AUGUST 22, 2019

Welcome to the Bundled Payment Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
the National Medical Home Summit, and the National MACRA MIPS/APM Summit

Why Episode-Based Analytics Help Unlock Healthcare Value
By enabling healthcare organizations to better assess risk at the patient level and develop a more nuanced understanding of care delivery, episode-based analytics are essential to the healthcare industry’s shift from volume to value. Episode-based payments, or bundled payments, have become an increasingly important part of value-based care agreements between payers and providers in recent years. An episode of care is a group of clinically related services delivered to a patient over time, such as the term of a pregnancy culminating in delivery, or a knee replacement and rehab. Many episode-based payment models have shown potential to lower costs while maintaining or improving quality. For example, Horizon Blue Cross Blue Shield of New Jersey reported that its episodes-based program for commercial and Medicare Advantage Plan members reduced hospital readmission rates after hip replacement by 37 percent and the rate of C-sections among pregnant women by 32 percent. (Health Data Management, August 12, 2019)

Advancing Bundled Payments Through Radiation Oncology Episodes
On July 10, 2019, the Centers for Medicare and Medicaid Services (CMS) announced a proposal to test bundled payments for radiation oncology services for 17 types of cancer (see exhibit 1). Although it shares features with existing bundled payment programs, the Radiation Oncology (RO) Model is positioned to launch CMS payment policy forward with novel features aimed at curbing known inefficiencies in spending on radiation therapy.

Exhibit 1: Cancer types included in the RO Model

Source: Draft Proposed Rule

As proposed, the RO Model shares or extends features used in preceding bundled payment programs. Like those in the ongoing Oncology Care Model (OCM), episodes in the RO Model would be triggered by initiation of therapeutic service -- in this case, radiation therapy. Like the Comprehensive Care for Joint Replacement (CJR) Model, the RO Model requires participation based on location in randomly selected geographic markets. The RO Model also ensures that CMS achieves savings by setting a discount factor (that is, the percentage by which CMS reduces payment for an episode, relative to traditional fee-for-service amounts) and sets payment based on national base rates adjusted for each participant’s geographic location, patient panel, and historical treatment patterns. Like the OCM and CJR Model, the RO Model works by adjusting financial savings or losses based on performance on a small number of quality metrics. Finally, the RO Model follows the precedent from other recently implemented bundled payment programs by qualifying as an advanced alternative payment model (APM) under Medicare’s Quality Payment Program. Despite these similarities, the RO Model is also poised to drive value by pulling three “policy levers” that have either been partially and wholly unexplored in prior programs. (Health Affairs, August 1, 2019)

The Adoption and Spread of Hospital Care Coordination Activities Under Value-Based Programs


Objectives: To examine the relationship between participation in value-based programs and care coordination activities.

Study Design: Cross-sectional, observational study of 1648 US hospitals using the American Hospital Association (AHA)’s 2013 Survey of Care Systems. Value-based program participation included participation in either an accountable care organization (ACO) or a bundled payment program. We assessed adoption (whether a hospital was using any of a set of 12 care coordination activities in the AHA survey) and spread (in each hospital adopting care coordination activities, how extensively those activities were implemented throughout the hospital).

Methods: Ordinary least squares regression assessed associations between participation in an ACO or bundled payment program and the adoption and spread of 12 care coordination activities.

Results: Hospitals adopted nearly two-thirds of the possible care coordination activities (mean [SD] = 7.9 [4.4] of 12). Among those hospitals adopting care coordination activities, there was a relatively moderate spread of these activities (mean = 2.5; range, 1 [minimally used] to 4 [used hospital-wide]). Hospital participation in an ACO was associated with the adoption of 3.07 more care coordination activities (P <.001), on average, and 0.16 more points on the scale of spread of care coordination activities (P <.001) compared with hospitals that were not participating in an ACO. Hospital participation in a bundled payment program was associated with the adoption of 1.84 more care coordination activities (b = 1.84; P <.001) but not greater spread (b = –0.04; P = .54).

Conclusions: Value-based programs such as ACOs appear to encourage the adoption and spread of care coordination activities by hospitals.

(American Journal of Managed Care, August 2019)

Who's Next in Line for New Payment Models? Everybody!
HHS and CMS recently unveiled the CMS Primary Cares Initiative, a group of voluntary payment models that CMS hopes will move primary care farther down the road to value-based care. Recognizing that primary care resources are stretched, CMS hopes the initiative will improve access, quality of care, and outcomes for Medicare patients by encouraging primary care physicians (PCPs) to play a more prominent role in caring for patients with complex conditions. While the Primary Cares Initiative focuses on PCPs, it has implications for all providers, particularly specialists. Simply put, the initiative is just one more indication that CMS is moving forward on their promise to transition healthcare to value-based care, and it is only a matter of time before CMS sets its sights on specialty-focused Advanced Alternative Payment Models (AAPMs). The majority of today’s healthcare delivery systems are designed to be reactive and address problems once they exist. The new models reward providers for delivering proactive care and keeping patients healthy, helping to prevent chronic conditions and identifying conditions that require specialty care earlier. Theoretically, fewer and less costly resources should be required to manage conditions, and better patient outcomes should be achieved. For example, in oncology, fewer patients may be diagnosed with cancer or patients may be referred to an oncologist earlier, resulting in cost savings and better outcomes. Oncology has already seen the emergence of a CMS-driven APM, the Oncology Care Model (OCM), a 5-year pilot program designed to reduce the cost of care while improving quality, care coordination and patient outcomes. The OCM will most likely lead to a more sophisticated APM when the pilot ends in June 2021. (American Journal of Managed Care, August 2019)

Small, Rural Hospitals Not Using Bundled Payment Models: Study
Hospitals signing up for bundled payment options tend to be larger and better resourced than hospitals that are not enrolling, according to a new study published in JAMA. Bundled payments are a value-based payment option in which providers are reimbursed based on expected costs for a clinically defined episode of care, such as all services tied to a surgery, as a strategy for reducing healthcare costs. Typically, a bundle includes all the costs related to hospitalization through 90 days after discharge. Several initiatives have been rolled out by the Centers for Medicare & Medicaid Services (CMS) in an effort to move providers toward value-based payment models. The Bundled Payments for Care Improvement (BPCI) initiative and BPCI-Advanced were established in 2018. An additional five primary care payment models were introduced in April under the Trump administration in an effort to improve value-based care. (Fierce Healthcare, July 23, 2019)

Evaluation of Economic and Clinical Outcomes Under Centers for Medicare & Medicaid Services Mandatory Bundled Payments for Joint Replacements


Question How did Medicare spending, quality, volume of episodes, and patient characteristics change for primary lower extremity joint replacements after the Comprehensive Care for Joint Replacement model was instituted?

Findings In the first 2 years, 90-day Medicare Part A spending decreased significantly by $582 per episode (-2.5%) associated with the Comprehensive Care for Joint Replacement model, driven by a 5.5% decrease in postacute spending. No detectable changes in hospital length of stay, readmissions, complications, 30- or 90-day mortality, volume of episodes, or patient characteristics relative to control were found.

Meaning Over 2 years, the Comprehensive Care for Joint Replacement model was associated with reduced Medicare Part A spending driven by postacute savings, without changes in volume, quality, or patient selection. ABSTRACT

Importance In 2016, the Centers for Medicare & Medicaid Services (CMS) launched its first mandatory bundled payment program, the Comprehensive Care for Joint Replacement (CJR) model, by randomizing metropolitan statistical areas (MSAs) into the payment model.

Objective To evaluate changes in key economic and clinical outcomes associated with the CJR model.

Design, Setting, and Participants A retrospective, national, population-based analysis of Medicare fee-for-service beneficiaries undergoing lower extremity joint replacement was conducted using 100% Medicare Part A data and 5% Medicare Part B data. Within an intention-to-treat framework, a difference-in-differences approach was used to compare Medicare spending, quality of care, volume of episodes, and patient selection in episodes of lower extremity joint replacements in the first 2 years of the program between propensity score–matched CJR and non-CJR hospitals (episodes initiated from April 1, 2016, through December 31, 2017, with the latter completed by March 31, 2018). Lower extremity joint replacement episodes in MSAs randomly assigned to the CJR model were compared with those in MSAs not assigned to the CJR model.

Exposures Random assignment of MSAs into the CJR model within prespecified strata.

Main Outcomes and Measures Spending and its components, quality of care, volume of episodes, and patient characteristics were the main outcomes.

Results After propensity score matching, there were 157,828 primary lower extremity joint replacement cases across 684 hospitals in the CJR (treatment) group (101,641 [64.4%] women; mean [SD] age, 72.8 [8.9] years) and 180,594 cases across 726 hospitals in the non-CJR (control) group (115,580 women [64.0%] women; mean [SD] age, 72.6 [8.8] years). The CJR was associated with a decrease of $582 per episode in Medicare Part A spending, a 2.5% savings on claims (95% CI, -$873 to -$290; P<.001) driven by a 5.5% decline in 90-day postacute care spending, concentrated in skilled nursing facilities (-4.5% change from baseline; 95% CI, -$460 to -$26; P=.03) and inpatient rehabilitation facilities (-22.9% change from baseline; 95% CI,-$497 to -$176; P<.001). Estimated savings on claims, while consistent with changes in practice patterns, may not have exceeded the reconciliation payments to hospitals reported by CMS to date. No significant changes in hospital length of stay, readmissions, complications, 30- or 90-day mortality, volume of episodes, or patient characteristics relative to control were found.

Conclusions and Relevance The CJR was associated with reduced Medicare Part A spending on claims over 2 years, largely through lower postacute spending. Mandatory bundled payments may serve as a useful model for policy efforts to change clinicians’ and facilities’ behavior without harming quality.

(Journal of the American Medical Association, June 3, 2019)

Will Increasing Primary Care Spending Alone Save Money?
Primary care, defined as core functions that patients receive from their usual source of care, is an essential component of health care and is associated with better-quality care, patient experience, and outcomes including lower mortality.1 Observational studies have also linked primary care to lower levels of spending.2 However, from a policy perspective, a key question is whether increasing primary care spending by a state or the nation would slow the growth of total health care spending. In recent years, policymakers have increasingly considered spending more on primary care to improve population health and slow total spending. Rhode Island statutorily required commercial insurers to increase the proportion of health care spending on primary care by 1 percentage point per year, raising statewide primary care spending from $47 million to $74 million over 7 years.3 Other states, including Delaware, Vermont, Maine, Oregon, and West Virginia, have passed or considered similar legislation. In May 2019, Colorado passed a bill that sets targets for primary care investments with the explicit goal of generating net savings. The Massachusetts Medical Society is considering advocating for doubling the state’s share of spending on primary care. Federally, the Centers for Medicare & Medicaid Services’ new Primary Cares Initiative also aims to strengthen primary care to slow spending, building on its Comprehensive Primary Care models. Such efforts to boost primary care spending often receive bipartisan support. (Journal of the American Medical Association, August 15, 2019)

WHITE PAPER: Reading the Signs: Three Patient and Provider Realities that Are Converging to Drive a Modern System of Agreement

Click on image to link to the download registration page.

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Integrating the Social Determinants of Health into Value-based Care

Peter Long, PhD
President and CEO, Blue Shield of California Foundation; Former Senior Vice President, Henry J. Kaiser Family Foundation; Former Director of Research and Planning, The California Endowment, San Francisco, CA