On January 31st 2013, the Centers for Medicare & Medicaid Services (CMS) announced the widely anticipated list of more than 450 organizations that will begin participating in the Bundled Payments for Care Improvement (BPCI) initiative, to test whether bundling payments for episodes of care results in higher quality, more coordinated care for beneficiaries and lower costs for Medicare.
For those who aren't familiar with the initiative, here's how Medicare describes the background and high level goals on their website.... "Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. Payment rewards the quantity of services offered by providers rather than the quality of care furnished. Research has shown that bundled payments can align incentives for providers – hospitals, post-acute care providers, physicians, and other practitioners– allowing them to work closely together across all specialties and settings."
Just as we saw with the rapid adoption of Medicare's Accountable Care Program, this most recent announcement signals that it's not just a few, leading edge, brand name healthcare organizations that are confident enough to dip their toe in the relatively uncharted waters of Value Based Payment, we are witnessing a broad, grass roots recognition that Value Based Payment models are here to stay and that it's prudent to jump in early, while the downside risk is minimal and the financial upside is sufficient to be enticing.
Let's take a slightly deeper look at the 4 Bundled Payment models being piloted, which ones appear to be the most popular and how many episodes most organizations are signing up for.
Who Signed Up for Which Model?
Model 1: Retrospective Acute Care Hospital Stay Only
Under this model, Medicare continues to pay physicians separately and according to the existing fee schedule but will pay participating hospitals a discounted amount for the hospital stay compared to the standard DRG payment. All DRGs are considered under the agreement and some or all of the savings below the discounted target may be shared between the hospital and physicians who participated in the care redesign efforts.
32 pilot sites - supported by three convening organizations
Model 2: Retrospective Acute Care Hospital Stay plus Post-Acute Care
Includes the inpatient stay plus post-acute care for a fixed period (30, 60 or 90 days) following discharge. Participants can select up to 48 episodes to pilot.
193 pilot sites - supported by multiple convening organizations, including Remedy Partners Inc., Geisinger Health System & Clinics and NaviHealth. Roughly split 60:40 between sites piloting the majority of the 48 currently defined episode types vs. those only exploring 1 or two episodes.
Model 3: Retrospective Post Acute Care Only
Post-acute care following inpatient stay. Episode initiated within 30 days of discharge and includes care delivered by participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency. Ends 30, 60 or 90 days after the initiation of the episode.
165 pilot sites - supported by multiple convening organizations, including Optum, Remedy Partners Inc. and Amedisys Holdings. Roughly split 70:20:10 between all 48 episodes, 16 episodes and 2 to 3 episodes.
Model 4: Acute Care Hospital Stay Only
Lump sum prospective payment that covers all services delivered to patient by the hospital, physicians and other practitioners.
76 pilot sites - supported by multiple convening organizations, including Tenet Healthcare Corporation and ScrippsCare. The vast majority of organizations choosing to pilot ten or less episode types, mainly orthopedic and cardiovascular procedures with only a small handful piloting medical episodes such as stroke, pneumonia and CHF.
So, you might ask "why the need for all these convening organizations?" The answer lies in the complexity of both the data analysis as well as the organizational process change that needs to be undertaken to ensure that the pilots are a win-win for all involved. This is an initiative where economies of scale help to ensure success, whether in data preparation and risk modeling, opportunity identification and prioritization, cross team care coordination and clinical change management or claims submission, payment tracking and distribution of shared savings.
The one thing that all of these 450+ sites have in common is that they need to become adept at manipulating large amounts of data, not just to understand past performance but to predict as accurately as possible the likely impact that organizational changes will make to both the cost and quality of care. To do both the planning and execution well at scale requires a new breed of analytics-powered software solutions, designed specifically for this new generation of Bundled Payment episodes. Episode based Case Rate (ECR) Analytic packages, such as Prometheus Payment ECR Analytics, that had previously only been available to the largest health plans will start to be used routinely by healthcare delivery organizations that will, over time, become experts in optimizing the risk/reward equation associated with Value Based Payment.
In 2012, SAS and HCI3 announced a partnership to jointly develop the next generation of pioneering Prometheus Payment ECR Analytics, and we provided sophisticated software to support many organizations submit their applications to become BPCI pilots. We are looking forward to working with many of the selected pilot sites in 2013 to apply advanced analytics and deliver data-driven insights that allow their organization to more deeply understand the most significant areas of opportunity for improvement and to guide towards what can be done to tap into the upside linked to these new bundled payment models.
Will Bundled Payments and ACOs have the quality improvement and cost saving impact that CMS is hoping for? Nobody knows, but many of us are not only keeping our fingers crossed but also actively working to provide information that enables success. 2013 will be a year of broad experimentation and with any luck, we'll start to see a number of innovative sites deliver some high impact successes that will help others better understand how to leverage these new value based incentive models to deliver higher quality care at lower costs.