CMS has proposed an initiative to pull hospitals into a program that would make them bear the risk for hip and knee replacements—and industry experts are welcoming the push.
While these surgeries are already among those procedures included in Medicare's voluntary Bundled Payments for Care Improvement (BPCI) initiative, CMS had noted that some types of hospitals were choosing not to participate. This new non-voluntary program would require hospitals in 75 geographic areas to participate in bundled payments for a period of five years beginning Jan. 1, 2016.
"By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care," the CMS said in its announcement last week. Each episode of care would run from the time of the surgery through 90 days after discharge.
Hospitals would continue to receive payment under Medicare's fee-for-service system, but then depending on their quality and cost performance, they would either receive an additional payment or be required to repay Medicare for a portion of the expenses.
Impact on hospitals
The initiative shows that CMS is looking to rapidly accelerate the trend toward pay-for-value, says Rich Bajner, managing director at consulting firm Navigant Healthcare.
As for how health systems will be affected, "Positive or negative is in the eye of the beholder," Bajner says. "Generally speaking, we think a shift toward value-based care is a positive, and we think this is a step in the right direction from a value-based care perspective."
He notes that about 800 facilities will be impacted and that Navigant has clients in all of the markets being pulled in.
From an impact perspective, Bajner offers several considerations:
- The level of risk will be impacted by the hospital's level of volume, and in their experience, there is an element of random variation rather than just performance variation for those who do low numbers of joints.
- In year five of this program, it intends to move from an organizational benchmark to a regional benchmark, so initially, better performers may have a harder time creating savings. However, moving to a regional benchmark will help those that can't beat their own trend as easily as they can beat a market trend.
- Under the current proposal, there is one year of no downside risk but providers will have to assume 100% of it by year two—although Navigant's clients would prefer shared risk or some cap on the level of risk, Bajner said.
- The program is limited to three quality metrics: readmissions, complications and patient satisfaction. While this is highly manageable, Navigant sees opportunities to push into other metrics on functional outcomes.
Opportunities for success
"Providers do have opportunities for success under this program," Bajner says. He notes that about 50% or more of the cost associated with a joint replacement occurs after discharge, so aligning with high value post-acute providers can drive significant savings.
"Our evidence so far is that organizations that do a good job engaging their physicians, and organizations that do a good job managing transitions in care, can succeed under bundled payment for joint replacement," he says.
Among those in favor of the initiative are Dereesa Reid, CEO of Hoag Orthopedic Institute, the largest volume orthopedic hospital/provider in California. It is among those that will be impacted by the program.
"Those of us who are in healthcare should be inspired to step up our game and really be able to provide care in a seamless fashion, and this is a perfect place to start," she says.
The implementation should be fairly efficient and straightforward, she suggests, noting that the program's plan for administration allows hospitals to continue to send out claims using the same processes they already have in place.
That said, it will require some additional resources as hospitals are forced to coordinate care beyond their four walls, she says.
"Change can be perceived as difficult or challenging but as U.S. citizens, if we're committed to what this country means, we've got to start doing things differently in healthcare and providing it at a lower cost," Reid said.