Top seven healthcare leadership problems



Medicare’s Bundled Payment Programs Suffer From Fatal Flaws, But There Is A Logical Alternative

Several authors from the Brookings Institution recently argued in favor of making Medicare’s Bundled Payment for Care Improvement (BPCI) initiative mandatory. While the principles guiding their recommendations are sound, the recommendations themselves fail to acknowledge five fatal methodological flaws within the BPCI program. Their analysis also overlooks the most logical and reasonable alternative: a physician-focused episode-of-care payment model.

Altarum Institute Urges CMS to Adopt Physician-Focused Payment Models

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Altarum Institute joins the debate over whether the Centers for Medicare & Medicaid Services (CMS) should delay expansion of its controversial bundled payment programs, specifically the Comprehensive Care for Joint Replacement (CJR) pilot and the cardiac care bundled payment initiative (also known as the Episode Payment Models, or EPM).

In a column published today in Health Affairs, Altarum Vice President and Director of the Center for Payment Innovation, François de Brantes, argues that CMS should delay and ultimately replace its Bundled Payment for Care Improvement (BPCI) program with a physician-focused model.

De Brantes writes that the BPCI program has five flaws that physician-focused models do not have, and those flaws are serious enough to compromise the successful long-term adoption of bundled payment models, which are critical to reducing health care costs and improving outcomes.

“I applaud CMS’s effort to launch bundled payment models, but the current models they have introduced—the CJR pilot and EPM—are inherently flawed, and unlikely to be successful,” says de Brantes.

The five flaws are outlined in detail in the Health Affairs article and in a public comment letter to CMS from Altarum President and CEO Lincoln Smith. They are summarized below:

Hospital Centricity. Each bundle under the program is triggered by an inpatient stay, and in particular, by a specific Diagnostic Related Group, where there is significant variation in the total costs of episodes. This makes it more difficult to distinguish between warranted and unwarranted variation. Additionally, when regulators force every episode to be triggered by a hospital stay, they prevent physicians from exercising judgement in finding the best site for a given episode.

Lack of severity adjustment. The program does not provide a risk adjustment for patients with more complications. For example, a physician performing a total knee replacement for a patient with a serious heart condition would be paid the same to perform the surgery on a patient without complications. This provides an incentive for providers to favor certain patients over others in an effort to avoid losses.

Encouraging hospitalizations for acute exacerbations. The program includes bundles for patients with an Acute Myocardial Infarction (AMI), providing an incentive to hospitalize a patient with a mild AMI that normally would not require an inpatient stay. This runs counter to the purpose of alternative payment models, which is to encourage better management of patient conditions and reduce the potential for acute events.

Weak ties to quality measures. While hospitals enrolled in the CJR pilot and EPM must report certain quality measures, there are instances in which there are not any thresholds required to receive reconciliation payments. In other words, some could be rewarded for reducing cost relative to the target price, even if quality of care deteriorated.

Moving goalposts. One of the core principles of an effective payment model is to provide clear performance targets. The CJR pilot and EPM adjust the target to reflect changes in national trends, but the new targets are not revealed until at least six months after the performance period. This means participants will not know the standard to which they are being held during any given performance period, potentially encouraging participants to overestimate the probability of losses.

In his public comment letter to CMS Administrator Seema Verma, Altarum President and CEO Lincoln Smith states that “Altarum is a strong advocate of payment bundles and alternative payment models in general, but the proposed mandated models is the wrong approach.” He goes on to encourage CMS to consider a physician-focused model proposed by the American College of Surgeons, which “adjusts for patient severity, ties patient outcomes to gains and losses, enables physicians to exercise judgement in providing the best treatment, and encourages collaboration across disciplines.”