The Centers for Medicare and Medicaid Services (CMS) proposed a program on Monday that would hold hospitals in 98 randomly selected metropolitan statistical areas (MSAs) accountable for the cost of bypass surgery and myocardial infarction (MI) treatment, as well as the quality of care for both.
In 2014, Medicare’s cost for hospitalizations associated with MI exceeded $6 billion, according to CMS, and the cost for those treatments varied by as much as 50 percent.
Under the proposed program, which would go into effect on July 1, 2017, Medicare would reimburse providers a fixed amount per beneficiary for one episode of care. The covered period would include the inpatient stay and the 90 days after discharge. CMS would establish annual target prices, and hospitals that hold costs below the target while meeting benchmarks for quality would receive quality-adjusted payments. Hospitals that exceed the target, however, would eventually be expected to pay Medicare a percentage of the difference. The financial risks and rewards would be phased in during the five years of the program.
Hospitals in rural counties would be excluded from the requirements, and rural hospitals within the selected MSAs would have limited financial risk.
The proposal would also extend CMS’s first bundled-payment program—the Comprehensive Care for Joint Replacement model initiated in 67 MSAs earlier this year for total hip and knee replacement surgeries—to include repairs of hip and femur fractures.
A provision of the new proposal would make it possible for physicians participating in either bundled-payment program to qualify for additional bonuses through the proposed Quality Payment Program.
Another provision would promote cardiac rehabilitation services, which have shown effectiveness in reducing the risk of subsequent MI or death. This incentive model would also be open to hospitals beyond the 98 bundled-payment MSAs.
The Medicare Acute Care Episode demonstration, an earlier CMS pilot program that tested bundled payments for 28 cardiac inpatient surgical services and procedures in four states, produced savings of $319 per patient. A separate bundled-payment program for cardiac care at Geisinger Health System reduced 30-day readmissions, decreased patient-reported complications, increased discharges to patients’ homes and eliminated in-hospital mortality.
A statement by the American Hospital Association noted that this is the third mandatory demonstration model CMS has put forth in just over a year and said the agency “is putting the success of these critical programs at risk.”
Comments on the proposed program are being accepted until Sept. 24.
Our Take: Pay attention, post-acute care providers. As CMS continues to push the bundled-payment model, hospitals are on the hook for greater risk. More importantly, they’re at risk for what is largely out of their hands. Hospitals will seek to foster better relationships with home health and cardiac rehabilitation providers because they need to control costs and achieve superior outcomes.
Personal home care services companies like Visiting Angels and Home Instead have an opportunity to contract with hospitals to do things outside a hospital’s core competency—think medication reminders, encouraging patients to eat healthy meals, and getting them to cardiac rehab facility.
Here, too, we see an opportunity for pharma. If your drug has demonstrated superior outcomes or lower costs (or both), bundles are a way to protect pricing and increase share. This is true no matter whether Medicare pays the bill or some other insurer does.
CMS’ push toward value, and more broadly provisions in the Affordable Care Act, will create winners and losers. In our view, the rapidly evolving payment environment has created substantial opportunity for those companies able to envision that opportunity and capitalize on it. Bundles are a great place to start.