Health Care Current: January 5, 2016

The health care innovator of the year

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.

The health care innovator of the year

One organization in my opinion has taken a strong leadership role in breaking the constraints of our under-performing health care system to create new and exciting possibilities for dramatically improving the quality and cost of health care in this country. You may be surprised, given my private sector bent, to learn my vote for health care innovator of the year is the US Centers for Medicare and Medicaid Services (CMS).

While the ACA mandated CMS find ways to improve the cost, quality, and service of the Medicare and Medicaid programs, a federally legislated mandate doesn’t necessarily mean the outcome will be achieved. But, when you look at all of the programs, pilots, increased transparency on practice patterns and outcomes, new policies, innovation awards, convening events, collaboration with health plan and health care provider leaders, responsiveness to comments made by industry, body of work, and the early results, it’s really impressive.

The CMS Innovation Center’s goals, set by the ACA legislation, are to test innovative payment and service delivery models that reduce costs and improve quality. CMS programs are active in testing accountable care, transforming primary care, expanding home care, improving end-stage renal disease programs, reducing readmissions, hospice and many others. CMS is focused on Medicare, Medicare Advantage, Medicaid, and the dual eligible population. The Innovation Center is working with communities, states, and industry leaders to gain their support, insight, and commitment for adoption. From my perspective, many of these programs are capable of aligning the financial incentives with the desired outcome.

One initiative stands out for me as potentially game changing: the Bundled Payment for Care Improvement (BPCI). Bundled payments are not new to Medicare. Their use has historically been focused on diagnosis-related group (DRG) inpatient hospital payments and global payments to surgeons. The BPCI program includes one payment for all of a patient’s health care services for up to 90 days, starting with the patient’s admission. The payment reimburses all providers serving the patient, including the physicians, hospital, skilled nursing, home care services, rehabilitation, mid-levels, virtual care, and therapeutic and diagnostic services. This program is voluntary, but as of October 2015 has 1,618 health care organizations participating and targets 48 conditions. 341 of these organizations are awardees, and the other 1,277 are episode initiators.1

The awardee organizations assume financial risk for cost and quality performance. If the cost of the services is higher than the CMS target price, the awardee is responsible for a recoupment payment back to CMS. If the cost of services was below the target price and the quality metrics met the expectation, the awardees can get a share of the savings from CMS.

To coordinate and manage the patient’s care and journey required 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

This is a complex undertaking. Many providers are working with third party organizations to help perform these required tasks since today’s processes and clinical and administrative technology are not configured to support bundled payments.

Aligning each organization and health care providers using the same quality and financial incentive focuses the patient’s team on the same outcome – safe, effective, and efficient care. Bundled payments break the constraints of fee-for-service and promote adoption of a system rewarding managing to an outcome rather than each provider’s own objectives.

This is innovation in health care getting more value for less cost.

If you weren’t involved in BPCI…don’t despair. In April, CMS will require organizations in 67 markets to participate in a mandatory bundle program for hip and knee replacements. The health care innovator of the year is coming to your community. Happy New Year!

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Source: 1CMS, Bundled Payments for Care Improvement (BPCI) Initiative: General Information,

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My Take

By Bill Copeland, Vice Chairman, US Life Sciences & Health Care Industry Leader, Deloitte LLP

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