Bundled payments: A glimpse into the future?
CMS is testing lump-sum payments
As part of the move to base reimbursement on quality, the Centers for Medicare & Medicaid Services (CMS) has launched the Bundled Payments for Care Improvement initiative, a three-year pilot program that provides a fixed price for a wide range of health services over a period of time.
Executive Summary
As part of its mission to cut costs and improve quality, the Centers for Medicare & Medicaid Services (CMS) has launched a pilot project that pays a fixed price for health services by multiple providers over a period of time.
- Case managers need to make sure that the care patients receive in the hospital is appropriate and can't be provided in another, less costly and less restrictive setting.
- Hospitals are going to have to evaluate their current practice patterns to identify potential areas for improvement and adopt the most efficient practices.
- Case managers must have accurate information about patients and their benefits to create the most appropriate and cost-effective discharge plan.
Bundled Payments for Care Improvement pay a fixed price or lump sum for health services by multiple providers over a specified period of time or episode of care, explains Karen Zander, RN, MS, CMAC, FAAN, president and co-owner of the Center for Case Management. "For hospital case managers, this means that cost and utilization per case will replace length of stay as a primary goal," she says.
With the bundled payments initiative, CMS is moving toward giving hospitals lump sums to cover the entire episode of care. CMS wants to test payment and service delivery models that can potentially cut costs and still maintain quality, says Linda Sallee, RN, MS, CMAC, ACM, IQCI, director for Huron Healthcare, with headquarters in Chicago.
"The bundled payment pilots are just that, pilots, but CMS has indicated that it is looking for ways to improve the cost of care. The purpose of the CMS Innovation Center, as I understand it, is to develop solutions to the current healthcare issues and conduct trials of those solutions," Sallee says.
The Bundled Payments for Care Improvement initiative was developed by the CMS Innovation Center, which was created by the Affordable Care Act. The project began in April 2013, with more participants coming on board in January 2014. More than 230 acute care hospitals, skilled nursing homes, physician group practices, long-term care hospitals, and home health agencies have entered into agreements to participate in the Bundled Payments for Care Improvement initiative. Participants can choose from four models and a list of 48 different clinical episodes of care on which to focus. According to CMS, the 48 episodes of care represent 70% of Medicare spending.
"Bundling payment for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement, is one way to encourage doctors, hospitals, and other health care providers to work together to better coordinate care for patients, both when they are in the hospital and after they are discharged," according to a CMS press release.
The bundled payment initiatives mean that hospitals must become extremely efficient and focus on reducing costs and improving quality, Sallee says. Case managers should work with physicians to make sure that the care patients receive in the hospital is appropriate and can’t be provided in another, less costly and less restrictive setting, Sallee says.
Pilot tests fixed payments for episodes of care
In the Bundled Payments for Care Improvement, the Centers for Medicare & Medicaid Services is testing four models that pay providers across a variety of settings a lump sum for an episode of care.
In Models 1, 2, and 3 in the pilot, CMS and the providers set a target price and payment amount for a defined episode of care for selected diagnoses, says Karen Zander, RN, MS, CMAC, FAAN, president and co-owner of the Center for Case Management. Providers are paid on a fee-for-service basis but at a negotiated discount. At the end of the pilot, total payments will be compared to the target prices and participants will share in the savings.
In Model 4, CMS makes a single bundled payment to the hospital to cover all part A and B services, including the hospital and physicians and other providers, and any readmissions. In this model, physicians and other providers submit "no pay" claims and are paid by the hospital, she adds.
Here's a look at the four models:
- Model 1 includes all acute care patients and all DRGs and pays hospitals a discounted amount based on the regular DRG rate. Medicare will pay physicians separately. CMS will share any cost savings due to better coordination of care with hospitals and physicians.
- Model 2 covers selected DRGs and includes all non-hospice Medicare Part A and B services during the initial inpatient stay plus the post-acute services for 30, 60, or 90 days depending on the DRG, and any readmissions. Laboratory services, durable medical equipment, prosthetics, orthotics and supplies, and Part B drugs are included.
- In Model 3, the episode of care is triggered by an acute hospital stay and begins when the patient begins receiving post-acute services at a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital, or home health agency. The model covers only the post-acute period for selected DRGs and includes any non-hospice Part A and B services, such as laboratory services, durable medical equipment, prosthetics, orthotics and supplies, and Part B drugs for only the post-acute period and any readmissions.
- Model 4 covers all services furnished during the inpatient stay by the hospital, physicians, and other practitioners as well as any services furnished when patients are readmitted for the same diagnosis within 30 days of discharge.
The role of case management
"Case managers must be involved in their hospitals’ efforts to analyze costs to determine the most cost-effective care and develop pathways or order sets to manage patients in an efficient manner. If services that are high-cost don’t provide better outcomes, the hospitals will have to look at doing something different," she says. For instance, some physicians order services or post-acute venues that cost more than what other physicians order but do not necessarily result in better outcomes, she points out.
"Using evidence-based research to determine standards of practice and expected outcomes and managing variations within those standards will be crucial," Sallee says.
Case managers are going to have to master the ability to negotiate and advocate for patients who need the lower and less restrictive levels of care but have limited benefits. "In bundled payments, it will be necessary to ensure the agreements with post-acute providers will allow patients to move to the lower level of care when it is appropriate without the delays that are often common in the current environment," Sallee says. For instance, some nursing homes do not accept patients on the weekend or in the evening, she adds.
Hospitals are going to have to evaluate their current practice patterns to identify potential areas for improvement, Zander adds.
"In order to survive in today’s healthcare world, hospitals need to understand the major cost drivers for care and develop predictive care paths that replicate the most efficient clinical decisions across the care continuum. In order to do this, hospitals have to have real-time reporting, monitoring, and accountability for utilization, outcomes, and demonstrating value," she says.
The bundled payment initiatives mean that case managers must have accurate information about the patients and what benefits they have immediately after admission, Zander says. They have to be familiar with the costs and outcomes of post-acute providers and be able to identify the most appropriate and cost-effective setting for their patients, she adds.
She points out that the choice of post-acute care settings can have a major impact on patient costs over a 30-day period. A readmission can more than double the episode cost, she adds. "According to the data I have reviewed, patients discharged to skilled nursing facilities have the highest readmission rates across all conditions. But the highest percent of readmissions comes from patients who did not receive post-acute care. Therefore, as we always have, case management professionals will need to continue to find that tricky balance between costs (including out-of-pocket costs to the patient) and quality of care," Zander says.