NOVEMBER 8, 2012

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

Is Bundled Payment an Idea Whose Time Has Come?
"Arkansas is on the leading edge of a movement to limit fee-for-services payments. It's weapon of choice is a modified version of bundled payment for episodes of care." So writes Joseph Burns in this month's issue of Managed Care. Arkansas Department of Health Services (DHS) has introduced innovative payment reforms which are detailed in this article. John M. Selig, the director of DHS, told the New York Times of their lofty goals. "In three to five years, we aspire to have 90 percent to 95 percent of all our medical expenditures off fee-for-service." Arkansas insurers QualChoice and Arkansas Blue Cross & Blue Shield are participating with DHS. Plans currently involve such episodes as perinatal care, upper respiratory infections and attention deficit-hyperactivity disorder with plans to add hip and knee replacements, congestive heart failure, and continuing to add additional episodes soon with the hope of covering most medical care costs in bundles in the next three to four years. (Managed Care, October, 2012)

Two SSM Health Care Hospitals Will Pilot Medicaid/Medicare Bundled Payments
The St. Louis American reports that SSM St. Mary's Health Center and SSM DePaul Health Center have been accepted by The Center for Medicare and Medicaid Innovation (CMMI) for two different "Bundled Payments for Care Improvement" pilot programs. SSM DePaul Health Center will focus on episodic orthopedic care while SSM St. Mary's Health Center will address bundled payments for patients with congestive heart failure (CHF). SSM Health Care - St. Louis will manage the bundled payments. Jay Moore, M.D., chief medical officer at SSM DePaul Health Center, said, "Our participation in these pilots will help shape the Medicare and Medicaid payment process of the future. This is all about finding ways to reduce costs while maintaining the highest quality care for patients." (The St. Louis American, October 30, 2012)

RGHS Signs Pay-for-Performance Deal with Excellus
Rochester General Health System (RGHS) and Excellus Blue Cross Blue Shield have signed a pay-for-performance agreement that RGHS President and CEO Mark Clement calls a "breakthrough...that will serve as a regional and national model." The contract begins in January and will be in effect for five years. "Our system and our physicians will assume greater accountability for managing the care and health of more than 110,000 Excellus members," Clement said. Details of the arrangement have not been released but are expected to be built around the episodes of care concept. (Rochester Business Journal, October 10, 2012)

Big Things Come in Bundled Packages: Implications of Bundled Payment Systems in Health Care Reimbursement Reform
ABSTRACT: With passage of the Affordable Care Act, the ever-evolving landscape of health care braces for another shift in the reimbursement paradigm. As health care costs continue to rise, providers are pressed to deliver efficient, high-quality care at flat to minimally increasing rates. Inherent system-wide inefficiencies between payers and providers at various clinical settings pose a daunting task for enhancing collaboration and care coordination. A change from Medicare's fee-for-service reimbursement model to bundled payments offers one avenue for resolution. Pilots using such payment models have realized varying degrees of success, leading to the development and upcoming implementation of a bundled payment initiative led by the Center for Medicare and Medicaid Innovation. Delivery integration is critical to ensure high-quality care at affordable costs across the system. Providers and payers able to adapt to the newly proposed models of payment will benefit from achieving cost reductions and improved patient outcomes and realize a competitive advantage. This article may be purchased for $32. (American Journal of Medical Quality, October 23, 2012)

Broad Stakeholder Coalition to Unveil Detailed Cost Control Ideas after Election
The National Coalition of Health Care (NCHC) President and CEO John Rother says his group, which represents a broad coalition of stakeholders, will present a detailed package of proposals that would reduce health care costs by $500 billion through mechanisms that include increasing the role for nursing, targeting the most costly beneficiaries, promoting medication therapy management, moving toward a value-based payment system, and focusing on the five percent of very sick patients who account for half of healthcare spending. The solution cannot be focused only on Medicare or Medicaid, or the private sector, he says. Rather, it must involve the whole system, and everyone needs to be on the same page. A whole range of people were involved in developing the package that the NCHC board officially approved a few weeks ago, Rother adds. (Inside Health Policy, November 5, 2012)

Radiation Oncologists Pleased CMS Backed Down on Industry Cuts
The American Society for Radiology Oncology (ASTRO) and the Radiation Therapy Alliance (RTA) have expressed interest in working on payment reform models. CMS intends to work on a radiation bundling project that would pay for episodes of treatment and related services. "The RTA has, since its inception, advocated for fundamental payment reform and looks forward to working with the agency to achieve reimbursement stability and predictability and to ensure patients' access to vital radiation therapy services in the community setting. Payment reform also offers the opportunity to promote the highest quality of care and better align the objectives of patients, providers and taxpayers," the group says. While he did not specifically discuss the bundling project, ASTRO's chariman of the board Michael Steinberg said ASTRO has already created a payment reform task force. (Inside Health Policy, November 6, 2012)

Successfully Implementing Bundled Payment Models
Hillcrest Medical Center in Tulsa, OK is an original participant in the CMS Acute Care Episiode (ACE) Demonstration and is participating in both the orthopedic and cardiac services. Hillcrest has reported savings of $1.59 million in these service lines. Device costs comprise a significant portion of the orthopedic case costs and are items orthopedic surgeons are particular about influencing given the potential impact on both quality and cost outcomes. Agreeing on standard products involves attention to data collection and analytics, maintaining full provider care choices, alignment of interests, and transparency among all in the care chain. (Hospital & Health Networks, November 1, 2012)

5 Points Hospital CFOs Need to Know about the Bundled Payment Business Model
The American Hospital Association and the Association of American Medical Colleges have released a report on bundled payments. Among the findings are these core tenets of the bundled payment business model: 1) Clinical and financial components fall within the hospital's responsibilities, 2) Reducing intensity of services to required level hypothetically leads to optimal patient care, 3) Bundled payments spur better management across the continuum of care, 4) Hospital-physician cooperation can lead to lower costs, and 5) Three primary risks exist: hospitals accepting bundled payments for an MS-DRG will be liable for any services rendered by providers outside of their direct control; CMS will likely require contracting organizations to discount the bundled payment amount; and hospitals may or may not be paid on a risk-adjusted or outlier basis for more complex cases. See the Resource section below for a link to the report and a chart of key MS-DRGs. (Becker's Hospital Review, November 5, 2012)

Medicare Payment Bundling: Insights from Claims Data and Policy Implications: Analyses of Episode-based Payment

(click image above and go to p. 23 of the document for full version)

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CMMI Bundled Payments for Care Improvement Initiative Applicants

Robert Mechanic, MBA
Heller School of Social Policy and Management, Waltham, MA

Karim Habibi, FHFMA
NYU Langone Medical Center, New York, NY

Mark Hiller
Premier Inc., Charlotte, NC

Jett Stansbury
Integrated Healthcare Association, Oakland, CA