FEBRUARY 27, 2020

Welcome to the Bundled Payment Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
the National Medical Home Summit, the National MACRA MIPS/APM Summit,
and the National Medicare Advantage Summit

Bundled Payments: The Outlook for 2020
The bundled payment market expanded significantly in 2019 and will continue to do so in 2020. Growth was primarily driven by industry pressure to deliver value-based care through alternative payment models (APMs). The most recent numbers show that over 35% of US healthcare reimbursements flowed through APMs--a 52% increase from three years earlier. This evolution paved the way for bundled payments, a relatively low barrier-to-entry APM model. For payers and providers lacking experience in such value-based payment models, "episodes of care" are less complex compared to their ACO and full-capitation counterparts, which has contributed significantly to bundled payments' rise in popularity. Growth was also driven by the launch of Bundled Payments for Care Improvement (BPCI) Advanced, a voluntary CMS program that allowed hospitals and physician groups to select specific episodes of care for participation. The second cohort of BPCI Advanced began on January 1, 2020.

Based on CMS activities and our observations throughout 2019, we anticipate four key bundled payment trends to look for in 2020.

  1. Mandatory participation in bundled payment programs is likely.
  2. Site-neutral payments will become increasingly common.
  3. Compared to provider organizations, payers and employers are driving the shift toward bundled payments.
  4. Substance use and behavioral health bundles will emerge.

Throughout 2020, the bundled payment market will continue to expand. Growth will be dictated by new CMS programs (behavioral health and substance abuse), innovative payment structures, and emerging service lines. Quality and value driven organizations, who are also willing to take measured risk, are most likely to succeed under bundled payments and will find themselves advancing further along the value-based care-delivery continuum. (ECG Management, accessed February 15, 2020)

Medicare Pays More Money to Doctors Taking Care of Rich Patients for Certain Procedures. Here's Why.
It has always been financially rewarding for doctors to take care of rich patients. People with more money…well, they have more money to spend on healthcare. But shouldn't this more money/higher payment relationship go away in Medicare? It doesn't, and some recent payment reforms may be making matters worse. Medicare is a federal program to reimburse medical costs in people who are disabled, have kidney failure, or are elderly. Under Medicare, the government determines reimbursement rates. If your favorite orthopedic surgeon takes care of Medicare enrollees, she doesn't decide how much to charge the government for the care she provides; the government does so, based on a fee schedule. Medicare fees are not uniform across the country. The government takes account of local cost of living, for example, in determining payment rate; consequently, Medicare fees are higher in San Francisco than in Oklahoma City. But here's a much more pernicious bias in Medicare's reimbursement policies. It's based on recent efforts to incentivize providers to constrain costs while maintaining or improving quality. Specifically, the bias results from Medicare's "comprehensive care for joint replacement" payment model, a.k.a. the CJR. Under this bundled payment program, providers get a fixed amount of money to cover the cost of joint replacement care: not just the procedure itself, but all the ensuing costs associated with recovery and rehabilitation. I'm a fan of the basic idea behind bundled payments. They incentivize providers to increase the efficiency of care across a longer period of time than, say, reimbursement fees tied solely to the immediate cost of a specific procedure. (Forbes, February 7, 2020)

BPCI Advanced (BPCI-A) Participation up 58% for Model Year 3
Participation in BPCI Advanced (BPCI-A) grew by 58% between March 2019 and January 2020. After the voluntary March withdrawal period, in which 16% of providers dropped from the model, there were 1,295 providers remaining in BPCI-A. During summer 2019, CMS opened the model to new applicants, allowing them to join existing providers for the third model year (MY), beginning January 1, 2020. Based on the latest participant list released by CMS, 2,041 providers are now participating in BPCI-A. Notably, only 18% of providers dropped from the model between MY2 and MY3.

Note: There were 89 ACHs and 150 physician group practices (PGPs) that dropped from the model between the start of MY2 and the start of MY3.

The addition of 451 new PGPs reflects the growing trend of PGPs entering episode-of-care programs. Many commercial payers are putting physicians in the driver's seat and incentivizing them to reduce utilization and increase care coordination through bundled payment programs. PGPs may sense that there will be increased pressure from commercial payers to participate in these models and are using BPCI-A (where losses are capped) as a trial run to gain the competencies needed to manage an episode of care. (ECG Management, accessed February 15, 2020)

Quantifying Health Systems' Investment in Social Determinants of Health, By Sector, 2017--19


The past decade has seen a growing recognition of the importance of social determinants of health for health outcomes. However, the degree to which US health systems are directly investing in community programs to address social determinants of health as opposed to screening and referral is uncertain. We searched for all public announcements of new programs involving direct financial investments in social determinants of health by US health systems from January 1, 2017, to November 30, 2019. We identified seventy-eight unique programs involving fifty-seven health systems that collectively included 917 hospitals. The programs involved at least $2.5 billion of health system funds, of which $1.6 billion in fifty-two programs was specifically committed to housing-focused interventions. Additional focus areas were employment (twenty-eight programs, $1.1 billion), education (fourteen programs, $476.4 million), food security (twenty-five programs, $294.2 million), social and community context (thirteen programs, $253.1 million), and transportation (six programs, $32 million). Health systems are making sizable investments in social determinants of health.

(Health Affairs, February 2020)

'Robotics is a Great Thing' But Bundled Payments will 'Be A Journey,' Says Adventhealth Spine Director
Nadia Fakira, MA, RN, director of spine services at AdventHealth Neuroscience Institute at AdventHealth Orlando (Fla.), which performs more than 1,500 spine surgeries per year says, "I think robotics is a great thing, but I truly believe it's the hospital protocols that help enhance the robots," said Ms. Fakira, who previously served on the neuroscience teams at UNC Hospital in Chapel Hill, N.C., and Duke University Medical Center in Durham, N.C. "For us, you're up three hours after extubation no matter what the surgery is -- whether it's robotic, navigated, or traditional fluoroscopic guided minimally invasive degenerative spine surgery, our patients have a successful outcome. As long as the disease process in their spine warrants them to be able to undergo minimally invasive spine surgery, they do great. They're ambulating the day of surgery and some do so well we can discharge one or two days after surgery." The advantages of robotic and navigation assisted minimally invasive spine surgery have been well-demonstrated in the literature and recent studies: improved surgical accuracy, smaller incisions, shorter hospital stays, decreased complication rates and less radiation exposure. Bundled payments have achieved some success in total joint replacements but the wide variation in spine procedures may hinder bundled payment programs finding the same success in spine. "For spinal surgery, it's going to be a journey," Ms. Fakira said. "I don't think it's as cut and dry as a hip or a knee. I think it's going to develop down the line, because we can now look at costs and quality. Nonetheless, I'm hopeful that down the line bundled payments are going to be helpful on the patient side of things and for hospitals from a cost perspective. This may require having more standardization of spinal care, which will need to be agreed upon by all stakeholders." (Becker's Spine Review, February 6, 2020)

The Finance Leader In Health Care: An Interview With The CFO Of Blue Cross Blue Shield Association
The health care industry is expected to comprise nearly 20 percent of the U.S. economy at some point this decade, and it is no secret that health care reform is shaping up to be a major issue in this year's U.S. presidential election. This is an interview with Bob Kolodgy, the EVP and CFO of the Blue Cross Blue Shield Association (BCBSA), about the challenges and opportunities in health care in 2020 and beyond. As a federation of 36 independent health insurance companies that provide health insurance to 107 million people in the United States, BCBSA has an immense presence in a gigantic industry. And Bob Kolodgy is at the very center of its finance function in an era of growth, disruption, technological change and political pressure. (Forbes, February 7, 2020)

Transformational Drivers in the Health System of the Future

Bundled Payment Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, patient safety, pay for performance, comparative effectiveness, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

The Challenges and Opportunities for Hospitals and Health Systems in Moving to Value-based Care

Lori Morgan, MBA
President and Chief Executive Officer, Huntington Hospital; President, Legacy Emanuel Medical Center, Pasadena, CA