Are bundled payments an innovation in care delivery? has been saved
Are bundled payments an innovation in care delivery?
Health Care Current | January 31, 2017
This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.
- My Take
- Implementation & Adoption
- On the Hill & In the Courts
- Around the Country
- Breaking Boundaries
Are bundled payments an innovation in care delivery?
By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte Consulting LLP
In health care, innovation can be defined as getting more value for less cost. And, at the beginning of last year, I suggested that the US Centers for Medicare and Medicaid Services (CMS) Innovation Center was one of health care’s innovators of the year. I said this because of the work that the Innovation Center has done to advance a game-changing payment model: bundled payments.
When I wrote that article, the Innovation Center had only implemented the Bundled Payments for Care Improvement (BPCI) program – a voluntary program that had 1,618 participating health care organizations targeting 48 conditions as of October 2015. But, only one year later, the Innovation Center has expanded that footprint. As of today, CMS has initiated mandatory bundled payment programs across the US, targeting four conditions: heart attack treatment, bypass surgery, surgical hip and femur fracture treatment, hip and knee replacements.
These models are no less than complex. To coordinate and manage the patient’s care and journey across multiple organizations, awardees must:
- Use an agreed upon care plan
- Engage the patient consistently
- Share clinical results
- Hit quality targets and service levels
- Reconcile the financial and payment amounts
As a sign of this complexity, under BPCI, many providers are working with third party organizations to help perform these required tasks. Many of today’s processes and clinical and administrative technology are not configured to support bundled payments. These so called “conveners” provide technical assistance to awardees to reduce the administrative burden on providers.
Based on a recent survey, Navigating bundled payments: Key strategies to reduce costs and improve health care, which Deloitte conducted with 20 health systems, conveners, technology companies, skilled nursing facilities (SNFs), and health plans participating in bundled payments, we’re seeing early results from this effort. We came out with three key takeaways from those interviews.
Invest in analytics and other technologies
Identifying the patients that are covered in a bundled program is the first step. Managing the physicians’ referral patterns, including the post-acute services, the clinical protocols for follow up, outcomes, and cost are all fundamental to developing a new best practice. These are all crucial to managing a successful bundled payments program according to the respondents. But, many organizations have found they have to do this on their own. Like the health systems implementing bundled payments, CMS is learning from implementation successes and failures and making adjustments to the BCPI program as needed. The organizations noted that continued communication and collaboration between CMS and health systems will be important. While it is largely understood that they should expect a lag time with CMS data, the organizations noted that having more data on a monthly rather than quarterly basis would help for planning purposes. Health systems have also found that having their own analytical capabilities or leveraging a technology company or convener is critical to identifying variation sources and savings opportunities.
Reduce use of SNFs
The interviewees widely agreed that most of the savings for orthopedic bundles have come from reduced use of SNF care. As a first step, many use detailed analytics to review utilization and outcomes across all the skilled nursing facilities in their market area. This can come in the form of avoiding the use of SNFs altogether or by shortening the length of time that patients spend in SNFs after they are discharged.
Engage the care team and patients
One of the core principles of alternative payment models (APMs) is aligning and engaging care teams to move away from the siloed approach typical of the traditional health care system. Health systems participating in bundled payments may need to be able to coordinate and manage care over different settings and over a longer time period. An engaged care team that can track patients, share care plans, and communicate with each other to achieve desired clinical and financial outcomes is a necessity under these models. It also means that educating patients and families early about their condition, the surgery or procedure they are going to have, and steps they could take to be as healthy as possible will likely be critical for success.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) makes these findings all the more relevant. Since MACRA enjoys bipartisan support, many in the health care industry have said that implementation is likely to continue under the new administration, further accelerating the adoption of APMs, including bundled payments.
Last year, I ended on a note that organizations that had not participated in BPCI would not have to miss out because CMS had begun to implement the mandatory bundles. There is some question as to what the nominee for Secretary of the US Department of Health and Human Services (HHS), Tom Price, will do once he is confirmed. Price has voiced opposition to these models. But, what he has voiced opposition to is the mandatory nature of the models – which means HHS may allow more flexibility. He has not indicated he would remove them entirely.
In Price’s testimony before the Senate Finance Committee last week, he said that he believed expanding innovation in health care is important. He also said that the Innovation Center is “the vehicle that just might do that.” My bet is that bundled payments may continue to be a part of the innovation toolbox that health care legislators and regulators will use as we find ways to deliver more for less – greater value for lower cost.
Implementation & Adoption
Medicare Advantage enrollees
use less post-acute care and have better health outcomes
Medicare Advantage (MA) enrollees are less likely to be admitted to inpatient rehabilitation facilities (IRFs) and have shorter stays at SNFs compared with fee-for-service (FFS) Medicare enrollees, according to a new study published in Health Affairs. Researchers analyzed discharge data for patients who were hospitalized for joint replacement, stroke, and heart failure. They found that MA enrollees are less likely to be readmitted to the hospital within thirty or ninety days and more likely to return to the community after being discharged from post-acute care.
As shown in the chart:
- MA enrollees discharged after joint replacements are 2 percentage points more likely to be admitted to a skilled nursing facility, but stay 3.2 fewer days than FFS Medicare patients on average.
- Differences in the use of post-acute care facilities between MA enrollees hospitalized for a stroke or heart failure are similar to that of joint replacement patients.
- MA enrollees with heart failure are less likely to be admitted to a skilled nursing facility compared with FFS enrollees.
Analysis: The prospective payment system in traditional FFS Medicare gives few incentives for effective coordination between hospitals and post-acute care. Moreover, Medicare pays different amounts and uses different methodologies for the different settings, which can drive variation in cost per episode.
(Source: Huckfeldt et al., “Less intense post-acute care, better outcomes for enrollees in Medicare Advantage than those in fee-for-service,” Health Affairs, 2017)
CBO: Health care spending projected to increase as share of GDP
The Congressional Budget Office (CBO) projects that Medicare and Medicaid spending per beneficiary will grow faster than the economy over the next decade. CBO projects the population of people age 65 and older will increase by 39 percent over the next ten years, while the population of people age 20 to 64 will grow just 3 percent during the same period. CBO says that Social Security and Medicare spending for people age 65 and older is roughly one-third of all federal non-interest spending in 2017 and projects it to reach approximately 42 percent by 2027.
- Outlays for mandatory programs reached $2.4 trillion in 2016, a $133 billion increase from 2015, reaching $4.3 trillion by 2027.
- Mandatory outlays are 12.9 percent of gross national product in 2017, and will be 15.4 percent by 2027.
- In 2016, the largest spending increases were in Social Security, Medicare, and Medicaid. Medicare grew 9 percent, and Medicaid grew 5 percent.
CBO’s calculates its baseline projections assuming that current laws, including Medicaid expansion and other laws, remain in place.
(Source: The Congressional Budget Office (CBO), The Budget and Economic Outlook: 2017 to 2027, January 24, 2017)
On the Hill & In the Courts
Aetna-Humana merger blocked in US District Court
Last Monday, DC District Court Judge John Bates ruled against the proposed merger between Aetna, Inc. and Humana, Inc. The two companies initiated the merger in July 2015, but the US Department of Justice (DOJ) filed a complaint shortly after they filed. The DOJ said that combining the firms would substantially reduce competition in the MA and individual insurance markets.
The case rested on three main points:
In his ruling, Judge Bates also stated that the efficiencies, or programmatic and administrative savings, that the firms could potentially achieve by combining assets and governance would not be enough to justify the merger. According to expert testimony provided by Aetna and Humana, the merger would have created $2.8 billion in efficiencies for the firms and $300 million for government payers and consumers. The DOJ expert estimated the total efficiencies at only $73.2 million. The Court noted the difficulty in projecting efficiencies, that any estimated efficiencies could not outweigh the impact on concentration in the MA market, and that the Supreme Court has never officially recognized an efficiencies defense in a case like this one.
HHS Secretary Nominee Tom Price testifies before Senate Finance
Last week, President Trump’s nominee for HHS Secretary, Representative Tom Price, testified at a hearing before the Senate Finance Committee. Price’s first Senate confirmation hearing was before the Senate Committee on Health, Education, Labor and Pensions (HELP) on January 18 (see the January 24,
During the hearing, members asked Price similar questions as those in the earlier hearing, but more questions on drug prices:
White House suspends new and pending regulations
President Trump issued a regulatory freeze last week, an action common for new administrations. The freeze halts any regulations from taking effect until the new administration reviews them. It applies to any new regulations or guidance, any regulations or guidance under review, and any regulations or guidance that has been published but not yet implemented.
CMS has several published rules impacted by the freeze:
- Pending updates to supplemental “pass through” payments to providers that care for low-income patients in Medicaid managed care
- Program integrity enhancements for providers enrolling in Medicare
- Updates to pre-existing condition insurance plans
- Conditions for participation for home health agencies
- Bundled payments for cardiac care and joint replacement
- Medicare appeals
- Sharing information among health care provider with substance abuse patients
The freeze allows but does not require changes to the effective dates of postponed regulations.
Republican lawmakers offer two new ACA replacement plans
Last week, Senators Bill Cassidy and Susan Collins introduced the Patient Freedom Act of 2017, a bill that would partially repeal the Affordable Care Act (ACA) and give states the option to keep select provisions. Senator Rand Paul also introduced a bill to fully repeal and replace the ACA. The Cassidy and Collins plan depends on the revenue from ACA taxes to fund the ACA alternative, while Senator Paul’s plan would repeal all of the ACA taxes.
Patient Freedom Act of 2017
The bill would repeal Title 1 of the ACA, which includes the individual and employer mandates, but keep essential consumer protections and provisions on Medicare and taxes. The bill would include insurance requirements related to individuals with pre-existing conditions, guaranteed issue and guaranteed renewability, and coverage of young adults until age 26.
Under this plan, states would have the following options:
- Maintain the ACA: Keep Title 1 of the ACA, allowing residents to continue to get federal premium and cost-sharing subsidies in the exchanges and federal match for Medicaid expansion. The federal government would cap payments so they would be no larger than payments under the second option.
- Establish a market-based system: Move to a market-based system, receiving 95 percent of the federal premium and cost-sharing subsidies and of the match for Medicaid expansion. But, the funds would be deposited in individual Roth Health Savings Accounts (HSAs).
- Reject any federal assistance: Design and regulate insurance markets how the state sees fit, but with no money for insurance subsidies or Medicaid expansion.
The Obamacare Replacement Act
Senator Paul’s plan would repeal the individual and employer mandate, essential health benefits, medical loss ratio, and other mandated provisions of the ACA and provide private health insurance reform. The plan would also:
- Require individuals with pre-existing conditions to obtain coverage within two years of the bill’s passing. After that, the continuous coverage requirements under the Health Insurance Portability and Accountability Act would protect people in the group market from being denied coverage.
- Give individuals tax credits for HSA contributions of up to $5,000 and eliminate the maximum allowable contribution and the requirement that an individual
beenrolled in a high-deductible health plan to use an HSA.
- Reform the individual market by allowing individuals to “pool” together to purchase insurance by forming Independent Health Pools.
- Tax exemptions for premiums would be available to those who purchase insurance in the individual market.
Around the Country
Massachusetts governor proposes fining employers that do not offer health coverage
Massachusetts Governor Charlie Baker released a budget plan that would require employers to spend at least $4,950 on their employees' health insurance premiums or HSAs. It would fine employers with more than 10 employees $2,000 per employee if they do not offer health insurance.
The provision was in the state’s 2006 health care reform package but was dropped because employers resisted it. Many of them said that the rule would be a new, expensive tax and would be especially hard on small employers.
The penalty could shift working people from MassHealth, the state's Medicaid program, to employer coverage. MassHealth covers 1.9 million low-income people and accounts for nearly 40 percent of the state budget. The program’s spending on employed individuals increased from $648 million in 2011 to nearly $1.7 billion in 2015, as approximately 118,000 full-time employed workers enrolled in MassHealth between 2011 and 2015. The governor’s office says that most of those people were offered health care coverage through their employer.
Governor Baker also proposed capping some payments to providers, eliminating certain hospital fees, and ending new coverage requirements that drive up premiums. The state legislature is now considering the proposal.
Governors say Congress should not shift health care costs to states
The National Governors Association asked Congress not to shift costs to states in a letter responding to House Majority Leader Kevin McCarthy’s request for input and recommendations on repealing and replacing the ACA (see the December 13, 2016 Health Care Current). The bipartisan letter said that states and the federal government should share the responsibility of providing health care to vulnerable populations.
The governors said that states have pursued diverse approaches to providing health care and managing costs among their residents and want to continue driving innovation in the delivery and payment of services.
Will innovative health systems make ER waiting rooms obsolete?
Geisinger Health Systems is trying to make emergency room wait times a thing of the past. In a provider-focused system, the patient waits for the care team. Geisinger and a few other health systems want to change the paradigm to a more patient-centered one, which ideally would eliminate wait times.
Geisinger wants to phase out ER wait times in two years through strategies that include hiring more clinicians and implementing online registration through a mobile app. The system may convert its physical waiting room into clinical space. Reduced wait times could reduce illness and spread of infection as well as being more patient centered by increasing patient satisfaction and comfort.
Startups and other companies that develop mobile apps and other technology platforms are striving to help health systems reduce wait times. One company, CrossChx, specializes in creating patient health identification to streamline communications among different hospital departments and staff who share and exchange patient information. Streamlining this information among staff is one strategy to reduce wait times. Another capability of CrossChx’s tools involves letting patients and families know how long the wait is. While this may not eliminate the wait time, it gives patients more information, which can reduce frustration. The company has an app called QLess, which alerts users about their wait time and can enable them to register remotely, potentially saving time.
Zoom+ is another company targeting wait times and patient experience. It is offered by a medical retail clinic provider that recently started selling health insurance through the Oregon exchange; its target population is millennials. It allows patients to make same-day appointments through a mobile app, keeps them updated on wait times in both urgent care and primary settings so they can avoid a waiting room, and offers a one stop shop approach for appointments, labs, and medications.
Analysis: A key question is whether or not getting rid of ER wait times would save hospital money or reduce revenues. Some analysts think it is possible
The Deloitte report, Emergency room use under the ACA, shows that improving outcomes and patient experience in the ER calls for:
- Expanding access to lower-cost settings
- Better directing patients to the right care setting through increased education and coordination activities.