Did CMS overcorrect by canceling mandatory bundled payments?

It’s official: in a final rule announced last week, the Centers for Medicare and Medicaid Services (CMS) will move forward with cancelling the hip fracture and cardiac episode mandatory bundled payment programs that were slated to begin January 1, 2018.

They also scaled back the mandatory geographic regions participating in the Comprehensive Care for Joint Replacement Model (CJR) by half, from 67 to 34, and made participation voluntary for all low-volume and rural hospitals in the areas.

"These changes will offer greater flexibility and choice for hospitals in providing care to Medicare patients," said CMS administrator Seema Verma. "While CMS continues to believe that bundled payment models offer opportunities to improve quality and care coordination while lowering spending, we believe that focusing on developing different bundled payment models and engaging more providers is the best way to drive health system change while minimizing burden and maintaining access to care."

No one is surprised

The move to cancel these bundles was expected, given that the Department of Health and Human Services (HHS) proposed a rule eliminating the bundled payment programs back in August, had already delayed the bundles twice, and has demonstrated a tepid agenda on following-through with value-based initiatives.

CMS acknowledged that stakeholders have voiced concerns that the Trump administration may not be as committed to value-based care as the Obama administration, but it insists that the Trump administration just believes voluntary models are a better way to go.

"We take seriously the commenters' concerns about the urgency of continuing our movement toward value-based care in order to accommodate an aging population with increasing levels of chronic conditions," the agency said in the rule. "We continue to believe that value-based payment methodologies will play an essential role in lowering costs and improving quality of care, which will be necessary in order to maintain Medicare's fiscal solvency."

Mixed Reactions

Blair Childs, senior vice president of public affairs, Premier, stated that he is unhappy with the ruling, as it did not include voluntary replacement models for those that were canceled.

  • We continue to believe that value-based payment methodologies will play an essential role in lowering costs and improving quality of care.

“Premier and its members are extremely disappointed with CMS’ decision to eliminate Episode Payment Models (EPMs) and the Cardiac Rehabilitation (CR) Incentive Payment Model without contemporaneously offering voluntary alternatives to replace them. Current bundled payment models are actively transforming care, driving improved patient outcomes and reducing healthcare costs. Approximately two-thirds of CJR participants in Premier’s Bundled Payment Collaborative improved care for their joint replacement patients by achieving excellent or good quality scores, and also reduced Medicare costs. Yet, CMS is pulling the rug out from underneath providers without offering another avenue to participate and apply their significant investments to the benefit of patients.”

However, many providers feel that the cancellation will allow for better groundwork to be laid for organizations that need more time to prepare and invest in infrastructure and processes to better embrace value-based care initiatives. The American Health Care Association/National Center for Assisted Living has taken a position against mandatory bundling, and the AHA has called the effort “too much, too soon.”

Mark Froimson, M.D., president of the American Association of Hip and Knee Surgeons (AAHKS), says that while there is general optimism around episode-based payments, the canceled bundles “would not have been effective and were filled with challenges for physicians, health systems, and patients.”

Many also point to the existing Bundled Payments for Care Improvement (BPCI) voluntary initiative as proof that forced participation is not necessary.

Financial Implications

CMS acknowledged that some hospitals wanted to see the models continue on a voluntary basis, as they’d already invested resources to be able to launch them, however, those arguments were not “detailed” enough to sway the agency.

This move means that health organizations that were preparing to participate in the models could be out millions of dollars, not to mention the millions in bonus payments they would’ve received if they’d improved care quality and patient outcomes.

In the proposed rule, the agency said there wouldn't be much financial impact, as the models hadn’t yet begun. But hospitals say that isn’t true, given the cost of hiring and training staff, upgrading systems and redesigning clinics.

"Given the extensive preparation many hospitals have conducted in anticipation of the program's launch, the CMS' assumption that the cancellation will not have any cost to providers is incorrect," Dr. Janis Orlowski, chief healthcare officer at the Association of American Medical Colleges said.

The future is...voluntary?

In addition to the potential of lost ROI, canceling these bundles before they even started could be quite a blow to further adoption of other APMs.

And rather than letting the data speak, and ensuring that healthcare organizations of all types and scales would participate in testing the efficacy of a mandatory model, any results or benchmarking from future voluntary models may be “skewed,” favoring early adopter organizations.

However, it was only just last year that officials under the Obama administration announced the mandatory bundles, and the idea that hospitals should be rewarded for working together with physicians and other providers to avoid complications, prevent readmissions, and help patients recover more quickly is still alive and well.

Healthcare leaders continue to acknowledge that they see the value-based care dominoes falling, but that getting healthcare organizations prepared to embrace such a large change will take time. So, we’ll stay tuned for the new voluntary payment bundles CMS said it would be announcing soon.