Ready or not, hos­pi­tals face manda­tory bundling for joint re­place­ment

Modern Healthcare - - NEWS - By Me­lanie Evans

The de­te­ri­o­rat­ing hips and knees of the na­tion’s se­niors were an ob­vi­ous tar­get for Medi­care’s first manda­tory test of an al­ter­na­tive pay­ment model for hos­pi­tals. But joint re­place­ment is not the only pos­si­ble tar­get, and hos­pi­tals are now on no­tice that Medi­care will move ahead if they don’t do it on their own.

Start­ing Jan. 1, nearly 800 hos­pi­tals in 75 mar­kets across the coun­try would be re­quired un­der the pro­posal to ac­cept bun­dled pay­ments cov­er­ing all ser­vices for hip and knee re­place­ment pro­ce­dures, start­ing with hos­pi­tal ad­mis­sion and ex­tend­ing for 90 days. They ei­ther would have to lower their costs or ab­sorb the losses, which will kick in af­ter the first year of the five-year demon­stra­tion. The pro­gram is pro­jected to save Medi­care $153 mil­lion over its du­ra­tion.

Ex­perts de­scribed the manda­tory bundling ini­tia­tive as bold but not sur­pris­ing. Rather, the an­nounce­ment is the latest and clear­est sig­nal from the ad­min­is­tra­tion that the na­tion’s hos­pi­tals and doc­tors in­creas­ingly will be paid un­der con­tracts that put them at risk for fi­nan­cial losses if they don’t meet cost and qual­ity tar­gets.

“This should not come as a big shock to any­one,” said Fran­cois de Brantes, ex­ec­u­tive di­rec­tor of the Health Care In­cen­tives Im­prove­ment In­sti­tute.

That’s be­cause Obama ad­min­is­tra­tion of­fi­cials in Jan­uary pledged to move more than $100 bil­lion in an­nual Medi­care spend­ing into new con­tracts that change how hos­pi­tals, doc­tors and oth­ers are paid no later than 2018.

The ad­min­is­tra­tion is seek­ing al­ter­na­tives to tra­di­tional Medi­care’s fee-for-ser­vice sys­tem, which re­wards vol­ume rather than out­comes. The goal is to re­place those vol­ume in­cen­tives with re­wards for more cost­ef­fec­tively man­ag­ing costs and out­comes.

The Af­ford­able Care Act gave HHS’ sec­re­tary au­thor­ity, with­out con­gres­sional ap­proval, to ex­pand demon­stra­tions of al­ter­na­tive pay­ment and de­liv­ery mod­els if they are shown to re­duce spend­ing growth with­out re­duc­ing qual­ity, or if they im­prove pa­tient care with­out boost­ing spend­ing. So HHS can now roll out suc­cess­ful mod­els through­out Medi­care on a manda­tory ba­sis. In­deed, some ex­perts have been urg­ing the ad­min­is­tra­tion to roll out demon­stra­tions that prove suc­cess­ful through­out Medi­care as a way to strengthen the ACA’s cost-sav­ing and qual­ity im­prove­ment re­sults.

“We know that this will pro­duce sav­ings, so the hope is that it can be ex­panded on a manda­tory ba­sis na­tion­wide within two years,” said To­pher Spiro, vice pres­i­dent for health pol­icy at the Cen­ter for Amer­i­can Progress.

The CMS’ new pro­posal would bun­dle all care for joint re­place­ment into one pay­ment per pa­tient, in­clud­ing the hos­pi­tal stay and ev­ery­thing that fol­lows for 90 days. Joint re­place­ments cost Medi­care $7 bil­lion last year. But that amount does not in­clude spend­ing for care af­ter pa­tients leave the hos­pi­tal, which varies widely and makes up nearly half of Medi­care’s to­tal spend­ing on new hips and knees, ac­cord­ing to re­search by the Ad­vi­sory Board Co.

The pro­gram would re­quire hos­pi­tals to co­or­di­nate care and man­age costs across surgery teams, pri­mary care, re­ha­bil­i­ta­tion and skilled nurs­ing, home care and phys­i­cal ther­apy, said Dr. Thomas Graf, chief med­i­cal of­fi­cer at Geisinger Health Sys­tem, Danville, Pa., which has de­vel­oped 17 bun­dles of care.

Hos­pi­tals also must de­ter­mine which pa­tients would be best suited for which set­ting. That in­volves new pro­to­cols and data anal­y­sis and the abil­ity to iden­tify ef­fi­cient, high­qual­ity providers in the com­mu­nity.

Medi­care has set an am­bi­tious sched­ule. “It’s a lit­tle fright­en­ing,” Graf said. “It’s a sig­nif­i­cant amount of work.”

Hos­pi­tals that can­not man­age care to hold spend­ing within the bun­dled amount would have to re­pay Medi­care the dif­fer­ence af­ter the first year. The gains or losses hos­pi­tals see de­pend on how quickly and suc­cess­fully they can co­or­di­nate all the care pa­tients need dur­ing the pro­ce­dure and in the 90 days there­after.

Medi­care is seek­ing com­ment on the pro­posal through Septem­ber. “It’s highly likely that it will go for­ward,” Graf said. He ex­pects more CMS-manda­tory al­ter­na­tive pay­ment pro­grams to fol­low as part of an evo­lu­tion to cap­i­tated pay­ment. “This would be the first of many. CMS put

At­tempts to de­velop other bun­dles have met with mixed suc­cess.

their stake in the ground.”

The CMS sought com­ment in April on ex­pan­sion of its Bun­dled Pay­ment for Care Im­prove­ment Ini­tia­tive demon­stra­tion, which in­cludes 48 episodes of care un­der bun­dled pay­ments, in­clud­ing joint re­place­ment, coro­nary artery by­pass grafts, and treat­ment for chronic con­di­tions such as di­a­betes and con­ges­tive heart fail­ure.

Medi­care has pre­vi­ously ex­per­i­mented with bun­dled pay­ment for joint re­place­ment and car­diac care. The CMS saw sav­ings, though they were mod­est. One three-year ini­tia­tive in­cluded 28 car­diac ser­vices and another eight or­tho­pe­dic pro­ce­dures. It shaved $319 per per­son off spend­ing.

The pri­vate sec­tor also has in­tro­duced joint re­place­ment bun­dled pay­ments and de­vel­oped oth­ers for preg­nancy, heart con­di­tions and some can­cers. Hori­zon Blue Cross and Blue Shield of New Jersey has in­creased the ser­vices un­der bun­dles to 10 over the past two years and ex­pects to pay for 11,000 bun­dled episodes of care this year. Over­all, bun­dles have pro­duced fa­vor­able re­sults with­out any “slam dunk,” said Peter Hussey, di­rec­tor of the health ser­vices de­liv­ery sys­tem pro­gram for RAND Corp.

Broader ex­pan­sion of bun­dled pay­ment may prove dif­fi­cult, how­ever. At­tempts to de­velop other bun­dles have met with mixed suc­cess. The Chil­dren’s High-Risk Asthma Bun­dled Pay­ment demon­stra­tion by Mas­sachusetts’ Med­i­caid pro­gram didn’t get off the ground de­spite years of work. “What we learned is that it’s re­ally hard,” said Katharine Lon­don, a prin­ci­pal at the Cen­ter for Health Law and Eco­nom­ics at the Univer­sity of Mas­sachusetts.

Other pri­vate-sec­tor ef­forts have seen more suc­cess. Dr. Con­stan­tine Mantz, chief med­i­cal of­fi­cer for 21st Cen­tury On­col­ogy, said com­pli­ca­tion rates and tox­i­c­ity among Hu­mana pa­tients have re­mained low since the 2012 start of an on­col­ogy bun­dled pay­ment for ra­di­a­tion ther­apy. He said it has pro­duced “mean­ing­ful sav­ings.”

Ex­perts said hips and knees are a good place for the CMS to start on manda­tory bundling. “Joint re­place­ment is a par­tic­u­larly good can­di­date for bun­dled pay­ments,” said Peter Huck­feldt, an as­sis­tant pro­fes­sor of health pol­icy and man­age­ment at the Univer­sity of Min­nesota. Wide vari­a­tion in spend­ing af­ter pa­tients leave the hos­pi­tal of­fers a clear tar­get for sav­ings.

Hos­pi­tals could curb spend­ing with ef­forts to iden­tify the most cost-ef­fec­tive post-acute providers and set­tings. Huck­feldt cited a June 2014 Medi­care Pay­ment Ad­vi­sory Com­mis­sion re­port that found re­ha­bil­i­ta­tion fa­cil­i­ties typ­i­cally cost 20% to 40% more than skilled-nurs­ing fa­cil­i­ties.

Man­ag­ing costs for joint re­place­ment largely boils down to send­ing pa­tients to the most ap­pro­pri­ate, low­est-cost post-acute set­ting, said de Brantes, whose or­ga­ni­za­tion man­ages a bun­dled pay­ment model now be­ing used by some state Med­i­caid pro­grams and com­mer­cial in­sur­ers. That’s not dif­fi­cult, but providers rarely do it with­out a fi­nan­cial in­cen­tive. Un­der bun­dles, “you start pay­ing at­ten­tion,” he said.

Bun­dled pay­ment for joint re­place­ment has been more widely tested than bun­dles in other clin­i­cal ar­eas. The three­year Medi­care Acute-Care Demon­stra­tion Pro­ject, which be­gan in 2009, re­duced Medi­care spend­ing for joint re­place­ment by $1.1 mil­lion across five hos­pi­tals. Four na­tional em­ploy­ers have saved “sev­eral thou­sand dol­lars per case” un­der a bun­dled pay­ment ini­tia­tive for joint re­place­ments launched in Jan­uary 2014, said David Lansky, CEO of the Pa­cific Busi­ness Group on Health.

An­them Blue Cross and Blue Shield of Wis­con­sin has seen sig­nif­i­cant cost sav­ings from a joint re­place­ment bun­dle launched in 2014 and the in­surer is con­sid­er­ing ex­pan­sion into other or­tho­pe­dic ser­vices, said Dr. Michael Jaeger, the health plan’s med­i­cal di­rec­tor.

Yet not all bundling pro­grams for joint re­place­ments have suc­ceeded. Health plans and hos­pi­tals dropped out of the In­te­grated Healthcare As­so­ci­a­tions’ pri­vate-sec­tor joint re­place­ment bun­dle ef­fort af­ter or­ga­niz­ers lost pa­tience and wran­gled over key fea­tures.

That un­der­scores the chal­lenge ahead for hos­pi­tals given the clear in­ter­est from ad­min­is­tra­tion of­fi­cials in ac­cel­er­at­ing al­ter­na­tive pay­ment meth­ods. Hos­pi­tals will have to race to iden­tify the fac­tors driv­ing higher costs for joint re­place­ments and get those costs down while pay­ing close at­ten­tion to out­comes. “They’re go­ing to have to move quickly,” Hussey said. “I’m sure it doesn’t feel like enough time.”

Rob Laze­row, a healthcare prac­tice man­ager at the Ad­vi­sory Board Co., said the CMS’ new bundling pro­gram comes as a bit of a sur­prise. “I don’t think providers ex­pected to see manda­tory any­time soon.”

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