Participants in the Medicare bundled payment programs hope to achieve positive financial results by revising care processes, focusing on particular elements of post-acute care, reducing medically unnecessary care and hoping that the resulting cost savings will fall to their bottom line. In many cases this will occur. In some cases, however, achieving positive clinical change does not result in financial success, while in other instances financial success can occur without creating significant clinical change.

The “Vision” and the “Game”

These situations illustrate what we at Singletrack Analytics referred to as the "vision" and the "game" of these payment programs. The “vision” is based on the actual objectives of the program – creating clinical change and reducing unnecessary costs. The “game”, however, is the details of the rules, targets, cost calculations, quality metrics, and other factors that enter into the financial results actually achieved by the participants. In the BPCI Advanced program, the episode costs targets are established through a variety of computational methods that occasionally create targets that will be extremely easy to achieve, while also creating targets that will be virtually impossible to meet. Since BPCI Advanced is a voluntary program, though, participants can avoid episodes with disadvantageous targets, incorporate those with advantageous targets, and occasionally improve their financial success.

Advantageous targets

An example of episodes with advantageous targets is shown below. The data was derived from the "BPCI_Advanced_National_ACH_Preliminary_Target_Prices_MY3.xlsx" model distributed by CMS that contains the episode target calculations for all applicants. The graph below utilizes two metrics from that model – the baseline cost and the target amount. Generally targets are below the baseline cost, especially since CMS extracts its 3% discount from the baseline cost when computing the target. However, for some applicants in some episodes the target exceeds the baseline cost even after extracting the discount. While financial success is never certain, having a target that exceeds the baseline cost is certainly advantageous.

The graph below is computed using the ratio of the target to the baseline cost for each of the applicants requesting data in the respective episode, and shows the percentage of those applicants for whom the target exceeds the baseline cost. For example, in outpatient percutaneous coronary intervention (PCI) episodes, 85% of applicants received a target that exceeded their baseline cost. Other episodes for which some fraction of applicants’ targets exceeded baseline costs are also shown (episodes for which no applicants’ target exceeded the baseline cost are omitted from the graph). Episodes with higher percentages are more likely to attract participants who select them because of their advantageous targets, as opposed to their opportunity to reduce episode costs.

Readers who are familiar with the bundled payment programs will note that participating solely in the episodes listed above is generally not feasible, since their episode volumes are relatively low and opportunities for cost reduction may also be minimal. However, inclusion of these episodes as part of a "portfolio" of clinically similar episodes may create a positive financial boost without requiring significant clinical change in those particular episodes. For example, a participant with strong cardiologist support may elect to participate in a "super-bundle" of episodes including congestive heart failure, cardiac arrhythmia, acute myocardial infarction, and perhaps cardiac defibrillator. Adding outpatient PCI episodes to that super-bundle incorporates a clinically similar episode with a strong possibility of positive financial results, and may boost the financial performance of the overall bundle. Outpatient PCI has little opportunity for clinical change because of the relatively small amount of post-discharge care as shown below, so providers participate in this episode primarily because of the relatively attractive target, and not because of the opportunity to reduce episode costs.

In rare cases, a particular applicant may have high-volume episode with a significantly advantageous target, in which case that applicant may elect to participate in that episode purely for financial purposes, having no expectation of being able to create meaningful clinical change. For example, we know of one hospital participating in the sepsis episode purely because of a high target, and realizing that creating change in sepsis is a clinically difficult undertaking. In this sense they’re “winning the game” (creating positive financial results) without actually playing it (creating clinical change).

Disadvantageous Targets

Similarly, the targets in some episodes offer virtually no chance of positive financial results. The graph below shows the ratio of target to baseline cost for Major Joint Replacement of the Lower Extremity (MJRLE) episodes for each of the approximately 2500 applicants who received a target for that episode type. As can be seen from this graph, for most applicants the target is lower than 90% of the baseline cost meaning that episode costs would need to be released by at least 10% from their baseline level in order to achieve positive financial results. Reductions of this magnitude are difficult, particularly for hospitals who previously participated in this episode in the BPCI program and for whom the "low hanging fruit" has already been picked. Therefore, this episode type is disadvantageous for most applicants – they might be able to achieve the “vision” but they would lose the “game”.

Reasons to participate

Applicants should note that achieving financial surplus is only one reason that many providers participate in these programs. Participants often wish to continue with existing clinical initiatives, incorporate bundled payment strategies into other similar initiatives such as readmission reduction programs, or to obtain data on services provide to their patients outside of their organization. In the episode selection process, only about 20% of episode selections might be affected by targets; in about 80% of cases targets are neither sufficiently advantageous nor disadvantageous as to create a criterion for selection. However, it behooves applicants to review all of the target data (a good guideline for target review is here) to determine whether targets should be part of their episode selection evaluation process, and if so they should proceed accordingly.