HEALTH POLICY & PAYMENT EDUCATION SERIES Medicare s Bundled Payment Initiatives The information in this document is based off of policy information available as of August 2016. Updated information may be available at https://innovation.cms.gov/initiatives/bundled-payments.
Summary Bundled payments provide Medicare payment for episodes of care instead of individual services. In contrast to traditional fee-for-service reimbursement where provider entities (e.g., hospitals, physicians, SNFs) are paid separately for their services, a bundled payment covers all the care a patient receives for a specific illness, condition or medical event across all providers, over a specified duration of time. Bundled payments align financial incentives across provider types to coordinate care, reduce unnecessary services, minimize inefficient utilization, and expand initiatives that aid in positive patient outcomes. Fee for service vs bundled payments Payment for individual services Traditional Fee-For-Service Payment for episode of care Bundled Payment Physician Fee Hopsital DRG Post Acute Services Episode of Care Essentially a DRG-like payment is extended beyond the inpatient hospital stay to encompass payment to other providers across the episode of care. Bundled payment programs are designed to generate cost-savings to the Medicare program by setting a target for total episode spending which is below the expected spending for that episode. Participating providers will either share in net Medicare savings or face penalties for excess costs, based on actual spending per episode compared to the target bundle price. Medicare has established both voluntary and mandatory bundled payment programs (see table below). Bundled payments which include both the initial inpatient hospital stay and post-acute care across all providers (BPCI Model 2 and the proposed, mandatory cardiac bundles) are the most relevant to Medtronic s hospital customers as the hospital is the entity at financial risk under these programs. VOLUNTARY Bundled Payments for Care Improvement (BPCI) Opt-in program initiated in 2013 Providers choose to participate in any of 48 bundles (15 of which are for cardiovascular conditions) 4 different models, differentiated largely by scope of providers and services included in the bundle MANDATORY Episode Payment Models Mandatory program participation for hospitals in select Metropolitan Statistical Areas (MSAs) Comprehensive Care for Joint Replacement (CRJ) program began in April 2016. (67 MSAs) Cardiac bundles for AMI and CABG were proposed in July to be effective July, 2017 in 98 MSAs
Key Take-aways Bundled payments change the paradigm for reimbursement to any involved healthcare constituency. The following points are important facts relevant to CMS bundled payment programs. Bundled payments are based upon fee-for-service architecture: Providers continue to be paid their regular fee-for- service rates. Reconciliation of actual spending versus the target bundle payment are made up to 1 year after services have been performed and initial Medicare FFS payment has been remitted. Hospitals may develop partnerships with post-acute care providers for these areas of bundled payment to accurately reflect shared risk under bundled payment contracts. Target bundle price and provider payment In general, bundled payments are determined by comparing actual adjusted hospital performance with a target price. CMS establishes bundle target price by applying a discount of up to 3% to the sum of expected payments for the episode. Historical claims establish the pricing for the bundled payment target prices: claims documentation today affects bundled payment targets in the future. Bundled Payment Determination CMS reconciles Actual and Target Price (may occur up to 12 months after services rendered) Providers may win payments by achieving savings below the target price Target Price Providers may lose payments by exceeding the target price Providers may share in the risk by participating in gainsharing agreements Actual Performace Actual expenditures are reconciled against the target price for the episode of care. Providers may win (receive the savings that they achieved below the target price) or lose (remit expenditures in excess of target price to CMS) based upon this reconciliation. While the acute care hospital is the entity at financial risk under the mandatory bundles, any provider may be the risk-bearing entity under the voluntary, BPCI bundles. In either case, the hospital (or risk bearing entity) may share the financial risk with other providers whose services are included in the bundle through contracting arrangements, known as gainsharing.
Alignment with other CMS payment programs Bundled payments are primarily focused on cost. Quality metrics influence only the mandatory bundles. CMS estimates 90% of hospitals in the mandatory programs will meet the minimum quality thresholds required for eligibility for reconciliation payments. Hospitals participating in bundled payment programs remain subject to CMS other hospital value incentive programs (e.g. HVBP, HRRP, HAC), amplifying the combined financial effect of these programs. Bundled payments do not apply to Medicare beneficiaries enrolled in the Medicare Advantage program. Bundled Payment Models To facilitate voluntary provider participation, there are 4 different models in the BPCI program, differentiated largely by the scope of providers included in the bundle, and episode duration. Mandatory bundle parameters are defined for all participating hospitals by CMS: there are no variations. Bundled Payment Model Types Payment Year MODEL 1 MODEL 2 MODEL 3 MODEL 4 Duration of Episode Providers Included Inpatient stay (hospital only) Inpatient stay AND post- acute care (30/60/90 day post discharge) 30, 60, or 90 days following admission to or initiation of PAC services Inpatient hospital stay + Readmissions for 30 days Hospital Inpatient 3 3 3 3 Hospital Outpatient 3 3 3 Physician 3 3 3 Other (e.g.snf, IRF) 3 3 Participants 1 609 838 9 Source: CMS Innovation Partner Collaboration Site. Number of participants as of 4/1/2016. 4 Voluntary Models: Providers choose among the 4 models in the table. 1 Mandatory Model: Parameters defined by CMS, similar to BPCI Model 2, with 90 day episode duration.
Comparison of Voluntary and Mandatory Bundled Payment Programs Payment Year Participation VOLUNTARY Bundled Payments for Care Improvement (BPCI) Voluntary provider participation among any of 48 episodes. Entity at Risk Any provider within bundle Hospital Bundle Target Price Based principally upon provider participant s historical claims data. MANDATORY Comprehensive Joint Replacement (CJR) and Proposed Cardiac Bundles Mandatory hospital participation (For AMI/CABG: all hospitals in 98 MSAs and for CJR all hospital in 67 MSAs)* Based upon blend of hospital s historical spending per episode and the Census Region average. Risk Sharing +/- 20% of target bundle amount +/- 20% of target bundle amount Quality Incentives None defined Minimum quality thresholds must be met to qualify for reconciliation paymentsand lower discounts for calculation of future target bundle prices. Hospitals may increase their quality score with submission of voluntary quality measures (AMI mortality and PRO). Scope of Providers Included Though 4 different models exist, Model 2, encompassing all hospital, physician, and postacute care is the most common format directly relevant to hospitals. Hospital and all post-acute care, including readmissions. (Similar to Model 2 within the BPCI program). Duration of Episode 30, 60, or 90 days 90 days post hospital discharge *Note: CMS has not yet defined the 98 MSAs where the mandatory cardiac bundles will be implemented. Risk-sharing potential under the mandatory bundles increases annually from 5% to 20% over 5 years of program participation. Implications CMS proposed expansion of mandatory bundles for 2 areas of cardiac care provides clear indication that CMS is looking to strengthen and extend the reach of its value-based payment programs. Similarly, CMS indicates its commitment to these programs as the conduit for enhancing quality and rewarding efficiency in healthcare delivery by proposing to categorize the mandatory bundles as Advanced Alternative Payment Models. Possible Future Developments Inclusion of quality thresholds as a component of bundled payment reconciliation may be introduced in future iterations of these programs. Stakeholders anticipate further integration and incentive alignment with CMS other value initiatives as providers gain experience with these programs. This brief is part of an ongoing educational series on health policy topics affecting our customers and our business. CMS announces policy changes affecting payment programs regularly. The information included in this briefing reflects policy as of August 2016. Medtronic 710 Medtronic Parkway Minneapolis, MN 55432-5604 USA Toll-free in USA: 800.633.8766 Worldwide: +1.763.514.4000 medtronic.com UC201705371 EN 2017 Medtronic. Minneapolis, MN. All Rights Reserved. Printed in USA. 01/2017 Medtronic and the Medtronic logo are trademarks of Medtronic. Third party brands are trademarks of their respective owners. All other brands are trademarks of a Medtronic company.