Bundled Payments: How to make a million dollars without doing any more work!

Medicare’s Bundled Payment for Care Improvement (BPCI) program has seen more ups and downs than the stock market lately. The Obama administration launched the programs and went thru 4 models including a mandatory model (Joint Replacement). The first 2 Secretaries of HHS under Trump decided that they didn’t like bundled payment programs and canceled 2 upcoming mandatory programs (care for heart attacks and for cardiac bypass surgery) but allowed the voluntary BPCI Advanced program to go forward. The 3rd HHS Secretary (Alex Azar) has now just announced that they will be launching 3 new mandatory bundles because, as he put it “BPCI Advanced is a voluntary model, where potential participants can select whether they want to join. But we’re not going to stick to voluntary models. Real experimentation with episodic bundles requires a willingness to try mandatory models. We know they are the most effective way to know whether these bundles can successfully save money and improve quality.”

“We need results, American patients need change, and when we need mandatory models to deliver it, mandatory models are going to see a comeback,” Azar said.

This is HUGE!!! Counting these new bundles there are now 32 Episode Groups that are available for bundling. Even the new initiative to try and tie medication prices to international prices is going to be implemented as a bundle (of sorts).

All Providers (hospitals and ambulatory practices) need to be paying very close attention to this because these programs will impact their businesses and care delivery process in a very big way.

So what are the bundled payment programs? In their most current incarnation and at a very high level these programs are operating as follows:

  • They are Advanced APMs so they make a provider eligible for the 5% MIPs bonus.
  • They are Episode based (as opposed to the patient based like in an ACO). This means that there is no cohort of attributed patients but rather patients are attributed to a facility at admission or at the beginning of a covered procedure (the Anchor Event). This has significant consequences which we will talk about in future posts.
  • CMS provides each entity that is going to be responsible for managing certain episodes risk and geography adjusted Target Prices covering all expenses associated with the Anchor Event and 90 days after that Event. This includes expenses incurred at SNFs, Part B expenses, and Home Health expenses. As the reader will no doubt recognize many of these expenses are out of the control of the Provider. Never the less they will be held responsible for these expenses!
  • Then twice a year CMS will look back at all the episodes for each entity and see if the total expense for each patient in these episodes is higher or lower than the Target Price. If lower the entity keeps the difference and makes money and if higher they have to pay the excess back to CMS.

Needless to say, there is a lot of money tied to bundled payments. We estimate that in the current BPCI Advanced model will pay the average Provider entity (Episode Initiator) over $1 million in gainsharing even if they do nothing other than keep doing what they have been doing over the last 3 years.

Keep tuned to this channel as we delve deeper into the intricacies (and trust me there are a lot of intricacies) of Bundled Payment Programs of the next few weeks.