GAO: Advantages of Voluntary and Mandatory Bundled Payments

January 24, 2019 - Voluntary and mandatory bundled payment models each have their own pros and cons. But providers like voluntary models because they offer more favorable financial terms, a new Government Accountability Office (GAO) report showed.

“In general, stakeholders reported that voluntary models largely benefit providers,” stated the report published on Jan. 22, 2019. “For example, these models tend to have more generous terms and providers can choose to participate in only those models where they are likely to be successful.”

In GAO’s analysis of six bundled payment models run by CMS, one of which is mandatory, the federal watchdog found that providers primarily chose to participate in voluntary demonstrations because of the perceived financial opportunity.

For example, the most common reason providers chose to participate in the voluntary Bundled Payments for Care Improvement (BPCI) was because track two of the program included services delivered after a hospitalization. Providers felt they would most likely be able to deliver care for less than the target price, resulting in bonus payments.

The level of financial risk was also key. Providers were likely to discontinue their participation in voluntary bundled payment models if they had to assume downside financial risk and potentially repay CMS for financial losses.

READ MORE: Key Strategies for Succeeding with Healthcare Bundled Payments

A group of oncology providers told GAO that “many physician practices were willing to participate in OCM when they only faced the possibility of losing bonus payments (i.e. ‘upside risk’), but they said providers might not continue to participate when the model required them to bear financial responsibility for episodes and face the prospect of financial penalties (i.e., ‘downside risk’).”

Providers also said they signed up for voluntary bundled payment models to gain access to CMS data and experience with value-based purchasing models, which interviewees believed were the payment models of the future.

CMS has largely supported voluntary alternative payment models.

In fact, CMS attempted to implement additional mandatory bundled payment models for hip fracture and cardiac care in 2016. However, the federal agency canceled the models about a year later and decreased the mandatory scope of the Comprehensive Care for Joint replacement (CJR) bundled payment model at the same time.

CMS Administrator Seema Verma explained that the federal agency planned to focus more on voluntary alternative payment models.

READ MORE: Prehabilitation Lowers Episode Costs Under Bundled Payment Models

Former HHS Secretary Tom Price also backed voluntary over mandatory models, arguing in 2016 that the proposed compulsory bundled payment models overstepped CMS’ statutory authority.

However, GAO found that mandatory demonstrations also have their advantages. Mandatory bundled payment models are more likely to give CMS more generalizable evaluation results, the federal watchdog stated in the report.

“Specifically, CMS officials and other stakeholders told us that a principal advantage of mandatory models is that they generally have larger and more diverse participant populations and likely include providers that may not have otherwise participated if the model were voluntary,” the watchdog wrote.

“According to CMS officials, an evaluation contractor, and several experts we interviewed, larger, more diverse patient populations give CMS and third-party contractors access to more generalizable data to evaluate the effects of the models. This in turn allows CMS to determine whether a model is likely to reduce costs and improve care quality among all types of providers, not just participants that elected to join voluntary models.”

Additionally, mandatory bundled payment models can include higher levels of financial risk and penalties without the concern providers will dropout.

READ MORE: Mandatory Bundled Payments Drive Value-Based Care, Docs Argue

Voluntary and mandatory bundled payment models have their own unique advantages so CMS should implement them based on the agency’s needs, GAO concluded.

“In general, voluntary models attract smaller groups of motivated providers—which may be ideal for CMS when testing a more novel concept in care redesign before attempting more extensive testing,” the report stated.

“In the case of mandatory models, these may be particularly useful for testing models of care delivery and payment that have already shown some potential for reducing costs and improving quality—that is, models that CMS is considering for broader implementation.”

Although, both types of models could benefit from some improvements, stakeholders told GAO.

Stakeholders advised CMS to consider several factors when designing voluntary and mandatory bundled payment models. Specifically, CMS should risk-adjust the target prices providers receive to account for the varying costs of caring for sicker patient populations. Without risk-adjusted prices, models incentivize providers to only treat relatively health patients to meet target prices and earn bonuses.

In general, bundled payment models should also account for changes in patient characteristics and the volume of services delivered by providers.

“These changes, according to stakeholders, could indicate that participants are reducing episode spending through means other than efficiency improvements—such as treating only healthier patients that they know will require fewer services during the episode—or increasing the number of procedures performed,” the report stated. “According to stakeholders, these responses have implications for the ability of the model to reduce Medicare spending and improve care if the model were more widely implemented.”