Featured Health Business Daily Story, Aug. 4, 2015

CMS Plan on Knees, Hips Leave Questions For Carriers Active in Bundled Care Space

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry. Sign up for a $91 two-month trial subscription today.

By ,
July 20, 2015Volume 25Issue 24

Health insurers may view the new proposed CMS program to bundle knee and hip replacement surgeries in Medicare with some trepidation, as the effort may complicate their own efforts in the space and how they negotiate with providers who are part of the 75-market, five-year trial, according to some market consultants. But one insurer takes a nuanced approach to the CMS effort, telling HPW that bundles are a way to “dip your toe” in the alternative payment world, and as such are more of a starting point in preparing physicians for broader population health reimbursement models.

CMS on July 9 proposed a new bundled payment model (80 Fed. Reg. 41197, July 14, 2015) that will put hospitals at financial risk if they do not make quality and care improvements for patients transitioning from surgery to recovery for knee and hip replacements. The five-year Comprehensive Care for Joint Replacement payment model would be mandatory for providers in 75 markets, and following a comment period that ends on Sept. 8, would take effect on Jan. 1, 2016. The payment changes would affect around 800 hospitals and some 100,000 patients per year, equating to 25% of all hip and knee replacements covered by Medicare. Providers would continue to receive fee-for-service (FFS) payment for hip and knee replacements for a period from the time of surgery through 90 days after for an entire “episode” of care. But depending on the “hospital’s quality and cost performance,” it “may receive an additional payment or be required to repay Medicare for a portion of the episode costs,” CMS said (HPW 7/13/15, p. 8).

Industry stakeholders say bundled payment initiatives like the one CMS has in mind are generally positive to the marketplace since they help move away from FFS, but some aspects of the proposed plan are potentially harmful and insurers are not necessarily married to the idea of bundles in the first place.

In comments during UnitedHealth Group’s earnings call on July 16, Dan Schumacher, chief financial officer for UnitedHealthcare, the insurance arm of the group, said the carrier has a more expansive view than just the bundled payment model. “As it relates to our value-based reimbursement and approach, we’ve talked historically about the continuum, working from less progressive to more progressive. Sitting in the middle of that is bundled payments,” he said. And to bring home the point of the model’s modest impact, Schumacher said of the $36 billion the insurer has deployed in value-based reimbursement for 2014 (a figure that he said will rise to $43 billion for this year) “we’ve got about 5% staked in that bundled payment category.”

He added that while bundles are a “good mechanism,” they still don’t “specifically address the volume of utilization….As we look at progressing we are looking to get to comprehensive alignment around total population costs. [Bundles are] productive and positive but just part of a broader solution.”

University of Pittsburgh Medical Center (UPMC) Health Plan executives tell HPW they are more positive about CMS’s bundling initiative. “Overall it is a very positive proposal and something we have been working on over the last few years with our provider network,” says Angela Moczan, senior director, strategic initiatives, UPMC Health Plan. “I definitely don’t think it will mess anything up. If anything it is a step forward, another step in a direction toward different payment models. We’ve been doing something very similar with our Medicare Advantage and commercial membership with our integrated delivery and financing system for the past several years.”

Tom Aubel, director of medical payment, strategy and policy, UPMC Health Plan, says it would take only “minor tweaks” to match what his company is doing with the thrust of the CMS plan. “Our program is a little different” since UPMC is an integrated health system with hospitals and physicians in tow. “We look at costs on the insurance side and also look at costs on the hospital side to get them to be more efficient on the way they provide care. We really look at the full continuum of care, which is a little different than what the nationals can do since we can see those claims and try and make doctors aware of what they are doing on the insurance side and hospital side,” he adds.

Is the CMS Plan a True Bundle?

There are critics of the CMS draft plan. Harold Miller, president and CEO of the Pittsburgh-based Center for Healthcare Quality and Payment Reform, tells HPW the problem with the CMS proposal is that right off the bat it makes one wonder whether the plan is a bundle.

“Add to that the fact that they are basically mandating that hospitals take responsibility for something that they don’t actually get any control over,” he says. CMS proposed that the acute care hospital that is the site of surgery would be held accountable for spending during the episode of care. That hospital would have to work with physicians, home health agencies and nursing facilities to coordinate care. “If you have a true bundle and you say, ‘OK, group of providers, get together, manage this bundle and kind of figure out how you want to deliver care differently, and then divide up the money however you want to,’ people commit to it however they want to and structure it in a fair way. But if you say to one entity you are going to be financially responsible for what all the other entities do but you won’t actually have any control over them, what are you going to do?”

UPMC’s Moczan sees the point, but understands the CMS process. “I can see why someone would say it is not a true bundle. In the aspect of that a lot of people consider a bundle like more of a prospective type payment. Our program is more along the lines of a shared savings program and it operates similarly to what this proposal is recommending where it is a retrospective reconciliation to a target. So, again, we are familiar with that type of methodology. In a bundle you have one payment for the entire episode of care, which is what this is recommending, on a prospective basis.”

Moczan adds that the first-year results for UPMC’s knee and hip bundle have been very positive, and second-year results are being evaluated. Moreover, the insurer started a spine program bundle at the beginning of 2015.

And Michael Sweeney, associate vice president, reimbursement and network, UPMC Health Plan, tells HPW that people need to see that CMS is just starting out in alternative payment models just as private insurers are. “While currently it is a retrospective bundle, it is an indication of the fact they are going to be moving to a more true bundle,” he says. “I think they realize, and frankly we realized when we started to do this, that physicians perhaps were not ready to accept payment for a true bundle. So you start by dipping your toe in the water…walking down that road to get to a true bundle.”

He says past mistakes are behind this approach. “One of the things we learned from the mid-1990s with all of these companies and physicians entering into risk arrangements is that they did not know how to manage or work them and were not successful. Now we want to do it slowly so we can maximize their potential,” Sweeney adds.

What Are Others Saying About CMS?

Because insurers have been developing alternative payments and population health for some time, the CMS plan should not conflict with this trend, says Francois de Brantes, executive director, Health Care Incentives Improvement Institute. “Most health plans are doing ACO-ish types of things. Most arrangements are upside only so they have very little downside risk. This would enable the plans to piggyback off the Medicare program and get many hospitals around the country engaged in contracting for risk-based contracts, albeit just on a few procedures,” he tells HPW.

He adds that the proposal is a pretty sizable effort in covering 75 areas at first. “So my sense is that those hospitals and health systems are going to go knocking on the door of the commercial payers that they do business with, and say we need to enter into a similar type of deal on joint replacements, because whatever changes we make to the way we are organizing care today for Medicare is going to filter into the commercial line as well,” de Brantes says. “And we want to make sure the extent to which we implement significant improvements we can get the benefit of that. So, I would suspect that your readers will get a lot of calls from network management asking for these such contracts.”

© 2015 by Atlantic Information Services, Inc. All Rights Reserved.

Get more timely news and business strategies on Medicare Advantage, Medicare Part D and Managed Medicaid in AIS’s Medicare Advantage News. Sign up for an $87 two-month trial subscription today!

It's quick and easy to sign up for FREE access to AISHealth.com!

Why do I need to register?

Resources for Paid Subscribers
Not a Paid Subscriber?

Check out all of the benefits, sample issues & more!