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KSM Blog | Katz, Sapper & Miller CPA

Examining the Health of the CMS Bundled Payments Initiative

Posted 2:39 PM by



Earlier this month, the Centers for Medicare and Medicaid Services (CMS) proposed canceling two bundled payment programs and scaling back a third. These proposed changes would cancel mandatory bundled payments for heart attacks, heart bypasses, cardiac rehabilitation, and hip and femur fracture treatments. Additionally, the Comprehensive Care for Joint Replacement (CJR) model would now be mandatory in only half the markets for which it was initially scheduled to be required.

Given these changes, we wanted to address questions that many providers likely have about the trajectory of value-based programs, the impact of the changes upon their practice or hospital, and what they should be doing next.

How should providers interpret these changes in the trajectory toward bundling? Do these cancellations mean the end of bundled payments or value-based care?

CMS is still moving toward value-based care models. In fact, CMS said in their proposed rule that canceling and scaling back these programs allows them more time to design additional episodes of care, to get input from key stakeholders, and to test and evaluate improvements in the care processes. As providers are asked to shift from volume to value, they are facing an ever-increasing regulatory burden. Beyond new data collection requirements, providers are challenged by finding new employees or retraining existing staff to assist in these data collection activities. They also are challenged by finding the money to invest in people, training, and computer systems to gather and report on this new set of data collection requirements. Many rural hospitals struggle because they simply cannot afford the investment required for an electronic health record system. CMS is seemingly slowing the introduction of bundled initiatives to reevaluate the programs and allow more time for providers to succeed under them.

Many providers have invested significant time and money in preparing for these initiatives only to have them be made voluntary. Could this happen with other bundled payment initiatives?

In July, CMS proposed removing joint replacement cases from the list of inpatient-only procedures, which would allow them to be performed as an outpatient procedure in an ambulatory surgery center (ASC). While this would have had a positive impact on overall healthcare cost to CMS, it also called into question the financial viability of the bundled payment project from the provider perspective. Hospitals would potentially be left treating the sickest and most complex patients, an attribute not considered when the CJR bundled payment model was developed. Total joint replacements are one of the most common procedures at many hospitals, and outpatient joint replacements would entirely bypass CJR bundling. This change would impact orthopedic service lines that have already begun implementing processes to comply with CJR.

It has been rumored that CMS is considering pivoting to different provider participation models that still meet the criteria to be considered an Advanced Alternative Payment Model (APM) under The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and Merit-based Incentive Payment System (MIPS). But the intention is to continue to press toward value-based reimbursement models. Critics of the shift toward voluntary participation say that it removes the incentive to improve value and reduce costs; they cite that mandatory models are more effective in moving toward improved standards with regard to care quality, cost reduction, and population health.

If providers have already invested in redesigning processes and IT infrastructure for these now-voluntary initiatives, what should they do?

Value-based care is not going away; the cancellations and delays in these programs are not an indication that providers should return to their fee-for-service models. Providers should continue to prepare their organizations for the eventual implementation of value-based reimbursement and should scale their investment of resources at an appropriate level: this will not be a one-size-fits-all task list but will instead be a case-by-case assessment. Providers should base their decision to participate in these voluntary programs on the potential to maximize opportunities and minimize penalties.

For providers that have not heavily invested resources in preparing for the transition to bundled payments, should they wait to do so until these initiatives are finalized?

As the healthcare industry continues its move toward value-based care, providers can ensure they are ready – regardless of the timing of bundled payment initiatives – by focusing on improving quality, reducing costs, and improving population health. In order to achieve these three goals, it is imperative that providers throughout the continuum of care focus on opportunities to work together in redesigning care pathways. It is much easier to begin learning how to work together when reporting is not required than when it is required. 

While CMS is clearly the dominant payer in healthcare, they are not the only payer. Many commercial insurance companies are implementing value-based reimbursement models, and large employers are evaluating direct-to-provider models that rely on bundled payment initiatives to help control cost and utilization.

Working through the transition toward value-based care now will benefit any hospital or physician practice. It is wise to continue to invest in tools that align performance with payment mechanisms, whether that involves implementing new technology solutions or redesigning care processes to maximize results. 

If you need help determining whether or not to participate in voluntary bundled payment initiatives or if you need help creating an action plan to prepare for the transition to value-based care, our team of healthcare experts is here to help.

About the Author
David Charles is the partner-in-charge of Katz, Sapper & Miller's Healthcare Resources Group. David provides consulting, tax, and accounting advice to a wide variety of businesses and high net worth clients. Connect with him on LinkedIn

 

About the Author
Michael Heaton is a partner in Katz, Sapper & Miller’s Healthcare Resources Group. Michael has extensive healthcare consulting experience and provides consulting in the areas of practice management, physician compensation, practice start-ups, practice valuations, and managed care contracting.

 

About the Author
John Martin is managing director of healthcare consulting with Katz, Sapper & Miller's Healthcare Resources GroupJohn leads a team of healthcare consultants who provide financial, strategic, and operational services to hospitals, health systems, and physician groups. Connect with him on LinkedIn.

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