Bundled Payment Models Here to Stay Despite CMS Program Delays

March 30, 2017 - CMS may have issued three-month delays for several new healthcare bundled payment models, but providers should still anticipate the shift to value-based purchasing through the episodic alternative payment model, said Colin Luke, a partner at Waller Lansden Dortch and Davis.

“It’s a frustrating time because providers are having to tread water while they wait for new direction,” the practice’s healthcare compliance and operations group leader recently told RevCycleIntelligence.com. “At the same time, they’ve got to make ends meet and understand that the environment is rapidly changing. But they shouldn’t lose sight.”

“They need to accept the reality that sooner or later bundled payments and value-based purchasing are going to become the norm,” he continued. “But whether that’s five years down the road or ten years is not determined at this point.”​

For providers, this is the second delay for several CMS bundled payment models, including the Comprehensive Care for Joint Replacement pilot (CJR), the Cardiac Rehabilitation Incentive Payment Model, and three other Medicare cardiac care payment programs. CMS announced the first postponement back in January after the Trump administration’s temporary freeze on federal regulations.

The most recent delay, however, came just one day before the thawing of the federal regulation freeze. Providers expecting to participate in the bundled payment models must now wait until May 20, the announcement stated. Other model components will also be pushed back from July 1 to October 1.

READ MORE: Understanding the Basics of Bundled Payments in Healthcare

The delays may spell trouble for some providers who are planning to implement the bundled payment models for MACRA attestation. All the episodic payment structures qualify as Advanced Alternative Payment Models, which can earn participating providers an automatic 5 percent incentive payment under MACRA.

Bundled payment model delays may also impact the previous administration’s value-based purchasing goals, Luke pointed out. Former HHS Secretary Sylvia Burwell announced in 2015 that the federal department intends to link one-half of fee-for-service Medicare reimbursements to alternative payment models, such as bundled payments, by the end the of 2018.

“It’s a lot of uncertainty,” Luke said. “Clearly, CMS has had a seat change in its leadership and direction and there’s no interest in trying to rush payment programs out in order to meet Obama administration objectives as far as percentage of care being delivered through bundled payments or outside of fee-for-service.”

However, providers should not be concerned that their bundled payment model efforts have been in vain. CMS options may be limited for now, but the delays should not impact the private sector, he added.

“Private payers are going to stay on target with the exception of Medicare Advantage plans, which are much more in sync with Medicare policies,” he claimed. “But with private payers that already have value-based purchasing programs underway, whether they are in a beta phase, a demonstration project or throughout its network, I do not think that these CMS delays and move away from mandatory programs is going to delay that or alter it significantly.”

READ MORE: Understanding the Quality Payment Program’s Advanced APM Track

“Market forces have caused private payers to move to these value-based initiatives and bundled payment is here to stay in a friendlier and more provider-directed model,” he added.

The value-based purchasing slowdown under the current administration may actually be beneficial for providers.

Like ICD-10 implementation delays, the federal government intends for the delays to help policymakers and providers prepare for the upcoming models. But as providers learned after ICD-10 launched, the extra time helped organizations train their staff and ready their systems, resulting in a smoother-than-expected transition.

Luke expressed similar views, saying that the recent announcement may be a way for policymakers to reformulate bundled payment models to be more provider-focused.

First of all, the bundled payment model delay may spur CMS to make more value-based purchasing arrangements voluntary, rather than compulsory for hospitals and/or providers in select geographic locations, such as the CJR bundled payment model.

READ MORE: What Does the Rise of Bundled Payments Mean For Providers?

“By and large, there are going to be more opportunities in time for voluntary participation with CMS, both on the Medicaid-level and then at the Medicare-level,” he stated. “And the federal government is going to get a lot more cooperation and participation with the models in the long-term if they make them voluntary.”

“It’s the sense that we’re going to participate when our organization is ready and can afford it,” he added. “It’s a much better way of implementing these kinds of draconian changes.”

Newly-appointed HHS Secretary Tom Price also criticized the compulsory component of the models. Before taking on the federal department, Price sent a letter to CMS urging the federal agency to cease all mandatory models. He noted that CMS had overstepped its legislative authority by requiring providers to participate in value-based purchasing models, such as the CJR initiative, without Congressional approval.

Price’s letter also detailed how mandatory models could stall the value-based purchasing transition. By rolling out mandatory models without a proper small-scale demonstration, CMS was putting providers at risk without ensuring that the models would maintain or improve care quality.

Luke explained that many providers had similar views as Price regarding the national mandatory bundled payment models.

“A lot of providers have felt that some of the most recent CMS initiatives did not make a lot of sense from the amount of investment and the return they were going to be receiving,” he said. “The number of times they asked questions to CMS and they couldn’t get direct answers because some model components had been rolled out before they were thought through or fully detailed.”

While making the models voluntary would allow for greater provider flexibility, Luke also pointed out that CMS may restructure the bundled payment structures in response to provider concerns about infrastructure investments.

“If you’re set up for fee-for-service and having to shift a large portion of your care delivery to a bundled payment initiative, that’s expensive and disruptive and it certainly consumes a lot of employee time,” he explained. “Existing and proposed models are likely to be revised so that they don’t require the kind of infrastructure commitments that are currently required.”

After the regulatory delay, the bundled payment models are also more likely to use regional, rather than national, data to assess provider performance with the care episodes, Luke predicted.

“There may be more regional variation allowed in some of these bundled payment initiatives,” he stated. “Healthcare is essentially locally delivered and there are significant differences in how providers are organized in different parts of the country and in the costs they are experiencing.”

A Health Care Cost Institute report found that healthcare costs can vary as much as twofold between states. For instance, New Hampshire and Wisconsin generated healthcare costs twice the national average for 20 percent of healthcare services, whereas Arizona, Florida, Maryland, and Tennessee had healthcare costs below the national average for more than 90 percent of services.

Bundled payment models should also use regional variation in provider assessments because healthcare costs and utilization patterns also differ within states, Luke noted.

“In some places, there is a lot of consolidation and there are one or two health systems competing to deliver care,” he explained. “It’s easier for those organizations to offer bundled payments because they already have the whole continuum of care within the health system. But it can be a lot more difficult when you have independent or much smaller providers.”

With private sector opportunities and potential Medicaid and Medicare bundled payment model redesigns, Luke advised providers to keep preparing their organization for value-based purchasing models.

“You still have to assess your organization’s readiness for these programs, being a private or public organization, and assign responsibility to someone to monitor developments because there’s going to be some frequent changes in this area,” he said.

Although not putting all your value-based purchasing eggs in one basket would be wise for now. “Stay nimble and don’t invest significantly in a particular model at the moment because certainly at the government-level it is likely to change,” he added.

Luke also advised providers to get more involved with value-based purchasing development. To prevent challenges providers have seen before with CMS and other payer alternative payment models, providers should be part of the development process.

“Providers ought to participate with their associations and health systems and help them design these models,” he concluded. “There are going to be those opportunities and they should seize them because it’s going to be much easier to be part of something in the future if you help design it.”

Whether CMS decides to launch bundled payment models sooner or later, providers should stay the course with value-based purchasing implementation.