The CFA Perspective

Medicare Cardiac Bundles:  Mandatory vs. Voluntary

Posted by John Meyer, FACHE

1/23/17 6:00 AM

Medicare Cardiac Bundles - Mandatory vs Voluntary.jpgIn past blog posts we have tried to keep you up-to-date on the proposed mandatory Medicare cardiac bundles that are (currently) set to commence in July 2017 (see Mandatory Medicare Cardiac Bundles: Final Regulations (Possibly) ).  As we have written, there is conjecture that the new model is in jeopardy because of the stated position of the HHS director appointee, Representative Tom Price (R-GA).  Dr. Price has publicly voiced his opinion that the mandatory model is going too far, too fast and would “dramatically alter the delivery of care”.  Of course CMS officially defends the model, its goals, objectives, and its implementation date.

Of note is the fact that Dr. Price voted for MACRA, which contains value-based payment provisions including Merit-Based Incentive Payment Systems (MIPS), Alternative Payment Models (APMs), which could possibly include Medicare Cardiac Bundles, and potentially Advanced APMs (essentially primary care focused).  He seems to be supportive of value-based payment models for physicians, at least in some forms and under some conditions.

Mandatory vs. Voluntary

At this time, Dr. Price has not been confirmed by Congress, and therefore has not stated an official position on the mandatory Medicare cardiac bundle issue.  There is some speculation in the industry that Dr. Price, based upon past statements, may not object to the Medicare bundled pricing model on a broad conceptual basis, but rather object to its mandatory versus voluntary strictures.  He may, instead, try to cancel implementation of the model completely.  But what if the only change is from mandatory participation to voluntary participation?  What impact will this have on the hospital industry, level of participation and individual hospital cardiac programs?

Realistically, the majority of hospitals will wait for the decision to be made within HHS and prepare only when/if mandatory participation is confirmed and when no other reasonable alternative exists.  Others will embrace the inevitability of value-based pricing, regardless of payer sponsorship and operational details, knowing that the benefits of orderly preparation will benefit overall financial performance, operational efficiency and effectiveness, and, hopefully, produce a marketplace advantage.  Value-based pricing models are here to stay; their share of the market may be relatively small at present, particularly on a mandatory basis, but they will increase and hospitals need to be prepared for this eventuality.

History of Voluntary Participation

The history of voluntary participation in Medicare-sponsored alternative payment has been mixed, going back to the original CABG surgery demonstration project and subsequent limited participation programs.  The number of hospitals that have volunteered to test these models has been relatively small, as would logically be expected from participants risking their dollars and reputations in unproven Federally-sponsored experiments with relatively large downside risks and relatively small upside potential.  However, if you asked the average CV service line administrator to name the hospitals that participated, they would likely be able to name 90+% of them accurately.  Participation did matter, did make news, and to those participants, it provided valuable experience in a time period when mistakes in judgment were less consequential (and ultimately less costly) than they will be under mandatory bundled pricing.  Is there any question in anyone’s mind that the hospitals that participated in previous models, if mandated to participate, or volunteer to participate in any upcoming Medicare cardiac bundle, will be better prepared than those that did not participate?

Implications

By now it should be obvious to the reader that CFA strongly believes that hospitals should prepare for Medicare bundled pricing, regardless of whether it becomes mandatory or voluntary.  Preparation for the inevitable is good management and should be top-of-mind for every CV service line administrator.  While the details of every payment-sponsored model will be different (e.g., specific patient populations and/or procedures, the inclusion/exclusion of coverage 90-days post-acute care discharge, payment rates and standards of performance), the underlying fundamentals needed to succeed remain the same and are well understood in broad terms.  

Potential Benefits

Here are some of the benefits that could accrue to hospitals preparing for bundled pricing, on a mandatory or voluntary basis:

  • Experience.  Every hospital needs the experience of building a bundled price to understand what is required and what gaps in performance need to be filled to be successful.  This includes determining what resources are required and whether or not the hospital is internally capable without outside consulting experience.  An important determination.
  • Team Building.  A team of experts is required to build a bundled price and needs to be assembled to function effectively regardless of payer-sponsorship.
  • Physician Alignment.  Physician participation and alignment with hospital goals will be critical and needs to be structured, modeled and tested to make up for any identified gaps.  Physician leadership needs to be identified and educated.
  • Operational Assessment.  Building a bundled price should provide the opportunity to critically assess the operational and infrastructure needs of the patients included in the bundle.  Identifying performance improvement opportunities will be critical to efficient and effective provision of required services.
  • Incorporating Best Practices.  Standardization and elimination of unnecessary variation while identifying best practices is a critical endeavor and supports the uniform provision of excellent services to targeted patient populations.
  • Quality Outcomes.  All payment models will be tied to clinical and patient experience outcomes metrics.  Identifying and managing these outcomes and any gaps in performance will be critical.
  • Cost Finding and Cost Management.  Having a complete understanding of the target patient cost structure is critical and will be necessary to build a successful bundled price.  Ongoing cost management and cost reduction activities, done concomitantly with operational and infrastructure assessment, are necessary to begin to understand the implications of care provision, unnecessary variation and post-acute care costs.
  • Post-Acute Care.  Broadening the hospital’s role in care provision to include the potential for post-acute care responsibilities is a new area for hospitals.  Networks of select providers may need to be identified, evaluated and developed to participate in new payment model situations.
  • Business Infrastructure.  The business processes supportive of payment models are often misunderstood.  Assessing how pricing, billing, and processing is important to the payer and often underdeveloped.  For example, how do you identify the targeted patient population so they can be appropriately managed and tracked during their acute care and post-acute care stay?  Addressing these issues and streamlining the processes will go a long way to efficient care provision, billing and collection.
  • Other.  Inevitably, these types of projects identify issues and gaps in performance that will need to be addressed and that may have broad implications beyond the targeted patient group.

Successfully addressing these and other related issues will provide a valuable experiential basis for the hospital to proceed with virtually any alternative payment model that presents itself.

Conclusion

At this time, CFA does not know what will happen with the Mandatory Medicare Bundled Pricing model.  Will it proceed, be modified, or not implemented at all?  But we do know that whether or not it proceeds, it is vitally important that all hospitals recognize the important trend towards bundled pricing and the inevitability of this model’s widespread adoption by various payers.  Should participation in the Medicare Bundled Pricing model become voluntary, then all hospitals must carefully consider this opportunity and participate accordingly.  Past experience in these types of programs has paid dividends for others; they should pay dividends for your hospital’s program as well.

As always, CFA invites your comments, suggestions and questions.  For additional information, including posts specific to bundled pricing and Medicare’s new cardiac bundle, please visit our blog.

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