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How to Get the Most Value from Bundled Payments

April 24, 2018 BY Alanna Moriarty

How to Get the Most Value from Bundled Payments

*Updated June 2019

The Centers for Medicare and Medicaid Services (CMS) first announced participants for the Bundled Payments for Care Improvement (BPCI) program back in January 2013. This program was designed as a way to move hospitals toward value-based care by incentivizing providers to advance coordination and efficiency of care while also improving quality and outcomes at lower costs.

In January 2018, CMS announced the implementation of Bundled Payments for Care Improvement Advanced, running from October 2018 through December 2023 and testing bundled payments for 32 clinical episodes. Like many CMS programs, BPCI is intended to improve care coordination and clinical outcomes while reducing care costs and unnecessary treatments. However, as of March 1, 2019, the reassessment period for organization to decide whether not to participate in the bundled payment model, more than 250 providers (16 percent) dropped out of the advanced program because they found they weren't meeting financial targets. Ultimately, the BPCI Advanced model is voluntary and, even with a 16 percent dropout rate, there is still robust participation with nearly 1,300 providers left in the program.

At its inception, Bundled Payments for Care Improvement was made up of four distinct care models that coordinate payments and penalties for distinct episodes of care. Participating hospitals and other care facilities are under an agreement to increase physician accountability for financial decisions as well as improve clinical performance during an episode of care. CMS research concluded that bundled payments s reduce care fragmentation by incentivizing effective communication between providers and care facilities, ameliorating care quality and outcomes. Hospitals participating in BPCI were more likely to be larger, non-profit facilities in urban areas. Participants were also located in larger and more competitive markets, often with fewer skilled nursing facilities, than markets with no participating hospitals.

Care Models under the Bundled Payments for Care Improvement program:

  • Model 1: Includes only the initial inpatient stay at an acute care hospital. Medicare pays the hospital at a discounted rate based on the Inpatient Prospective Payment System
  • Model 2: The episode of care includes the initial inpatient stay at an acute care hospital as well as all related medical services provided up to 90 days post-discharge
  • Model 3: An episode of care is triggered by an inpatient stay at an acute care hospital, but truly begins with provision of post-acute services from a skilled nursing facility (SNF), inpatient rehabilitation center, long-term care (LTC) facility, or home health agency (HHA)
    • Medicare provides fee-for-service payments during patient treatment, with total expenditures reconciled against the target bundled payment amount as previously determined by CMS
  • Model 4: CMS makes a single bundled payment to the hospital that encompasses all services provided to the patient by a care facility and care practitioners

BPCI Model 2 is the most popular among hospitals tracked by Definitive Healthcare, with over 400 participating facilities. Model 2 officially began in October 2013, when hospitals began bearing financial risk through the program. Retroactive bundled payments or penalties were assigned to participants to reconcile actual spending with CMS targets. An evaluation of the BPCI program, co-sponsored by CMS and the Lewin Group, reported the keys to success for Model 2 participants as well as common stumbling blocks faced in the attempt to reduce costs and improve communication between providers at disparate facilities.

Keys to Success in BPCI Model 2

  • Initial buy-in from physicians in participating hospitals offering continued support and engagement
  • Strong relationships with external contractors for data management and analysis

Positive Outcomes from BPCI Participation

  • Developed collaborative relationships with post-acute care providers to manage post-discharge care & reduce readmission  rates
  • Providers set explicit patient expectations for discharge destination to alter post-acute care path

Challenges to Success for BPCI hospitals

  • Barriers in sharing real-time patient data with post-acute care providers due to disparate electronic health record (EHR) systems
  • Difficulty in influencing post-acute care providers to alter care practices in less competitive markets

In the first two years of the BPCI program, from 2013 to 2015, 14 percent of hospitals and physician groups stopped participating in at least one clinical episode out of the 48 being tracked. Six percent of hospitals withdrew completely in this period. 

Top 10 BPCI Model 2 Hospitals by Net Patient Revenue

Hospital Name Net Patient Revenue (B) Discharges
Vanderbilt University Hospital  $3,443 57,902
Yale New Haven Hospital  $2,750 65,019
Montefiore Hospital  $2,728 86,865
Baystate Medical Center  $2,545 37,985
Mount Sinai Medical Center  $2,468 56,276
Hospital of the University of Pennsylvania  $2,448 37,929
UC San Diego Medical Center  $1,843 30,647
Northwestern Memorial Hospital $1,746 45,506
University of Utah Medical Center $1,730 31,550

Fig 1 Data from Definitive Healthcare's Hospitals & IDNs platform, June 2019, based on CMS reporting guidelines

Though bundled payments have been linked to improved care quality at lower costs, some industry experts have reservations. The American Academy of Orthopaedic Surgeons (AAOS) voiced several concerns in January 2018. Leaders at the AAOS questioned whether physicians would be likely to participate in BPCI due to the popularity and precedence of the Comprehensive Care for Joint Replacement (CJR) program. In terms of care costs, lower-extremity joint replacements at CJR hospitals did not see lower expenditures. Rather, it was independent physician groups participating in CJR that reduced lower-extremity joint replacement costs by $12.6 million in comparison.

And, as of June 2019, CJR hospitals saw significant changes in discharges to skilled nursing facilities, from 45 percent of patients to 26 percent. For skilled nursing facilities, these bundled payment models may be an area of concern. The bundled payment models tend to bypass skilled nursing facilities entirely, as rehabilitation for procedures like joint replacements increasingly move into the less-costly outpatient care settings. Because BPCI provides a single reimbursement for an entire episode of care — for instance, a hip or knee replacement — hospitals now have a significant incentive to encourage patients to go directly from the hospital to the home health setting for recovery. 

Accessing Bundled Payments (BPCI) Data in the Definitive Healthcare Database

Interested in supporting providers that are part of alternative payment programs? Want to understand which hospitals and physician groups are currently participating in these BPCI programs? Whether it's Model 2, 3, 4, Advanced, or CJR bundled payment, Definitive Healthcare can enable you search for and fully understand CMS Programs, as well as all types of payment programs across the entire continuum of care.

BPCI-1

Fig 2 Data from Definitive Healthcare's Hospitals & IDNs platform, CMS Programs tab 

To read more about CMS program participation, claims data, and quality scores, visit the Definitive Blog.

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