More on Reimbursement

As payers see success in bundled payments, critics say model needs fine-tuning

Commercial plans are following Medicare's lead, but physicians need more flexibility, experts say.

Susan Morse, Senior Editor

New Health and Human Services Secretary Tom Price has made no secret of the fact that he dislikes mandatory bundled payments. And in general, Republicans don't like the Centers for Medicare and Medicaid Innovation coming out with initiatives they haven't approved or funded. However, that hasn't stopped commercial insurers from lining up to offer bundled reimbursement programs.

"There is a fog of war around Dr. Price and CMMI," said Tyler Dinwiddie, a market analyst who works on health plan analysis for Decision Resources Group, DRG, in Nashville. "He supports voluntary bundles for payment initiatives. I still think bundles are here to stay. A lot of health plans have invested in the models so far."

[Also: Tom Price says CMMI 'off track,' hints at changes to programs]

Insurers want in, he said, after seeing positive results from CMS's demonstration models.

"I have seen some acceleration of commercial bundles lately," Dinwiddie said.

Dave Terry, CEO of Archway Health in Watertown, Massachusetts, said he is also seeing more interest from commercial payers in bundled payments. Archway helps providers and payers set up networks for bundled payments.

"I'm getting a lot more inquiries from commercial plans," Terry said. "We think we're going to see considerable growth in the bundled payment model."

Success rises when physicians are engaged in the process. In cardiac bundles to treat heart failure, for instance, health systems experience an average 9.9 percent savings, but that figure rises to 14 to 17 percent when cardiologists are in charge of the process, Terry said.

Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, believes meeting the needs of physicians in caring for their patients will go a long way to seeing bundled payments remain a welcome part of healthcare's future.

But although there are positives, Miller also thinks the current model does not adequately meet what's needed for post-acute care.

For instance, there's nothing in the Comprehensive Care for Joint Replacement bundle to pay for care after a patient has surgery other than a skilled nursing facility, Miller said.

"There are very serious problems with that, it's not effectively risk-adjusted," Miller said. "Not all need a skilled nursing facility. (The bundle) did nothing to adjust the payment amount based on how many patients need facility-based post-acute care."

Diagnosis-related groups were only designed to account for differences in hospital costs, not post-acute care needs, Miller said. A hospital that has many joint replacement patients who need rehab in a skilled nursing facility will be penalized compared to a hospital that has fewer such patients. This creates a strong incentive for hospitals not to treat these high-risk patients.

[Also: C-suite: Keep Obamacare coverage, but not bundled payments]

While Medicare pays for home care, if someone were to create a home-based intensive rehab program, Medicare has no way to know what's being done because it's not a billable service.

"The advantage of a well-designed bundle is to give flexibility," Miller said. "People are talking about bundles as though there's so much magic to bundles. The challenge is to improve care. You don't get to better care delivery if you don't support people to get to that care."

It's the hospitals and physician who should take responsibility to decide what a patient will need for post-acute care, Miller said. If health systems aren't rushing to get into bundles, it's because these models create problems when they mandate a payment system that doesn't fit the care needed, he said.

"It's not the problem with the bundle. Tom Price is not opposed to the concept of bundled payments," Miller said. "The problem is we're going to force everyone into something before we find out if it's the right thing to do."

[Also: Lawrence General Hospital finds success, few hiccups with bundled payments]

Miller believes the future for bundled payments is in condition-based payments, with surgeons, primary care physicians and therapists all working together.

"You don't manage the surgery, you manage the condition," Miller said. "That is the frontier everyone is looking at right now."

CMS's mandatory bundled payment model for heart attack, bypass surgery and surgical hip and femur fractures covered under Medicare is set to launch in randomly selected hospitals in 98 metro areas starting July 1.

The bundles qualify as advanced alternative payment models under the Medicare Access and CHIP Reauthorization Act starting in 2018.

Twitter: @SusanJMorse

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