What Have We Learned About Bundling Medical Conditions?


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As an alternative payment model, bundled payments hold the potential to improve the value of care by holding clinicians and organizations accountable for episode-specific quality and costs. Medicare has scaled bundled payments nationwide via several programs that define episodes based on hospitalization and up to 90 days of post-acute care.

However, the impact of bundled payments appears to differ between surgical and medical episodes. On one hand, Medicare has achieved promising results from bundling surgical care for lower extremity joint replacement. Medicare’s evaluation of its largest national bundled payment program, the Bundled Payments for Care Improvement (BPCI) initiative, has demonstrated that participation in joint replacement bundles is associated with a 3.8 percent decrease in per-episode spending with stable-to-improved quality. Other work evaluating the experience of high performers in BPCI demonstrates that bundled payments may reduce the costs of joint replacement episodes by up to 20 percent, with sizeable bonuses to physicians and hospitals and small improvements in quality – outcomes that, if scalable, would represent a win for patients, clinicians, organizations, and Medicare alike. On the other hand, recent evidence corroborates analyses conducted by Medicare and its contractor, suggesting that as designed, bundles for medical conditions such as congestive heart failure (CHF) and chronic obstructive pulmonary disease (COPD) are not associated with significant changes in quality or Medicare spending.

Therefore, one critical aspect of understanding the impact of bundled payments is evaluating how and why it differs for surgical versus medical care. This insight is particularly important given that surgical and medical episodes will be further expanded at a national scale in the forthcoming Bundled Payments for Care Improvement Advanced (BPCI-Advanced) program. In this post, we describe why the lack of episode savings in Medicare’s medical bundles may not be unexpected, why policymakers should not abandon medical bundles, and why existing evidence poses three important policy implications for the future of medical bundles.

Why Results May Differ For Surgical Versus Medical Bundles

By designing bundles that span hospitalization and post-acute care, Medicare has emphasized reductions in post-acute utilization and spending as major financial savings opportunities. While this approach suits surgical care in which a procedure triggers a cascade of acute and post-acute care, it may pose several challenges for episodes related to medical conditions. First, spending patterns for surgical versus medical care differ, more predictably spiking after surgical procedures but adopting a more cyclical pattern for chronic medical conditions. Accordingly, hospitalization may be more appropriate as an episode trigger for surgical episodes than for medical ones.

In surgical care such as joint replacement, hospitalization is a clear, distinct trigger before which there would be no expected episode-related utilization (e.g., little to no joint replacement-associated services prior to the surgery) and after which there is a distinct cascade of related utilization (e.g., physical rehabilitation, wound care, and post-surgical follow-up). In contrast, hospitalization only represents one aspect and phase of management for medical conditions such as CHF and COPD, which span outpatient, inpatient, emergency department, and post-acute settings over longer periods.

Second, physicians’ and hospitals’ ability to impact post-acute care utilization and spending may differ between surgical and medical episodes. This difference is not simply a reflection of the proportion of total episode spending paid to institutional post-acute care providers. For example, spending on skilled nursing facilities and inpatient rehabilitation facilities was only marginally higher for joint replacement compared with five medical conditions (26 versus 24 percent, respectively).

Rather, differences in the ability to impact post-acute care utilization may relate to the types of services provided in institutional post-acute settings for surgical versus medical patients. For surgical episodes, care at skilled nursing facilities often involves discrete, time-limited activities such as physical rehabilitation to achieve post-surgical recovery (e.g., strengthening, functional improvement). In contrast, given the natural history of diseases such as CHF and COPD, institutional post-acute care services for medical patients generally involve complex tasks such as medication management(e.g., diuretics) and multifaceted occupational therapy to promote self-care and activities of daily living. Consequently, hospitals in surgical bundles have achieved savings without compromising quality by shifting discharges from skilled nursing facilities and inpatient rehabilitation facilities towards home, with either home health or self-care. However, it remains unclear if similar efforts are possible or appropriate for the types of post-acute care that are often required as part of medical bundles. In turn, discharge patterns in medical bundles may reflect the less predictably defined roles of institutional post-acute care providers.

Another reason that shifting discharges away from institutional post-acute care providers may prove challenging under medical bundles is that they involve different types of patients than those often involved in surgical bundles. As noted recently, patients in medical bundles tend to be older and at higher risk for poverty and disability than patients in joint replacement bundles. In turn, patients receiving care for medical conditions may have greater clinical needs during and after hospitalization than patients undergoing surgical procedures.

Implications For The Design Of Medical Bundles

Collectively, these dynamics offer insight into why clinicians bundling care for medical conditions have not achieved savings in BPCI. They also have implications for the design of medical bundles going forward.

First, Medicare could consider modifying when and how medical episodes begin. Rather than being a necessary pre-condition for an episode, hospitalization itself may be a modifiable element of variation in medical conditions. Consequently, unlike in surgical procedures, using hospitalization as a medical episode trigger may miss the opportunity to include cost and utilization variation across the care continuum. As an alternative, if medical episodes were triggered in the outpatient setting – for example, after two specialty office visits within one month — provides might be better able to coordinate medical bundles with other efforts to improve value (e.g., payment models such as accountable care organizations and policies such as the Hospital Readmissions Reduction Program).

Second, Medicare could design medical bundles so that the emphasis on improvement is not restricted to care delivered in the post-discharge period. While variation reduction is not an absolute requisite for performance in bundled payments, care standardization remains an important organizational strategy for improving episode-based care. Creating incentives to focus on outpatient and pre-discharge elements may be particularly fruitful for medical bundles given the complexities of ongoing (in the ambulatory setting) and acute (in the hospital setting) management, and the possibility that practice redesign may require more time and greater effort than in surgical episodes.

Third, more data are needed to understand the impact of medical bundles and how best to design them in the future. To date, we have only early evidence about the impact of medical bundles in BPCI (the mean number of months of BPCI participation was 7 months for these hospitals). Given that other alternative payment models such as accountable care organizations have required three or more years before participants achieved savings, medical bundled payment policy should be guided by longer-term evaluations. Such evaluations should also closely monitor the programs for unintended effects: while it may be reassuring that medical bundles have not appeared to inadvertently lead to more readmissions or emergency department visits, vigilance is nonetheless required given the history of racial disparities in access that stem from quality- and value-based policies. Finally, future work can speed progress towards improvement by providing more detailed descriptions of the utilization and spending patterns of patients involved in medical bundles, as well as highlighting the experiences of high-performing providers.

Looking Ahead

While existing evidence suggests that medical bundles may not improve the value of care, these findings are not necessarily unexpected, and policymakers should not abandon the effort to bundle the care of medical conditions. Instead, in addition to more long-term evaluations, the design of medical bundles may be improved in the future by modifying how they are triggered and which phases of care they capture.


CMS Reevaluates Stark Law in Response to Value-Based Care Initiatives


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On June 20, 2018, CMS and HHS issued a “request for information” (RFI) seeking input on strategies to reduce the burden of the federal physician self-referral law or “Stark Law,” including the law’s impact on the transition to value-based care.

In the RFI, CMS solicits information on the ways in which the Stark Law creates challenges for coordinated, value-based care, and the transition to alternative payment and delivery models; it also seeks ideas and input on how the Stark Law may be changed to facilitate these models.

What’s driving the RFI

The RFI is launched as part of the agency’s “Regulatory Sprint to Coordinated Care” led by HHS Deputy Secretary Eric Hargan, which is directed at addressing regulatory barriers to coordinated care.  As such, the Regulatory Sprint and the RFI represent the administration’s efforts to reduce regulatory burden, while also demonstrating a commitment to the transition to more value-based, coordinated care and risk-based payment.  In public statements, HHS and CMS officials have suggested that the Regulatory Sprint may support similar flexibility in other laws, including the Anti-Kickback Statute.

Although the agency does not commit to any specific regulatory changes in this document, it is notable that HHS issued a similar RFI in 2010 just before it issued sweeping waivers of the Stark Law and Anti-Kickback Statute for the Medicare Shared Savings Program.  While many of the questions focus on “Alternative Payment Models” under the Quality Payment Program, the RFI is not limited to these programs.  Instead, the RFI invites the public to propose new exceptions and revised interpretations of the statute to advance the goals of coordinated care.

What CMS wants to know

In the RFI, CMS poses twenty specific questions related to the Stark Law, Alternative Payment Arrangements, and delivery system innovation strategies. The topics and questions range from:

  • Requests for details on Alternative Payment Models and innovations considered or engaged in by healthcare delivery system participants, including details on the financial and operational details of the arrangements, such as financial risk;
  • Solicitation of ideas and input on additional and/or new exceptions to the Stark Law that would facilitate existing and innovative arrangements;
  • Thoughts on changes to existing provisions of the final rule implementing the Stark Law, such as definitions of “commercial reasonableness” and “fair market value,” and thoughts on other potential definitions and terms such as “Alternative Payment Model,” clinical and financial integration and others;
  • Comments on key concepts in the existing law including compensation formulas that do and do not take into account the volume or value of referrals or other business within the meaning of the Stark Law and other novel financial arrangements; an
  • Requests for information on the Stark Law’s compliance cost, the potential role of increased transparency to promote compliance and how CMS should assess the Stark Law’s effectiveness in achieving its underling policy goals related to improper financial incentives.

The RFI may represent an important opportunity for the healthcare industry to educate CMS on current experiences and challenges, and to shape the content of future rules implementing changes to the Stark Law, particularly in a time of industry integration across the continuum of care.  The RFI also offers tangible evidence of the administration’s commitment to continue a migration to value-based care, and potentially reflects an enhanced commitment and desire to migrate away from fee-for-service payment to arrangements involving financial risk.



An Untapped Opportunity For Health Care Progress: Redesigning Care For High-Need Patients


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While uncertainty and debate about health care reform remains, there is near-universal agreement on the need to improve care delivery and health outcomes and decrease the rate at which spending continues to grow. An underrecognized but crucial component to achieving these goals is redesigning care for “high-need patients”—in other words, the small cohort of patients with complex needs who represent the greatest usage of the health care system.

Currently, 1 percent of patients account for more than 20 percent of health care expenditures, and 5 percent account for nearly half of the nation’s spending on health care, according to the Agency for Healthcare Research and Quality. Driving these costs for high-need patients are the functional limitations that impact patients’ daily living and ability to cope with health challenges, leading to their use of health care and social services that are often too late and poorly matched to their needs.

A 2014 survey conducted by the Commonwealth Fund found that high-need patients are highly susceptible to lack of coordination within the health care system and are more likely to experience cost-related barriers to accessing care, compared to other older adults. A 2016 Commonwealth Fund survey found that nearly two-thirds of high-need patients reported hardships with housing, meals, or utilities and that this population was also more likely to report feeling socially isolated, compared with the general adult population. Providing quality care for these high-need patients is a sizable challenge—yet it’s also an area where strategic attention and investment could yield significant payoffs for patients and the entire health system.

Indeed, a number of health systems have designed successful models that leverage an understanding of the unique characteristics of high-need patients to deliver quality care at sustainable costs.

Although there is no one-size-fits-all solution, a new publication from the National Academy of Medicine (NAM) says successful models generally share a number of common features across four dimensions:

    • Focus of service setting. Successful models tailor their care settings for either a targeted age group with various combinations of illnesses or individuals who use a significant amount of care. Examples of care settings include enhanced primary care, transitional care, integrated care, home-based care, and others.
    • Care and condition attributes. Successful models include practices such as targeting patients most likely to benefit from an intervention, coordinating care and communication among patients and providers, promoting patient and family engagement in self-care, and facilitating transitions from the hospital and referrals to community resources.
    • Delivery features. Successful models often feature the use of care managers alongside primary care providers to identify and work with high-risk patients. In addition, they often put high-risk patients under the care of specific physicians who treat a limited number of patients to enhance communication and adherence.
    • Organizational culture. For care models to be successful, organizations must emphasize leadership at all levels; be capable of adapting based on the size of the program and local circumstances; offer specialized, customizable training for team members; and effectively use data access, sources, and application.

Denver Health: A Real-World Example

In 2012, Denver Health—an integrated system that includes an acute care hospital, all of Denver’s federally qualified health centers, a public health department, an emergency 9-1-1 call center, a health maintenance organization, and several school-based health centers—set out to create a new care model and transform its primary care delivery system by providing individualized care that would more effectively meet medical, behavioral, and social needs for its largely low-income population. In designing its 21st Century Care model, which included modifications to better serve its high-need patients, Denver Health’s goals were to improve the experience of care, improve the health of populations, and reduce per capita costs of health care. Early in its implementation, a fourth goal also emerged: improving provider engagement and creating healthier and happier patients.

With support from a Center for Medicare and Medicaid Innovation award, Denver Health was able to redesign its health teams and invest in health information technology to enable population segmentation and categorization of patients by clinical risk groups. Funds were also spent on rapid evaluation efforts to refine the care model’s design.

The new model matched care delivery to four risk tiers. Healthy individuals were assigned to tier one and interacted with staff using Denver Health’s eTouch text messaging platform. Individuals in tier two received additional chronic disease management, such as lay patient navigators, nurse care coordination and home visits, and environmental scans for children with asthma. For patients in tiers three and four, integrated behavioral health assessments and care were standard, as was the inclusion of nurse care coordinators, clinical pharmacists, and clinical social workers as part of the care team. For patients in tier four, Denver Health relied on specialized intensive outpatient clinics to serve as adult patients’ medical homes or multidisciplinary special needs clinics for high-risk pediatric patients. Targeted toward individuals who had experienced multiple potentially avoidable inpatient admissions within one year, care teams in these clinics included a dedicated social worker and navigator, and teams were responsible for a limited number of patients. This clinic also worked closely with the Mental Health Center of Denver.

Denver Health’s systems modification paid off, particularly for high-need patients. These innovations not only improved patient outcomes and patient and provider satisfaction, but also resulted in reductions in expected spending. Over a one-year period, the system saw an approximately 2 percent reduction in expected spending. Most of the savings were driven by a decrease in hospitalizations among patients in tier four. Denver Health’s success demonstrates the real potential of strategic models to improve care for these patients while curbing health care spending.

The Opportunity

Health systems can play an essential role in improving care for our nation’s high-need patients. That’s why we, as members of an initiative under the NAM Leadership Consortium for a Value and Science-Driven Health System, are spreading the word about the characteristics of high-need patients, the challenges they face, and the features of successful care models for this population. This initiative was conducted in partnership with the Harvard T.H. Chan School of Public Health, the Bipartisan Policy Center, the Commonwealth Fund, and publication sponsor, the Peterson Center on Healthcare.

To promote improvements to the care of high-need patients, health systems should work with payers, providers, and other health systems to better identify and target high-need patients, test new practices and tools, and develop interactive electronic health records that can include functional and behavioral status and social needs. They should use established metrics and quality improvement approaches to continuously assess and improve care models and partner with community organizations, patients, caregivers, and social and behavioral health service providers outside the health care system to create patient-centered care plans. Health systems can also assess their current culture and promote changes needed to build new and successful care models, blending medical, social, and behavioral approaches.

Of course, health systems can’t do this alone. At the federal level, policy makers should improve coordination among the Medicare and Medicaid programs to increase access to needed services and reduce the burden on patients and caregivers, and should continue payment policy reforms that align initiatives to incentivize pay-for-performance instead of fee-for-service models. Policy makers should also explore the expansion of programs that could mitigate the financial strain of caregiving, such as Medicaid’s Cash and Counseling—a national program in which the government gave people cash allowances to pay for the services and goods they felt would best meet their personal care needs and counseling about managing their services—and incentivize the adoption and use of interoperable electronic health records that include functional, behavioral health, and social factors.

Payers can develop financing models to provide social and behavioral health services that will both improve care and lower the total cost of care for high-need patients, recognizing that even cost-neutral programs are worth supporting if the outcome is positive for patients. Providers can learn to work collaboratively in teams and engage with patients, care partners, and their caregivers in the design and delivery of care.

Return on investment for most models of care for high-need patients will take time. But one of the most expensive and challenging populations for the current health care system will remain underserved and continue to drive health care spending until there is a unified effort to improve their care. We know there are models that work. Now, action is critical, and while health care reform remains on center stage in the national policy agenda, the time is right. By taking the lead in the bold changes needed for this transformation, health systems can play a pivotal role alongside all stakeholders in reducing costs and improving the health of some of the nation’s most vulnerable patients.

As Healthcare Changes, So Must its CEOs, CFOs, COOs…


To keep up with big changes in how healthcare is administered, financed, and organized, top leaders are finding a need for new talents and organizational structures.

Eleven ways MACRA will impact your business


The Medicare Access and CHIP Reauthorization Act, known as MACRA, is one of the most significant payment changes since Medicare’s inception in 1965.

“Physicians and other clinicians payments will be at risk, beginning with a plus or minus swing of 4% in 2019, that increases to plus or minus 9% by 2023,” says Chester A. Speed, JD, LLM, vice president, public policy, AMGA.

To be successful under MACRA, providers will have to consider the clinical, financial and cultural changes they need to make to do well under risk, according to Speed.

“And while providers can rightfully say they’ve seen this before in the 1990s, risk, or value-based payments are now written into law and they are here to stay,” he says.

What impact will MACRA have on your organization? We asked experts to tell us.