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The Keckley Report

Let’s be Honest about the Pushback to Mandatory Bundles

By October 3, 2016March 1st, 2023No Comments

Last Wednesday, 179 members of the House of Representatives sent notice to CMS Acting Administrator Andy Slavitt and Chief Medical Officer Patrick Conway that they’re not happy about Medicare’s decision to double down on its bundled payment programs.

At issue is Medicare’s proposed plan next year to implement mandatory bundled payment programs for heart failure and coronary artery bypass graft (CABG) surgery akin to the joint replacement bundles it announced four months prior.

The essence of the House members’ complaint is this: through its Centers for Medicare and Medicaid Innovation (CMMI), Medicare has over-reached its authority in forcing hospitals and doctors to accept bundled payments for services. Their letter said mandated bundles have the potential to compromise patient care and more time is needed to get provider input before the new bundles become mandatory next summer. But the essence of the complaint is the legitimacy of CMMI which was authorized and funded in the Affordable Care Act as the vehicle through which delivery system reforms that shift incentives from volume to value were authorized. One Democrat joined 178 GOP House members as a signee of the letter, lending to its partisan flavor.

Partisan politics aside, let’s get the larger issue of mandatory bundled payments in perspective:

Bundled payment programs are not new nor is their legitimacy as a bona fide vehicle for changing incentives the issue. They attempt to align the financial incentives between all providers (for example, hospitals, physicians, and post-acute care providers) that touch a single episode of care. By rewarding coordination across multiple settings of care, errors are fewer, outcomes are better and efficiency gains realized. That’s the theory and it’s central to Medicare’s effort to bend the cost curve for the program that covers more than 55 million seniors.

Initially, Medicare encouraged the bundled payment program via two voluntary programs:

·       Bundled Payment for Care Improvement Initiative (BPCI, 2013): a voluntary program wherein hospitals may choose from one or many of 48 episodes of care in a bundles payment effort, with shared savings achievable based on historic “unbundled” costs

·       Oncology Care Model (OCM, 2016): a voluntary program (physician practices) targets chemotherapy and related care during a 6-month period following the initiation of chemotherapy treatment. The OCM is a three-part payment model, physician practices continue to bill fee-for-service and practices also receive a prospective per-beneficiary-per-month payment and have the opportunity to earn performance-based payments, if they meet quality and cost goals; there are 195 practices (List) and 16 payers participating in the Oncology Care Model; CMS is also partnering with commercial payers in the model.

But recently, CMS doubled down on bundles by mandating them via two proposals earlier this year:

 ·       Comprehensive Care for Joint Replacement (CJR, 2016): targeting the 400,000 total joint episodes with costs ranging from $16,500 to $33,000; the CJR program is a mandated bundle for 5 years in 67 communities involving 800 hospitals. Costs and savings are calculated for 90-days post-discharge and regional costs factor into the cost basis calculation over the span of the program. Note: 700 hospitals are testing the CJR bundle per CMS.

 ·       Cardiac Rehabilitation (CR) Incentive Payment Model (CR, 2017): bundled payment models for High-quality, Coordinated Cardiac Care: Heart Failure, Coronary Artery Bypass Graft Bundles and Cardiac Rehabilitation. The heart failure and CABG bundles will be mandatory in 98 communities. Notably, in years 3,4 and 5 of these, savings or penalties up to 5% of costs will be calculated against regional baselines instead of limiting comparison to the local community. The cardiac rehabilitation bundle will be accessible in 45 markets.

Both of these are mandatory for hospitals and physicians in many communities, and both anticipate implementation next year. That’s the issue; not the legitimacy of bundled payments per se.

In fact, voluntary provider participation in Medicare’s bundles to date has been significant to date. As of January 2016, the BPCI initiative had 1448 participants, including 409 acute care hospitals, 700 skilled nursing facilities, 288 physician group practices, and 100 home health agencies. And Medicare has shown they’re working: in its most recent report noting “promising results on cost and quality” in 11 of 15 clinical episode groups evaluated.

So why the pushback from this group of House members?

Perhaps it’s a principled belief that Medicare has no authority to force a new payment model on providers or that CMMI is out of bounds. The view that Medicare should act as a benign payer on behalf of its enrollees is a debate that’s appropriate, but perhaps that discussion should be expanded to include private insurers who cover 155 million through employer sponsored plans. In these, the insurers make the rules, define the networks, set their premiums and force providers to adhere if they are to be included in the plans. So their letter poses a larger question about the role of payers in making rules for providers: it’s source of tension that’s been around for decades.

Perhaps it’s a legitimate concern about the risk-adjustment methodologies proposed in the mandated bundles proposed to date. The fact that the new mandated bundles were announced only four months after the CJR program seems a bit rushed, and the wide distinction between episodes involving joint replacement and heart issues inadequately addressed in the proposed rules.  In many instances, the government’s not gotten it right on their first try. For instance, the accountable care organizations were flawed initially: too many measures, faulty calculus for determining shared savings and dubious design that made two-sided risk too risky for most provider organizations. In the cardiac bundle, for instance, there’s legitimate reason to do a re-do around its risk calculus, and thoughtful analysis by the American Hospital Association, Medical Group Management Association and others point out technical flaws that should be legitimately addressed. Rushing to implementation of mandatory bundles is poor public policy, especially since the issue is not the acceptance of bundles, but how.

Perhaps the House members letter is a response to political pressure from those who benefit from maintaining the status quo. After all, most physicians don’t like the concept of shared risk and distrust payers, so alternative payment programs like bundles, ACOs and others are unwelcome intrusions. The status quo has served the many in the industry well.

But for sure, the rationale cannot be that bundles compromise patient care as referenced in the House members’ letter. Bundles force coordination across multiple settings and practices, Bundles force providers to create formal pathways for patient care management and methods for knowing when patients fall through their cracks. Bundles force hospitals, physicians, allied health professionals and post-acute providers to share patient information and measure outcomes and monitor costs. Protection of vulnerable patient populations is laudable, but that’s no excuse for reinforcing poor care coordination, uneven and inadequate access and lack of transparency that’s systemic for Medicare enrollees.

There are legitimate reasons for providers to take a guarded but proactive approach to bundled payments: that’s the posture taken by AHA, MGMA and others. There are flaws in the proposed mandated bundles and we need to get them right.

But there’s no reason to claim they will harm our patients. Care coordination, transparency, team-based delivery, evidence-based clinical processes and an intense focus on outcomes and cost seem in everyone’s best interest, especially our patients.

Let’s be honest about the proposed mandatory bundled payment programs: the issue is how they’re implemented, not whether bundled payments harm our patients.


Some comments about the mandated bundled payments proposal:

American Hospital Association:
“The purpose of the bundled payment is to create a financial incentive that aligns with the care goal of improving the patient’s health to the point where a return to the hospital is unnecessary. Measuring EDAC might be important when the financial incentives push toward greater numbers of hospital encounters, as they do in a fee for service system. However, in a bundled payment, CMS needs to alter how it thinks about what to measure – and excess days in hospital care should not be the focus.”

Medical Group Management Association:
“CMS is also exploring increased use of bundled payments in Medicare, including the Bundled Payments for Care Improvement Initiative. It is completely contradictory for the agency to tout the benefits of bundled payments, such as increased accountability, while simultaneously proposing to abandon the use of long-standing bundled payments under the current proposal.”

“We appreciate the challenges associated with appropriately valuing these services, but the answer should not be to prematurely abandon use of bundled codes. Instead, we urge CMS to withdraw this proposal and work closely with the RUC and medical community to explore other options for evaluating these codes as potentially misvalued.”

Letter from 179 Members of the U.S. House of Representatives September 29, 2016:
By focusing solely on cost-savings without adequate regard to the detrimental effects that the CJR Model, Part B Drug Payment Model, and Cardiac Models may potentially have, CMS at best has heeded only part of its statutory “duty-reducing program expenditures” at the expense of its other duties-“preserving or enhancing the quality of care.”  

However, a 2015 blog post by the Congressional Budget Office would suggest that CMMI’ s demonstrations do not in fact reduce costs, stating that they have “not yet yielded noticeable savings.” In addition to failing to cut costs, mandating participation in large scale demonstrations could have the opposite effect of “preserving or enhancing the quality of care.”

“In contravention of the statute, these CMMI models were developed absent input from impacted stakeholders and fail to include safeguards to protect the delicate balance of quality, cost, and access to care for beneficiaries. These mandatory models overhaul major payment systems, commandeer clinical decision-making, and dramatically alter the delivery of care.”