AUGUST 9, 2012

Welcome to the Bundled Payment Update eNewsletter
This issue is sponsored by Bundled Payment Summit

A Systemic Approach to Containing Health Care Spending
The New England Journal of Medicine (NEJM) published two Sounding Board pieces this month. The first article is by Ezekiel Emanuel, MD, PhD and a distinguished panel of nearly two dozen collaborators. Eleven recommendations for reform are made including aggressive use of bundled payments. "The bundles will also need to include rehabilitation and postacute care for 90 days after discharge. Within 5 years, Medicare should make bundled payments for at least two chronic conditions, such as cancer or coronary artery disease. Within 10 years, Medicare and Medicaid should base at least 75% of payments in every region on alternatives to fee-for-service payment." (New England Journal of Medicine, August 1, 2012)

Bending the Cost Curve through Market-Based Incentives
The second Sounding Board article is by Joseph R. Antos, PhD of the American Enterprise Institute as well as Mark V. Pauly, PhD of the Wharton and Gail R. Wilensky, PhD of Project HOPE and former Healthcare Financing Administration (HCFA) Administrator. These authors suggest a market-based approach to healthcare reform including replacing open-ended subsidies for Medicare beneficiaries with a fixed dollar, defined-contribution model. The effectiveness of the Affordable Care Act's (ACA) provisions such as accountable care organizations, value-based purchasing and bundled payments promote "more spending, not better spending." The defined-contribution approach "...would shift from one that is driven by the volume and intensity of services to one that rewards cost-effective and efficient care." (New England Journal of Medicine, August 1, 2012)

11 Ways to Reduce Healthcare Costs
This blog responds to the NEJM article "A Systemic Approach to Containing Health Care Spending" referenced above. It is a helpful review and provides some good background graphics. (BostInno, August 7, 2012)

Hospital, Free-Standing Radiation Therapists Split on Bundled Pay
In an effort to stabilize pay while facing major CMS cuts, the Radiation Therapy Alliance (RTA), a non-profit group representing 207 community-based cancer centers in 21 states, is pushing bundled payment. The American Society of Radiation Oncologists (ASTRO), a large portion of whose membership are hospital-based, does not support bundled payment. The concern revolves around fluctuations in reimbursement, the proposed CMS pay cuts and the fact that reimbursement differs between clinic-based and hospital-based radiation oncologists. (Inside Health Policy, August 3, 2012)

21st Century Oncology and Humana Break New Ground with Case Rate Reimbursement Agreement
Humana, Inc. and 21st Century Oncology, the nation's largest provider of radiation therapy, have announced a national agreement for case rate reimbursement for radiation therapy services. The agreement became effective August 1, 2012. "We believe that translating these proven best practices into a bundled format that comprises a widely-supported group of medical services will benefit patients," said Constantine A. Mantz, M.D., a Board Certified radiation oncologist and 21st Century Oncology's Chief Medical Officer. "The agreement with Humana serves as an example of how collaboration and innovation can support efficient, high-quality health care." No mention was made of either RTA or ASTRO in the announcement. (MarketWatch, August 8, 2012)

Nation's Largest Bundled Payment Collaborative Helping Health Systems Succeed in Public and Private Market Arrangements
The Premier Healthcare Alliance has launched its Bundled Payment Collaborative (PBC) offering members ongoing analysis, assessment, technical assistance, education and knowledge sharing to address issues that arise from bundled payments. More than 50 hospitals in 18 states are participating in the collaborative. (MarketWatch, July 23, 2012)

Communicating with Patients about Bundled Payment: One Hospital's Experience
Hillcrest Medical Center (HMC) in Tulsa, Oklahoma was the first hospital to launch the Acute Care Episode (ACE) Demonstration project sponsored by CMS. A unique aspect of this Demonstration is the distribution of incentive checks to patients selecting HMC (or any other ACE participant) for covered cardiac and orthopedic procedures. The incentives at HMC range from $151 to $1,199. Interestingly, these incentives were not a significant factor in patient decisions even though HMC saw large increases in surgical volume. "Patients said the incentive was a nice benefit, but it really was not the market driver that we thought it was going to be," said Nancy Harrison of Ardent Health Services, the owner of HMC. "The incentives didn't influence patient choice." Communicating to patients before and after the procedure was a complex undertaking and is described in this article. (HFMA.org, July 17, 2012)

Bundled Payment Retrospective
Sharon Fiser, Vice President of Financial Operation for Ardent Health, owners of two hospitals participating in the CMS Acute Care Episode (ACE) Demonstration (see above story) offers here six key lessons learned from participating in the ACE demonstration: 1) Bundled payment helped forge closer ties with specialists, 2) Profitability depends on spillover benefits, 3) Bundled payment can (indirectly) support marketing efforts, 4) The bulk of savings from procedural inpatient bundles results from device cost reductions, 5) Significant investments are necessary for implementation, and 6) Substantial quality benefits were realized. (The Advisory Board Company, 2012)

Post-Acute Partnerships to Support Bundled Payments: Risk or Opportunity?

This brief HFMA article describes the need to consider partnering with post-acute providers to manage both bundling and readmissions.

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Updates from CMS: The Latest on All Things Bundled Payment

Pamela M. Pelizzari, MPH and Valinda Rutledge, MBA
Center for Medicare and Medicaid Services Washington, DC