The CMS’ recent announcements to cancel or scale back bundled payment programs could create “short-term positives” for some areas of healthcare, according to Fitch Ratings.
Earlier this month, the CMS published a proposed rule to cancel the cardiac bundled payment program and the episode payment models program. It also proposed reducing the mandatory geographic areas for the joint bundled program from 67 to 34.
Fitch Ratings said the announcements “will allow for more flexibility in choice of care settings albeit at the expense of some of the catalysts driving coordination and risk-sharing amongst providers.”
Bundled payments incentivize care coordination and risk-sharing, and focus payments on quality and outcomes rather than strictly fee for service. CMS and other payers see bundled payments as a way to contain healthcare costs while still improving outcomes.
Many of them have shown successful results, and the American Hospital Association and multiple other provider groups support the CMS programs. News of the canceled models raised concern. Thoughts in the industry are more mixed on mandatory participation, but policy experts note requiring participation produces more data that is also more comprehensive.
Regardless, HHS Secretary Tom Price, who has been a vocal critic of requiring providers to take part in bundled payment programs, announced the changes earlier this month. The Fitch analysis focuses on short-term effects, but providers and payers intent on fully transitioning to value-based care see the changes as a setback. Hospitals that were participating in the CMS programs also point to the investments they had already made in implementing bundled models.
Fitch said CMS’ changes in stance about bundled payments under Price “indicate alternative payment models will not be as meaningful a portion of Medicare payments as the previous administration aspired that they would be.”
Fitch said the — at least temporary — move away from bundled payments means general acute care and skilled nursing facilities (SNFs) received a “reprieve from one of their operating headwinds.” Meanwhile, ambulatory surgery centers (ASCs) should see volume growth.
Also, the move may mean volume losses at general acute hospitals, which will help ASCs, though hospitals will enjoy “a reprieve from the compliance and risk-sharing elements of bundles," the company said.
Fitch said ASCs will benefit from CMS’ proposal to remove total knee replacements from the inpatient-only list for next year and questioned whether total hip and partial hip replacements should be removed from the list.
“This would be another win for ASCs, as adding knee and hip replacements gives them access to roughly $7 billion in annual Medicare spend. The proposal may also help to alleviate some of the recent volume pressures ASC operators have been experiencing as commercial-insured patients delay surgeries due to high deductible plans but will accelerate the existing admissions issues at general acute care hospitals,” according ot the analysis.
Though Fitch sees short-term positives in some areas of healthcare, the announcements haven’t changed the company’s belief that SNF revenues and operating margins will “still be pressured by remaining headwinds, such as the growth in Medicare Advantage (i.e. shorter stays and lower rates), Department of Justice investigations into billing practices and wage inflation.”
Over the long term, Fitch “continues to expect financial constraints and demographic-driven demand will be powerful motivators to shift care to the lower cost settings of providers with the financial resources to risk-share and coordinate with operators in other settings,” said Fitch Ratings.