Health Reform WK-EDGE Impact of bundled payments on quality and costs evaluated
Thursday, September 22, 2016

Impact of bundled payments on quality and costs evaluated

By Harold Bishop, J.D.

A second annual report evaluating and monitoring the impact of Models 2, 3, and 4 of the Bundled Payments for Care Improvement (BPCI) initiative is available from The Lewin Group. The Lewin Group is under contract to CMS to evaluate and monitor the impact of these models for five years. The second analysis is based on the experience of Phase 2 participants during the first year of the initiative (episodes initiated between October 2013 and September 2014). The qualitative results reflect participants’ experiences through June 2015.

Background. The BPCI initiative was developed by the Center for Medicare and Medicaid Innovation (Innovation Center). The Innovation Center operates this initiative under the authority of section 1115A of the Social Security Act, as added by section 3021 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), to test innovative payment and service delivery models that have the potential to reduce Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) expenditures while preserving or enhancing the quality of care for beneficiaries.

The BPCI initiative is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Under the initiative, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. These models may lead to higher quality and more coordinated care at a lower cost to Medicare.

Overall results. From October 2013 through September 2014, the first full year of the active phase of the BPCI initiative, the evaluation found that 94 awardees entered into agreements with CMS to be held accountable for total Medicare episode payments. Across the three models, 130 hospitals, 63 skilled nursing facilities (SNFs), 28 home health agencies (HHAs) and four physician group practices (PGPs) initiated almost 60,000 episodes of care under the initiative. The evaluation also found the following:

  • BPCI-participating providers tended to be larger, operate in more affluent urban areas, have higher episode costs, and differed in other ways from providers that did not participate.

  • While analyses were stratified by BPCI Model, episode-initiating provider type, and clinical episode to ensure results are meaningful, this limited the sample sizes and the ability to detect statistically significant effects of the initiative.

  • Given the small sample sizes and the many provider characteristics that may affect outcomes, all individual results should be viewed with caution and conclusions should be based on information gleaned across multiple sources.

  • There have been modest reductions in Medicare episode payments for select clinical episode groups with isolated instances of quality declines and fewer instances of increased quality.

Model 2: Retrospective Acute & Post Acute Care Episode. Model 2 involves a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. The evaluation found that Model 2 accounted for approximately three-quarters of the episodes and half of provider participants, with the majority of episode initiators being acute care hospitals, which tended to be larger, urban and likelier to have teaching programs than non-participating hospitals. The evaluation also made the following findings regarding Model 2:

  • The average Model 2 participant was in five clinical episodes.

  • Almost 75 percent of Model 2 episode initiators participated in major joint replacement of the lower extremity, with congestive heart failure chosen by 35 percent of episode-initiating hospitals, chronic obstructive pulmonary disease by 26 percent, and pneumonia by 20 percent.

  • Average standardized allowed Medicare payments for the hospitalization and 90-days post-discharge were estimated to have declined $864 more for orthopedic surgery episodes initiated at BPCI-participating hospitals than episodes initiated at comparison hospitals.

  • For cardiovascular surgery episodes, institutional post-acute care (PAC) use declined more for BPCI than comparison populations among those with any PAC.

  • Among spinal surgery episodes, average Medicare payments increased more for the hospitalization and the 90-day post-discharge period for the BPCI than comparison population.

Model 3: Retrospective Post Acute Care Only. Model 3 involves a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. The evaluation found that SNFs were the most dominant participants under Model 3, followed by HHAs. Only one inpatient rehabilitation facility, long-term care hospital, and PGP participated. The evaluation of Model 3 also found the following:

  • The average Model 3 episode initiator participated in 19 clinical episodes, the most common of which was congestive heart failure, which was selected by 95 percent of episode initiators.

  • Standardized SNF payments and SNF days for SNF-initiated BPCI episodes declined relative to the comparison group across almost all clinical episode groups.

  • Quality generally was maintained or improved, except in three isolated instances where BPCI participant quality outcomes declined relative to the comparison group.

Model 4: Prospective Acute Care Hospital Stay Only. In Model 4, CMS makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished by the hospital, physicians, and other practitioners during the episode of care, which lasts the entire inpatient stay. The evaluations found that Model 4 was the option with the lowest number of participants and 10 out of 20 episode initiators opted out of BPCI by the end of the study period. The evaluation of Model 4 also found:

  • Orthopedic surgery and cardiovascular surgery clinical episode groups accounted for 81 percent of all episodes.

  • For the orthopedic surgery clinical episode group, there were no statistically significant relative changes in Medicare standardized allowed payments, quality, or utilization.

  • Post-bundle payments and utilization increased and certain functional outcomes declined for the cardiovascular surgery clinical episode group relative to the comparison.

Conclusion. The Lewin Group concluded that participation in BPCI has continued to grow, with more providers entering Phase 2 ("risk-bearing" period requiring a contract with CMS) in April and July 2015, and more episode initiators transitioning episodes to Phase 2. Phase 1, also referred to as the "preparation" period, is the initial period of the BPCI initiative during which CMS and participants prepare for implementation and assumption of financial risk.

The Lewin Group also concluded that increased sample sizes, as well as extended times under the initiative, will allow it to expand its understanding of the impact of BPCI and strengthen its conclusions about participation under Models 2 and 3. However, because participation in Model 4 has dropped, it believes that there may be less that it can say about it in next year’s annual report.

JAMA. In a related investigation, The Journal of the American Medical Association (JAMA) found that in the first 21 months of the BPCI initiative, Medicare payments declined more for lower extremity joint replacement episodes provided in BPCI-participating hospitals than in comparison hospitals, without a significant change in quality outcomes. The study cautioned, however, that further studies are needed to assess longer-term follow-up as well as patterns for other types of clinical care.

Companies: The Lewin Group; Journal of the American Medical Association

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