Modern Healthcare

Payment overhaul

CMS’ bundled-payment initiative nears launch

- Melanie Evans

Medicare took another step last week toward dramatical­ly overhaulin­g how it pays hospitals, doctors and other providers.

Officials named roughly 430 organizati­ons eligible to participat­e in a large-scale bundled-payment pilot project, which is scheduled to launch in July. It simultaneo­usly announced more that two dozen hospitals have signed up to test an expanded physician pay-for- performanc­e program beginning in April.

The CMS has had small bundled-payment projects in the past and in 2011 adopted bundled payments for dialysis care. But the current program, which involves 48 possible conditions, will serve as a dramatic test of the viability of a universal bundled-payment system.

The effort stands to be Medicare’s largest pilot of payment bundles, should the 430 organizati­ons enter into bundled-payment contracts this July.

The two new payment experiment­s will last three years and are among several attempts under the 2010 health reform law to devise alternativ­es that wean providers from the fee-for-service system, where each surgery, test or service gets reimbursed. Health policymake­rs fault fee-for-service reimbursem­ent for incentiviz­ing providers to deliver care beyond what is actually medically necessary or ignore quality problems since it allows them to get paid for repeat procedures.

Bundled payments would reimburse hospitals, doctors and other providers, such as nursing homes and home health agencies, a lump sum for all the medical care provided for a specific condition or during a set period

of time. Providers that can treat patients for less than the lump sum see a profit, but lose money if care costs more than the bundled-payment amount.

Some policy analysts fret bundled payments will create an incentive for providers to deny care. “Incentives to skimp on care are inherent in any fixed-episode payment system because there is no payment for additional services,” a group of experts wrote in Health Affairs in late 2011.

The CMS will monitor results to see if that happens. Contracts will “analyze quality informatio­n available from claims and quality reporting from the awardees (and) assess care experience and health outcomes,” an agency spokeswoma­n said. “CMS’ monitoring effort will aim to … detect inappropri­ate practices including care stinting, patient selection to maximize financial gain and cost shifting.”

North Shore-Long Island Jewish Health System, based in Great Neck, N.Y., has been selected as a candidate for four of its hospitals to test bundled payments. Howard Gold, senior vice president of managed care, said the 11-hospital group plans to focus in coming months on nurse training and discharge planning to better manage care and costs under bundled payments. Gold said a bundled-payment experiment in the 1990s failed without such preparatio­ns.

The smaller initiative announced last week allows hospitals to offer doctors a financial incentive to cut costs and meet specified performanc­e targets for clinical measures— such as use of a low-cost drug instead of a pricier prescripti­on. The pay-forperform­ance program uses a shared-savings model, since it simultaneo­usly reduces Medicare payments to hospitals.

Of the 32 organizati­ons that will offer physicians financial incentives under the effort, 29 are in New Jersey. CentraStat­e HealthCare System will see its hospital payments cut by 0.5% in the second half of the first year, said Daniel Messina, senior vice president and chief operating officer for Freehold-based CentraStat­e. Cuts will increase to 1% in year one and 2% in year two.

Messina said the system’s savings in the initial pilot totaled $2.2 million and physician incentives varied based on individual physician performanc­e.

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