Will Your Hospital Succeed if Selected for Cardiac Bundles?

Thursday, August 25, 2016 | Larry Sobal

 

Earlier this month, I highlighted in my blog the recent proposed rule by CMS that would establish 90-day bundled payments for heart attack (Acute Myocardial Infarction, or AMI) and heart surgery (Coronary Artery Bypass Graft, or CABG) patients. The questions I’m being asked by hospitals and cardiology groups alike are: “What should I be doing now to prepare—and what will it take to be successful?” Aside from the complexity and uncertainty of how the proposed rule will end up, I suspect people may be reacting to initial reports, such as one recently released by Avalere, which predicts some hospitals are likely to take a big financial hit.

First, let’s summarize what’s being planned by CMS. If the proposed rule is enacted, which we’ll know later this fall after the public comment period closes on October 3, the cardiac bundles will be mandatorily established in 98 (out of a possible 294) randomly selected metropolitan statistical areas (MSAs). The participating hospital is accountable for the cost and quality of the entire episode of care for eligible Medicare Part A and Part B fee-for-service beneficiaries, which begins upon admission and continues during the 90 days post-discharge.

Usually, my first piece of advice is to assess the odds of being selected. A complete listing of the MSAs and eligibility for being chosen can be found here.

Next, I suggest becoming intimately familiar with how the bundled reimbursement proposes to work. The proposed rule language describes how selected hospitals would attempt to provide care lower than a target price and how they would be paid.

Year one is proposed to only offer upside risk; however, beginning in year two, hospitals have both upside and downside risk. That’s based on a target annually adjusted by a discount factor (which is based on the treating hospital’s quality performance) and also reflects savings to Medicare. The quality adjustment formula is not yet fully-defined, but the implication is that it will incorporate pay-for-performance methodologies. Separate quality-adjusted target prices will be established for each DRG included in the AMI and CABG episodes.

During a performance year, hospitals bill—and are paid—as usual. At the end of the performance year, CMS compares a hospital’s average episode costs to the target. If the target price, less the discount, exceeds the hospital’s average episode cost, the hospital receives a “reconciliation” payment from CMS. If the target price, less the discount, is lower than the hospital’s average episode cost, the hospital would make a “repayment” to CMS.

Since this only focuses on Medicare Parts A and B, the proposed rule contemplates that participants would align with other providers and suppliers (such as independent physicians and post-acute care) to engage them in improving the episodic cost and quality, possibly through a customized gainsharing arrangement.

Regarding how to prepare, the simple advice I offer is that hospitals and physician groups will need to have the data analysis infrastructure, cost management discipline and care coordination capabilities required to deliver more efficient cardiac care. Since bundles are a relatively new phenomenon for most hospitals, this will likely be new territory and will require new information and expertise.

At a minimum, I anticipate that selected organizations will need to:

• Be able to identify patients eligible for bundles early in their interaction with your organization (ideally before an admission actually occurs) and assess their risk for admission and associated complications
• Establish data analytics and information-sharing capabilities in real time, so that episodes can be assessed against the target for both individual patients and global populations
• Have the capability to track patients across the continuum of care, so you know where they stand in relation to not only the 90-day episode, but also pre-and post-episodic care
• Have experience and competency in being able to redesign care in ways that lead to measurable improvements in cost and quality—to meet and exceed your targets
• Be able to engage a wide range of physicians, whether they are employed or independent, in a more collaborative model of care using evidenced-based care pathways to guide the delivery of care
• Create the infrastructure and expertise to coordinate care transitions and manage post-acute services

I don’t come across many organizations today that have all six, or even a good portion of that list, at a highly-functioning level. There’s a lot of work to be done now in order to be ready next July. Remember that CMS is not the only organization beginning to implement bundled payments for episodes of care. Commercial payers are also very interested and are pursuing payment plans very similar to this.

The focus on bundles is not surprising. It’s safe to assume that bundled payments will become more of a reality since they do not force providers to accept risk for an entire population or require large numbers of primary care clinicians, like other alternative payment models such as accountable care organizations. In addition, the bundles allow CMS to target conditions that are common and expensive to treat—with great variation in cost. CMS projects $170 million in cost savings over five years in connection with bundled payment methods.

My final advice is that if you’re ready, or planning to be ready, then you should consider proactively approaching private payers and discussing how you could establish either a bundled payment or cardiology ACO model with them. I’m sure they’d be willing to sit down and discuss it, given the high dollars and variation associated with AMI and CABG. If you’d like more information on how to do that, MedAxiom covered that topic in a recent webinar related to sub-specialty ACOs.

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Larry Sobal is Executive Vice President of Business Development at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and insurance. As part of his current role, Larry consults, writes and presents on topics relevant to transforming physician practices and health systems.

 

 

 

Illustration: Lee Sauer

 

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