OCTOBER 11, 2012

Welcome to the Bundled Payment Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the ACO Congress

CMMI Suspends Implementation of First Model in Bundled Pay Initiative
Inside Health Policy reports that CMS is suspending further implementation of Model 1 of the Bundled Payment for Care Improvement (BCPI) initiative. According to the summary by Inside Health Policy, under Model 1 "Medicare would pay the hospital a discounted amount based on the payment rates established under the hospital Inpatient Prospective Payment System, and physicians would be paid separately for their services under the Medicare Physician Fee Schedule. As a part of the initiative, providers would be able to share in savings that come from better care coordination." CMS will evaluate the model over the next three months to determine whether or not to proceed or cancel further implementation. It will also evaluate ways in which Model 1 participants can be fit into the broader bundled payment initiative. (Inside Health Policy, October 10, 2012)

Medical Payment Advisory Commission (MedPAC) Public Meeting Transcript
The Medical Payment Advisory Commission (MedPAC) held a regular public meeting on September 6, 2012 and the meeting is detailed in the 501-page meeting transcript referenced in the above link. The future of bundled payment was an agenda item and attention was directed to post-acute care and how these services will be addressed in the future. Medicare currently pays approximately $50 billion to skilled nursing facilities, rehabilitation hospitals and long-term care hospitals. Alternatives for PAC bundles are seen in the slide below extracted from the presentation on bundling:

Accounting for regional variation is another subject under review. (MedPAC, September 2012)

Curbing Overpriced Treatments for Cancer Care
"If you think this is a tough reimbursement environment, just wait a year or two," said Mark McClellan, MD, PhD, former CMS head, at a recent Institute of Medicine meeting entitled "Delivering Affordable Cancer Care in the 21st Century." Ezekiel Emanuel, MD, PhD, and top Obama advisor, said, "We can never get too much cost control. There's $700 to $800 billion of waste in the health care system. We have a long way to go." Oncology is becoming a focal point in the reform debate. A United Healthcare official reported that 12% of their non-Medicare/Medicaid payments are for oncology care. The Company has an experiment underway in which the insurer will pay for medications directly to the manufacturer rather than to the oncologist, who has traditionally marked up the drug. Peter Bach, MD, of Sloan Kettering Cancer Center, suggested a shift to bundled payments. Bach said, "Episode-based payment is all about shifting risk. It puts the provider - the oncologist - at risk for performance. This is very different from fee-for-service, where the only risk is if someone doesn't pay you." (The Fiscal Times, October 10, 2102)

CMMI Converging Proposed Episode Definitions
During a September 12, 2012 webconference the Center for Medicare and Medicaid Innovation (CMMI) announced that it will develop a limited, standardized set of bundle definitions based on what it calls "convergence" of similar proposals it had received from hundreds of providers in response to its application process for the Bundled Payments for Care Improvement (BPCI) initiative. CMMI also explained the upcoming schedule which includes these key dates: Technical review: In late September 2012, Candidate awardee notification: In early October 2012, Implementation period: In early October 2012, and Program launch: In late spring 2013. The Advisory Board believes providers face six key implications following CMMI's new BPCI initiative announcements:
  1. Providers may be unable to pursue clinical conditions they initially proposed.
  2. Providers face more limited diversity of bundle definitions than initially expected.
  3. Awardees must review their claims data in light of new episode definitions.
  4. CMMI preparing for a collaborative implementation period.
  5. Providers should expect a delay before bundled payment goes live.
  6. Episode convergence may enable broader scale in the future.
(The Advisory Board Company, September 13, 2012)

Heart Surgery Payment Initiative Aims at Health Care Reform
Kaleida Health and affiliated physicians are adopting a new heart surgery payment system for patients insured through BlueCross BlueShield of Western New York. The insurer will make a single payment for all care the patients receive in the weeks before the patient arrives and months into recovery. Robert Gatewood, MD, a cardiologist, said, "With health care costs spiraling out of control, we need to do something to pull in the reins. The change has to come from those who deliver the care. We need to lead the charge." (The Buffalo News, September 25, 2012)

AHRQ: Bundled Payments May Lead to Lower Healthcare Costs
A recent report by the Agency for Healthcare Research and Quality (AHRQ) finds that bundled payments may lead to a reduction in healthcare spending without affecting quality. The report concludes that bundled payments generally led to decreases in cost of approximately 10%. (Becker's Hospital Review, October 5, 2012)

Medicaid's High Marks on Preventive Care Contrary to Its Stingy Image
According to a recent study Medicaid programs are doing an above-average job in providing needed preventive care services. The Kaiser Commission on Medicaid and the Uninsured found that most Medicaid programs covered the bulk of 42 recommended services for adults, particularly for cancer and sexually transmitted infection screenings as well as pregnancy care. Many of these services, such as screenings, are being bundled with other services. (amednews.com, October 8, 2012)

5 Tactics to Negotiate Bundled Payments for Surgery Centers
Bundled payments are becoming increasingly demanded of outpatient surgery centers. The five most important steps in negotiating an outpatient surgery bundled payment contract the authors recommend are these: 1) Make sure all physicians have a seat at the table, 2) Make sure bundled payments are lucrative compared to current reimbursement, 3) Understand which procedures will be included, 4) Determine how to measure quality, and 5) Make sure you understand the contract. (Becker's ASC Review, October 2, 2012)

The Bundled Payment Experience

Hospital & Health Networks interviews Shannon Fiser, Vice President of Financial Operations, Ardent Healthcare, who discusses Ardent's experiences with Medicare's Acute Care Episode (ACE) Demonstration in which two of Ardent's hospitals participated. ACE is a predecessor of the Bundled Payment for Care Improvement (BPCI) Initiative.

(click image above for video)

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Updates from CMS: The Latest on all things Bundled Payment

Pamela M. Pelizzari, MPH
Center for Medicare and Medicaid Services (CMS), Washington, DC

Valinda Rutledge, MBA
Center for Medicare and Medicaid Services (CMS), Washington, DC