How ‘bout that Super Bowl? Did you watch the entire game? Have a new favorite commercial? Some of you were probably decked out in your favorite team’s attire. Others (like yours truly) packed that attire away several weeks ago. We’ve been feeding you a heavy dose of MACRA over the past few months. Fear not Acumen blog readers, we have other fish to fry today. And although the topic may suggest game day attire, the bundles and caps on the menu today are cut from a different cloth.
I’ve been spending some time watching the debate over whether or not US health care would be better off in a bundled payment environment or in a capitated payment environment. This debate is receiving a lot of attention within the context of migrating from a fee-for-service environment to value-based reimbursement. Health information technology is critical to both, so this is not as much of a tangent for the Acumen blog as first meets the eye. For those of you unfamiliar with these concepts, let me try to explain the two from the perspective of the nephrology practice.
In many respects, bundled payments work as the name implies. The payor establishes a price they will pay for the delivery of a specific service or episode of care. In a bundled environment, individual services that were previously billed as separate services in a fee-for-service world are lumped together under the umbrella of the bundle. Typically some measure of quality is weaved into the bundled payment programs such that maximum payment requires the provider to score high on quality. Tying the bundled payment to quality is done to ensure the provider’s effort to financially prosper within the bundle does not reduce the quality of care delivered within the bundle. At the end of the day, it is this connection between quality and cost which makes this a value-based program: a program that fosters the financially efficient delivery of quality.
Nephrologists should be very familiar with bundled payments. A few short years ago, dialysis facilities were paid a fee for the dialysis treatment and a separate fee for lab tests and medications used during dialysis. Today, under the prospective payment system, cleverly referred to as “the bundle”, the dialysis facility is paid a single fee, which covers the treatment itself and a host of related services (including lab tests and renal-related medications). More recently, the quality side of this bundle has seen the introduction of the Quality Incentive Program, affectionately known as the QIP. While we could spend many a blog post discussing the merits (or more specifically the lack thereof) of the QIP, suffice it to say a poor score on the QIP results in a reduction in the fee paid for the dialysis bundle.
The other approach to value-based payment is via capitation. Although not a perfect example, one example of capitation today is Medicare Advantage (MA). In a capitated program like MA, the payor (CMS in this case) pays the health plan a monthly premium. In the case of MA, the premium is used to cover the total cost of the patient’s care. The premium paid to the plan is individualized for each patient based loosely on the perceived level of complexity the patient possesses (through risk adjustment). The plan sponsor (which could be a nationally recognized insurance company, a local health system, or a large dialysis organization) uses a suite of services to manage the spend of those premium dollars. As with the bundle example above, MA plans must pursue specific quality measures, although payment is not directly tied to these quality outcomes. Unfortunately, the quality measures within the MA program today have little to do with the delivery of care to patients with advanced renal disease.
Hips and knees
Returning to bundles for a moment, the bundle payment program that’s made the news recently is the CMS Comprehensive Care for Joint Replacement (CJR) Model. The CJR story is one I think we should pay close attention to. CJR began as a bundle in the CMS Bundled Payments for Care Improvement Initiative (BPCI). In the BPCI example, you basically pull together a group of providers and agree to take financial and quality risk on every Medicare beneficiary who has an elective hip or knee replacement in your hospital. The financial risk includes not only the cost of care during the hospital stay, but all of the Medicare Part A & B spend for the 30, 60, or 90 days following hospital discharge.
One of the key tenets of BPCI is that it’s voluntary. You had to step up to the plate and your application had to be approved by CMMI in order to play this game. The reason I think we need to pay close attention to this story is CMS recently decided they were going to expand this “experiment”, but do so in a mandatory fashion. Starting in 2016, if you are among the almost 800 hospitals that finds itself in one of 67 metropolitan statistical areas, you are now enrolled in the CJR program. You are financially accountable for the Part A & B spend for elective hips and knees. The financial clock starts on the date of admission and it stops 90 days post discharge. New for these folks in 2017 is the addition of hip and femur fractures to the model. It’s the abrupt move from a voluntary program to one mandated by the payor that should have our undivided attention.
One of the concerns about episode of care bundles for elective procedures is that bundled payments could create an environment that fosters “lemon dropping” and “cherry picking”. Imagine you are the CFO of one of the health systems where CJR is now mandatory. Unless the risk adjustment is perfect (it is not), the payment you receive for replacing hips and knees in “older, sicker” patients is unlikely to cover the costs you will incur during those 90 days. Likewise, you will likely financially prosper every time you replace a hip or knee in an otherwise healthy 50-year-old patient. It is not hard to imagine a scenario in which the structure of the program influences who receives elective joint replacements at some of these hospitals.
The other point frequently raised in the debate over caps and bundles is that most of the experience with bundles to date involves procedures (note that a Coronary Artery Bypass Graft model is set to begin on July 1 of this year). As CMMI contemplates disease-specific bundles, things will get very messy as few beneficiaries with chronic illness have a single disease.
Last year, Harvard Business Review added fuel to this debate when Michael Porter and Robert Kaplan of Harvard Business School wrote in favor of bundles while Brent James and Greg Poulsen of Intermountain Healthcare wrote in favor of population-based capitation. Granted Porter is an icon in the world of business education, but I must say the gentlemen from Intermountain were far more persuasive in my view. If you can get your hands on the July/August 2016 issue of HBR, have a look. Those articles are well worth your time and attention.
Renal caps and bundles
Where does all this leave the practice of nephrology? As Acumen blog readers you are all now very well versed in the changes MACRA has brought to our table. The move from transactional fee for service to value-based purchasing is well underway. Some of you are now participating in an ESCO. The ESCO model is a nice start, but it is far from perfect. Many of you are familiar with the PATIENTS Act, which surfaced last year. The PATIENT Act has its supporters and its critics, but if it makes its way through the legislative process we will see something much closer to a capitation program than a bundle. My suggestion to each of you is to pay very close attention to this fast-moving conversation. I certainly do not have a magic crystal ball, but I believe at some point in the not too distant future you will have the opportunity to “try on” caps and bundles. When that opportunity arrives, make sure the new attire fits well.
Terry Ketchersid, MD, MBA, practiced nephrology for 15 years before spending the past seven years at Acumen focused on the Health IT needs of nephrologists. He currently holds the position of Chief Medical Officer for the Integrated Care Group at Fresenius Medical Care North America where he leverages his passion for Health IT to problem solve the coordination of care for the complex patient population served by the enterprise.
Top image from www.canstockphoto.com