September 13, 2011

Open dialogue among hospitals, physicians, long-term care providers, and payers is required to achieve the goals of the bundling provisions of health care reform.

In recent years, entities such as the Congressional Budget Office and Medicare’s board of trustees have expressed concern that the Medicare program is fiscally unsustainable. Medicare’s fee-for-service payment system has been considered the driver of this problem because it rewards volume of services regardless of the services’ appropriateness, cost, quality, or outcome.

Jill Mendlen

Thus, "bundling" has gained support. The idea is that a single, set payment for a group of health care providers to divide among themselves will prompt them to integrate their care. All are responsible for the cost, quality, and outcome of the group of services provided.

The use of bundled payments for certain defined services is not new and, in fact, has been growing in popularity among private insurers. Medicare first explored bundled payments almost 20 years ago. More recently, in 2009 the Centers for Medicare & Medicaid Services started the 3-year Acute Care Episode (ACE) demonstration in four Southwestern states. It bundles payments for select high-cost, inpatient cardiac and orthopedic surgeries but does not include prehospitalization or posthospitalization costs.

There is no precedent for the scope of the latest CMS bundling demonstration, as mandated by the health-reform Affordable Care Act enacted last year. No approach has ever before included posthospital care in bundled payments for the care of Medicare beneficiaries.

In the health-reform act, Congress mandated that the Secretary of Health and Human Services, Kathleen Sebelius, establish a national, voluntary, pilot bundling program by Jan. 1, 2013. The secretary was to select 10 diagnoses to be considered for bundled payment.

According to the statute, the bundled period will begin 3 days before hospitalization and conclude 30 days after discharge. The cost of posthospital care provided by a nursing facility, home health agency, or inpatient rehabilitation facility is to be included in the bundle, but the secretary has the discretion to shorten or extend the 30-day period.

Although 2013 is the date given in the Accountable Care Act for the pilot, just 2 months ago, on July 18, during a panel presentation at the Center for American Progress, White House Deputy Chief of Staff Nancy Ann DeParle and CMS official Richard Gilfillan announced that the CMS will launch of a series of bundling demonstrations, or "models," in the coming weeks.

[On Aug. 23, the CMS invited physicians and other providers to propose Medicare-pay bundling pilot programs under four models. Skilled nursing facilities and other providers have until Nov. 4 to submit letters of intent to apply for the models that include postacute care. For more information, go to www.innovations.cms.gov/areas-of-focus/patient-care-models/bundled-payments-for-care-improvement.html.]

"Bundling payments will help reverse the perverse incentives that currently exist in our health care system, including in Medicare," Ms. DeParle told the group. "The current payment system does not reward providers for coordinating the care for a patient who has multiple health problems and sees multiple doctors. ... Right now there’s no financial incentive for providers to work together to prevent illnesses from becoming serious long-term health problems, with disastrous consequences for patients and cost containment."

 

While giving few specifics about the upcoming models, Ms. DeParle did say that Medicare will negotiate payments with doctors, hospitals, and other providers for a set of health care services and that those payments will be less than what a provider could charge if each procedure was treated separately. Yet, providers will have financial incentives for quality care, she said. "If they can provide quality care at a lower cost, they can keep whatever they save."

Mr. Gilfillan, acting director of the CMS’s Center for Medicare & Medicaid Innovation, said that Medicare is considering bundled payments set both prospectively and retrospectively, while acknowledging the difficulty of the former. While also avoiding details of the models to come, Mr. Gilfillan laid out some principles: Beneficiary protection is the top issue in drawing up rules, followed closely by getting the program going quickly and then scaling it up.

Of four models Mr. Gilfillan outlined, two include postacute care in payment bundling. He described the four as: acute episode only, physicians and hospitals, bundling with postacute care, and postacute care only for specific procedures.

He also said that the CMS demonstrations will follow many of the principles laid out in a Center for American Progress report on payment bundling released at the panel discussion. That document states, "Bundled payment will also affect services in the posthospital period. The provider organization receiving the bundled payment will be responsible for arranging and coordinating follow-up care after the hospital stay – and, importantly, for addressing any complications that arise in the covered posthospital period. Financial responsibility encourages providers to actively prevent complications and avoid their associated treatment costs – lowering costs and promoting quality at the same time. In contrast, under current payment incentives, discharge policies at hospitals today typically focus on getting the patient to the next step, with little incentive to see that follow-up care is of good quality."

The health-reform act scheduled the bundling pilot for 5 years, but the CMS is obviously planning to act fast. A report from the HHS secretary is due to Congress in 2016, and the program is to expand at that point if it has achieved quality and cost-containment goals. This provision had already effectively made it a 3-year pilot program. Currently, there are no answers to many of the questions raised by this initiative.

The CMS has just begun the process of selecting a contractor to assist with data analysis and program design. The Bundling Workgroup of the American Health Care Association has been working for the past several months with the Moran Company to understand what the available CMS data say about Medicare beneficiaries’ movement throughout the health care system, what type of diagnoses are commonly referred to postacute providers, and what questions and concerns arise for long-term care providers. Our intent is to have an active dialogue with other professional organizations such as AMDA and the American Hospital Association over the next few months. We will also be meeting with the CMS once it is further along in the planning process.

What is clear is that we are entering an era of reimbursement-system redesign. For you to prepare for all the changes that are coming, it is necessary to understand the specific opportunities and challenges in your community. Open dialogue among hospitals, physicians, long-term care providers, and payers is required to achieve the goals of not only the bundling provisions of the Affordable Care Act but many other aspects of health care reform. For instance, enhanced data systems that can provide information on costs, length of stay, quality outcomes, and beneficiary satisfaction will be essential to succeed in the new health care paradigm.

While the success of the Bundling Pilot remains to be seen, one thing is certain: Providers will experience a demand for increased accountability, transparency, and cost containment, and they will need to collaborate in new and innovative ways to achieve quality outcomes across settings, reduce overall costs, improve patient satisfaction, and thrive in the years ahead. CfA

Jill Mendlen is president and chief executive officer of LightBridge Hospice and Palliative Care in San Diego and of Family Choice of New York, a company that provides clinical programs through managed care. She currently serves as vice chairman of the finance committee of the American Health Care Association.