The CFA Perspective

Medicare Bundled Payment for Cardiac Procedures to Start in 2017

Posted by John Meyer, FACHE

8/3/16 6:29 AM

Medicare_Bundled_Payment_for_Cardiac_Procedures_to_Start_in_2017_image-732463-edited.jpgCFA’s prediction that Medicare would inevitably initiate mandatory bundled payment for cardiac procedures
, has come to pass more quickly than even we imagined.  On July 25th, HHS published their Notice of Proposed Rulemaking for Bundled Payment Models for High-Quality, Coordinated Cardiac and Hip Fracture Care.

CMS is seeking comment on the five-year demonstration, which would take effect July 1, 2017, in 98 (of 381) randomly selected metropolitan statistical areas.  No word on which areas would be targeted.  This announcement is just part of CMS’ push to expand their existing bundled payment projects in an effort to move Medicare from fee-for-service to alternative payment models to achieve a 50 percent penetration rate by 2018.

How the Bundled Payment for Cardiac Procedures Model is Intended to Work

Under the proposal, a hospital in which a patient is admitted for care for a heart attack or bypass surgery would be accountable for the cost and quality of the care provided to Medicare fee-for-service beneficiaries during their inpatient stay and 90 days after discharge.  Once the model is in full effect,

  • Hospitals would be paid a fixed target price per episode, with hospitals that deliver higher-quality care receiving a higher target price
  • At the end of a model year, the actual spending for the episode of care would be compared to the targeted price that reflects the quality outcomes for the individual hospital
  • Hospitals and physicians that provided needed care for less than the quality-adjusted target price, while meeting or exceeding quality standards, would be paid the savings achieved.  Hospitals that did not meet these standards would be required to repay Medicare.

Each year Medicare will set the target prices for different episodes of care based on a blend of regional historical data and hospital specific data on total costs for Medicare fee-for-service patients admitted for heart attack and bypass surgery – from hospitalization through 90 days following discharge.  Target prices will be “adjusted based on the complexity of treating a heart attack or providing bypass surgery.”   The target prices will be blended from hospital specific data and regional historical data, starting with the first year (July 2017 to December 2018) at two-thirds participant-specific data and one-third regional data, to the last year of the demonstration (2020 to 2021) with only regional data.

Paying for High Quality Care

Under the proposal, hospitals that produce higher quality outcomes would be paid more than those that did not.  For example, an individual hospital quality-adjusted target price would be based on a 1.5 to 3 percent discount rate relative to historical spending – with the lowest discount percentage going to those hospitals providing the highest-quality care.  The quality metrics used would be measures already in use in other CMS programs.  For example, for bypass surgery, measures would include hospital 30-day, all cause, risk-stratified mortality rates as well as HCAHPS survey results.

Implementation of the Model

The program will be phased-in according to a proposed schedule.  Possible repayment to Medicare (downside risk) would include no repayment the first year, capped at 5% the second year, 10% the third year and ultimately 20% the fourth and fifth years.  Possible payment from Medicare to hospitals (upside reward) would include possible payment capped at 5% for the first two years, 10% the third year, and 20% the fourth and fifth years.

Note that while it has been stated that the program will take place in 98 randomly selected MSA’s, 671 of those specific MSAs will be the same as are currently used in the Comprehensive Care for Joint Replacement Model (review the complete list of included MSAs here ).  Also note that there is no application process required to participate.

While CMS has proposed a formal evaluation at the end of the program’s run, there is no reason to believe – given the positive outcomes of multiple previous bundled-payment programs – that the bundled payment for cardiac procedures program will not only produce positive results, but expand to include more providers and additional patient populations.

Implications for Hospitals

As with previous bundled payment programs, response to the announcement of the expansion of the program to include heart attack and bypass surgery has been mixed but cautious.  Hospitals that have been preparing for bundled pricing (or already participating in pilot programs) will welcome this expansion – it plays to their strengths and their market positioning.  Those that are not prepared will not welcome this model.  The latest American Hospital Association (AHA) estimate is that only 30 percent of surveyed hospitals are prepared to manage bundled payments2.  The AHA’s press release on the model announcement expresses concerns that the addition of bundled payment for cardiac procedures places a significant burden on hospitals and puts them “at risk”.  Both the American College of Cardiology and the Society of Thoracic Surgeons have weighed in on the program, generally supportive of the concept, but vowing to review the program thoroughly during the mandatory 60-day comment period after publication in the Federal Register (see CMS Proposes Bundled Payment Models for Cardiac Services).

Note that CMS has also announced a model to test the effects of payment to encourage the use of cardiac rehabilitation services, and new pathways for physicians who participate in bundled pricing to qualify for financial rewards through the proposed Quality Payment Program, which implements the Medicare Access and CHIP Reauthorization Act (MACRA).  Both these important issues will be addressed in a future blog post.

CFA has written extensively on bundled payment methodologies and bundled payment for cardiac procedures, recognizing that such programs put considerable pressure on hospitals, their medical staff and network partners to coordinate care across the continuum, redefine care practices, engage in predictive analytics, reduce and manage costs and aggressively manage both quality outcomes and the overall patient experience.  

We believe that a baseline assessment of your readiness to compete in a bundled payment environment (review the list of baseline capabilities needed to thrive in this environment) is a prudent, proactive step for most cardiac care providers.  In some cases, being an early adopter in the cardiac bundled care delivery arena may provide a competitive advantage.

If you are interested in learning more about enhancing your capabilities to proper under a bundled payment system, or developing a bundled payment program for cardiovascular services, please contact CFA at (949) 443-4005 or by e-mail at

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1For example, in California, these include Los Angeles, Long Beach & Anaheim; Modesto; and San Francisco, Oakland and Hayward.

2Most Wired:  Levering data for bundled payments, orthopedics goes first, Hospitals & Health Networks, American Hospital Association, June 2016, page 16.