Synchronization of Coverage, Benefits, and Payment to Drive Innovation

Implementation of payment reform, without a corresponding change to coverage, benefit, and other payment requirements, creates conflicting incentives that may nullify the intended aim of payment reform: to improve health outcomes, while saving costs.
Published Online: September 03, 2014
Annemarie V. Wouters, PhD; and Nancy McGee, JD, DrPH

More than 35% of Medicare beneficiaries receive care from providers operating under some form of shared savings/risk type of pay-for-performance incentive. Implementation of payment reform without a corresponding change to coverage, benefit, and other payment requirements, however, creates conflicting incentives that may nullify the intended aim of payment reform: to improve health outcomes, while saving costs. If related policies do not evolve to align with payment reform, those entities contracted to receive new bundled payments, such as hospitals or physician groups, will only be able to redesign care to the extent that care meets the myriad of related payment policy requirements. Shifting greater medical management authority from payers to entities managing the payment bundles is a gradual process, as the experience of commercial payers proves. Transitioning the responsibility for modifying coverage, benefit, and payment requirements from CMS to principal accountable bundlers (PABs) will depend on the PAB’s degree of financial risk sharing as well as scope of the episode.

Am J Manag Care. 2014;20(8):e285-e293

More than 35% of the nearly 50 million Medicare beneficiaries in 2013 received care from providers operating under some form of shared savings/risk type of pay-for-performance incentive. This statistic reflects more than 14.4 million beneficiaries in Medicare Advantage (MA) plans in 2013,1 plans which are reimbursed paid using an annual capitation rate. It also includes 4.4 million beneficiaries in 2013 who are attributed to 252 Medicare accountable care organizations (ACOs) under the Medicare Shared Savings Program (MSSP),2 which are paid using a combination of fee-for-service and shared savings or losses. In October 2013, additional beneficiaries began receiving care from providers participating in the Centers for Medicare & Medicaid Innovation’s (CMMI's) Bundled Payment for Care Improvement Initiative (BPCI).3 Under BPCI, awardees will be sharing financial risk with CMS for selected episodes of care.

CMS is incentivizing providers through payment reform to redesign healthcare services to improve health outcomes while saving costs. However, implementation of payment reform without a corresponding change to coverage, benefit, and other payment requirements creates conflicting incentives that may nullify the intended aims of payment reform.

To date, providers working under MA,4 MSSP,5 and the BPCI6 must comply with 3 types of CMS policies. These policies are core to the medical management of patients: (i) coverage policies under Original Medicare Part A and Part B (eg, national and local coverage determinations7); (ii) Medicare benefit policies8 (eg, hospital services, physician services, home healthcare, durable medical equipment, telehealth benefit9); and (iii) other payment policy requirements tied to payment systems for particular sites of care (eg, prior 3-day inpatient stay for covered skilled nursing facility services, 3-hour therapy inpatient rehabilitation rule). Interestingly, while traditional payment methodologies that are tied to the site of service are rapidly changing to allow for more innovative approaches—such as payment by episode of care, which permits patients to receive treatments at multiple sites of service for 1 bundled payment—these 3 principles of coverage remain static.

Failure to evolve coverage, benefit, and payment policy requirements as payment methods change is likely to impede the ability of payment reform to reach maximum quality, efficiency, and innovation in care. If related policies do not evolve to align with payment reform, those entities contracted to receive new bundled payments, here referred to as principal accountable bundlers (PABs), are only able to redesign care to the extent that care meets the myriad of related payment policy requirements. PABs may be hospitals, physician groups, post-acute providers or third party entities who are in a position to financially and clinically oversee an episode of care. As shown in Figure 1, coverage and benefit mechanisms that were designed to support original payment models must be reconfigured to be in synch with new pay-for-performance paradigms.

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