. The writers noted, among other points, that commercial payers generally follow Medicare's lead in payment systems, and they highlighted the importance of Medicare continuing the BPCI initiative and ultimately developing a standard set of bundled payments that can be implemented by all payers. We've always favored the Medicare BPCI program design over most commercial programs for many reasons, and this result emphasizes that point.
Reviewing Reconciliations
Meanwhile, two groups of BPCI participants are (or should be) carefully studying their analytics reports. The first group is the at-risk participants who have received, or will shortly receive their first actual reconciliation reports. Although they don't conclusively demonstrate success or failure in the program for reasons discussed here and here, they will allow participants to assess the accuracy of their own reporting tools, and gain an understanding, using real numbers, of the process by which their financial success or failure will be measured on an ongoing basis. They should also carefully review the CMS calculations to assure that those calculations are performed in accordance with the CMs specifications. In our review with our clients we have rarely found errors in the CMS calculations; however the review process itself has focused attention on the details of the payment methodology that are often opaque to participants. Because the variation in episode costs over time is significant, even on a quarterly basis, individual quarterly results are less indicative of overall bundled payment success or failure than they are of whether participant was lucky or unlucky in patient selection during that period. True financial results will take a longer period to measure.
Evaluating Participation Options
The other group of participants reviewing data are those in the pre-risk period who will shortly be required to select episode families, episode lengths and risk tracks if they are to continue with the BPCI program. As we've previously written,there are a multitude of factors to consider in evaluating the opportunities and risks in various episode families including distribution of costs across the episode, the drivers of post-acute cost (generally either post-acute provider utilization or readmissions; for which the strategies of managing are quite different), the effect of other BPCI participants (primarily physician groups) usurping episodes occurring in the hospital, and the overall financial variation in episode costs over time.
As participants in the Pioneer ACO program drop out, and MSSP ACOs show mixed results, bundled payments become a more likely future payment system for Medicare providers. Early engagement during the BPCI demonstration periods allows providers to understand how these programs operate, and effective analytics coupled with development of meaningful care management initiatives are likely to pay significant dividends in the future.