Bundled Payment for Cardiac Services: “Why would we want to do that?”

Following our posting of the blog announcing the CMS Final Rule ending the proposed Mandatory Cardiac Bundled Payment initiative posted on December 5, 2017, a little over one month later, CMS announced its new voluntary bundled payment model (see CMS Announces New Voluntary Bundled Payment Model for Ten In- and Out-Patient Cardiac Clinical Events, posted January 10, 2018.)

  After these events, CFA was engaged in a conversation with a cardiac service line administrator of one of the largest programs in the Western U.S.  When we mentioned the formal cancellation of mandatory cardiac bundles, this person asked a key question about the new CMS voluntary bundle initiative process – “Why would we want to do that?”  Frankly, given CMS’s recent webinars and proliferation of documents on the bundle, we are asking the same question!  As is often the case, the simplest most direct question often gets to the true heart of the matter.  With all the discussion (and our own past blog posts) on this subject, we are sure that this question will be asked repeatedly.  Just as a point of reference, CMS had over 600 questions submitted for its first webinar on the subject.  Since that initial client conversation, CMS announced January 9^th the new voluntary advanced bundled payment model that includes ten cardiac episodes (see table).  Given the proposed March 12, 2018 deadline to apply for the new bundle, the question asked becomes not only relevant, but also timely and challenging[1] to answer.

In thinking about an answer to this question, particularly in light of the CMS announcement, CFA offers the following for all to consider.

• A Clear Direction? – While CMS’ decision to cancel mandatory cardiac bundles is based on transitioning cost and quality improvement efforts to a more free-market approach and philosophy, it does not change the underlying intent and overall direction of the initiative. Many factors went into this decision, including an acknowledgement of the dependence upon healthcare market forces, optional versus mandatory participation, industry (particularly physician) push-back, the perceived speed of required adoption, the number of affected hospitals and geographies, the appearance of being viewed as picking “winners” and “losers,” administrative complexity and the like.  But remember that innovation in both healthcare delivery and payment methodologies is fundamental to CMS’s stated goals and is essential to improving performance outcomes and competitive advantage!

Therefore, the announcement of the new advanced bundle should not have been a surprise, but the rapidity with which they are proceeding clearly caught many off guard, as did the overall complexity involved, as did the March 12 application due date. As with many things CMS proposes this date may be pushed back depending upon demand and industry pushback.

The documented facts prove that bundles have worked in the past – lowering costs and enhancing outcomes – and will likely work in the future.  CMS is moving to bundles.  The ten cardiac episodes listed in the Request for Applications (RFA) cover a significant percentage of any program’s cardiac volume, especially procedural volume.  CFA has always believed that bundles in the form of a defined CMS innovation process looking to identify “best practice models” across the spectrum of hospital operating environments, was inevitable and represents a clear direction for the future².[2] 

• Managing Hospital and Physician Participation and Push-Back -- Obtaining hospital executive and physician participation in non-mandatory bundles has always been an issue – often the most significant and challenging issue. The posed question, “Why would I want to do that?” is most assuredly on every hospitals and physician’s mind as the potential upsides of mandatory or even optional participation are both less tangible and riskier than the perceived downside.  One potential strategy for coping with physician push-back is to incorporate their participation in (what is by any other name) bundle development that focuses on best practices, clinical care-related issues, team communication, coordination of episodes of care across a defined continuum, operational efficiency, enhancement of outcomes, and overall patient experience (i.e., directly in the clinicians sphere of influence and inherent interest) rather than an overt focus on the cost, pricing and financial aspects.  With a delineated “fine-tuned” clinical service offering, the hospital can cost, price and administratively manage a bundle when/if the market is ready, while concomitantly reaping the benefits of enhanced processes outcomes, and lowered cost on an on-going basis.  Again, CFA believes bundled pricing is here to stay, so the question is when do we take this seriously and, what if anything, do we need to do to get ready, and if we choose to participate, which episodes do we want to include (as few as possible to experiment; enough to make the effort worthwhile, more?)

A potential key “value-add” for CMS, hospital executives, physicians and clinical staff is creating a process that clearly incentivizes simplifying and streamlining delivery processes (reduced overall burden of care delivery) driven by engaged stakeholder physician-driven teams.  In our experience, this would get to the heart of the “Why would we do this?“ question by making the goal not only better clinical outcomes and cost reduction, but enhanced physician satisfaction too.  This potential innovation objective would require hospitals and physicians to develop an “overall satisfaction” metric in the new bundled process.  While trying to standardize physician satisfaction is not an easy proposition for sure, acknowledging it and developing a qualitative measure of the physician experience can strengthen the program.  These measures can include the level of technologic and operational process frustration expressed by the physicians and could help drive improvement with inefficient clinical processes and redundant or unnecessary administrative tanks that are so challenging to physicians and often impact their willingness to innovate.  We believe, based on previous CMS guidance, this is a metric they want or will want measured.

• Enhancement of Competitive Position – Bundling has the potential to enhance a hospital’s competitive position for several reasons. First and foremost, it solidifies the existing hospital/physician integration relationship by supporting a process to improve patient care, in all dimensions, and potentially reward physician participants for their loyalty and efforts.  The focus on enhancing patient care processes, outcomes and costs should translate into a hospital’s competitive position and brand awareness.  In a competitive marketplace, any hospital that distinguishes itself by achieving a superior “product” – incorporated in the totality of the patient experience – should achieve a competitive advantage.  It should be potentially beneficial to have pre-tested episode “products” available for sale to non-Medicare payers.  An additional question one could pose here is, “What are the implications if your competitor bundles and you don’t?”  Do you really want your competitors to acquire this capability and experience?  We will have more on this issue in a future post.   
• A Journey not a Destination – As CFA has often stated, developing a comprehensive bundle should not be viewed strictly as an end point, but rather a means toward an end. As a wise man said, it is the journey, not the destination.  The process required to build a comprehensive bundle necessitates vision, leadership, teamwork, and coordinated participation of all stakeholders.  To successfully address all of the elements that go into the creation, development and going-forward administration of a bundle requires that the entire team identifies and successfully addresses all of the elements of the targeted episode of care, incorporating consensus-based best practices, achieving operational efficiency and effectiveness, and overall patient experience across the continuum of care that may or may not need to be set in place.
• Early Adopters May Benefit – There are benefits to be had for early adopters to payment trends that may be inevitable. Those hospitals that recognize trends and anticipate their implications and the keys-for-success, can commit sufficient resources, build infrastructure, and possess the leadership and level of physician participation necessary to try new concepts could secure an enviable advantage in a particular market.  Experience builds expertise, mitigates sometimes costly mistakes, and builds infrastructure (particularly analytic and “real-time” clinical management capabilities) and confidence as trends unfold – even if they inevitably morph and change.  Recognize however, such a marketplace strategy is neither without risk nor for everyone.  The new advanced bundle offers both upside and downside risks for all participants, as they base payment/repayment on target rates and quality measures performance, care provision design innovations, and the ability to manage an episode of care across the continuum over a 90-day window.

It will be interesting to see what type of response CMS receives on March 12.  If too few applications are received by the deadline, will they extend it?  Clearly, a read of the RFA document shows that hospitals that have either prepared for or actively participated in previous CMS bundled payment models have an advantage based upon their collective experience and the supportive infrastructure and processes they have developed.  Hospitals new to bundling but who perceive the new model as an opportunity will need to scramble to make the March 12 deadline (unless CMS pushes back the filing date) and may be at a disadvantage if this application process is truly competitive.  Nevertheless, every hospital should carefully consider its options, evaluate the risk/reward equation, and its readiness to participate in this specific bundling opportunity or the next.  Surely, there will be a next. 

If you are interested in learning more about strategies to deal with bundled pricing, cardiac services strategic development, service expansion or low volume cardiac surgery programs and/or other programmatic needs for cardiovascular or other services, please contact CFA at (949) 443-4005 or by e-mail at cfa@charlesfrancassociates.com.

Footnotes

[1] A particular challenge involves participants (both hospitals and physician group practices alike) choosing to become “Convener” or “Non-Convener” participants with implications for bringing together multiple downstream entities or “Episode Initiators.”

[2] It is assumed, but has yet to be confirmed, that non-participating hospitals will continue to be paid existing fee-for-service rates until some future date when Medicare revises its current payment system.