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The American Journal of Managed Care November 2015
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Medicare's Bundled Payments for Care Improvement Initiative: Expanding Enrollment Suggests Potential for Large Impact
Lena M. Chen, MD, MS; Ellen Meara, PhD; and John D. Birkmeyer, MD
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Susan K. Schmitt, PhD; Mintu P. Turakhia, MD, MAS; Ciaran S. Phibbs, PhD; Rudolf H. Moos, PhD; Dan Berlowitz, MD, MPH; Paul Heidenreich, MD, MS; Victor Y. Chiu, MD; Alan S. Go, MD; Sarah A. Friedman
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Medicare's Bundled Payments for Care Improvement Initiative: Expanding Enrollment Suggests Potential for Large Impact

Lena M. Chen, MD, MS; Ellen Meara, PhD; and John D. Birkmeyer, MD
Expanding and more representative participation in Medicare's Bundled Payments for Care Improvement initiative suggests potential for large impact, pending the results of risk-bearing participants.
ABSTRACT

Objectives: Aiming to encourage care coordination and cost efficiency, the Center for Medicare & Medicaid Innovation (CMMI) launched the Bundled Payments for Care Improvement (BPCI) initiative in 2013. To help gauge the program’s potential impact and generalizability, we describe early and current participants.

Study Design: We examined the cross-sectional association between BPCI participation and providers’ structural and cost characteristics.

Methods: Using data from October 2013 and June 2014, we quantified changes in BPCI participation. We described structural differences between participating and nonparticipating hospitals using t tests and χ2 tests, and we used the Cochrane-Armitage test to assess whether participants were more likely be in higher 90-day episode cost quintiles than their peers at baseline (2009-2010).

Results: Overall (risk-bearing and non–risk-bearing) participation in BPCI increased from about 400 in October 2013 to more than 2000 in June 2014—attributable, in part, to Model 2, the most comprehensive of the 4 models offered by CMMI for provider participation. Model 2 hospitals increasingly resemble eligible but nonparticipating hospitals. For the most commonly chosen condition of hip replacement, Model 2 hospitals were not costlier than their peers. Hospitals used to make up 97% of Model 2 participants, but physician practices now comprise a substantial number of Model 2 participants. However, most BPCI participants have not yet begun to bear financial risk. Risk-bearing Model 2 hospitals are a smaller and less representative group, with higher baseline costs for hip replacement than their peers.

Conclusions: Growing participation in BPCI suggests strong interest in bundled payments. The long-term impact of BPCI will depend on CMMI’s ability to persuade interested but non–risk-bearing participants to bear risk.

Am J Manag Care. 2015;21(11):814-820
Take-Away Points
 
Growing and more representative enrollment in Medicare’s Bundled Payments for Care Improvement (BPCI) initiative suggests strong interest in bundled payments. The long-term impact of BPCI will depend on the results of risk-bearing participants.
 
Episode-based bundled payments are one of several proposed healthcare payment reforms aimed at encouraging care coordination, quality improvement, and cost efficiency.1-6 Historically, hospitals, physicians, and post acute care providers have been paid separately for services occurring during and after hospital admissions. With bundled payments, a fixed lump sum payment is shared among all caregivers, who also share savings when actual expenditures fall below the bundled payment amount. Based on data highlighting wide variation in episode payments across hospitals with many common conditions,7,8 some estimate that implementation of bundled payments around hospitalizations could save more than $30 billion annually in the Medicare program alone.4

A new program by the Center for Medicare & Medicaid Innovation (CMMI) provides early insights about the future prospects of bundled payments. The Bundled Payments for Care Improvement initiative (BPCI) was launched in 2013, with CMMI offering providers 4 models for participation.3,5 Model 1 includes Part A services for the index hospitalization alone, and thus most closely resembles current fee-for-service payment. Model 2 is the most comprehensive of the 4, encompassing Part A and Part B services for the index hospitalization, readmissions, and all other post acute care. Model 3 includes only post acute care, and Model 4 includes both the index hospitalization and any readmissions.

Although the end results of the BPCI program will not be available for some time, we provide an overview of the program’s general parameters and describe the characteristics of its participants in order to help gauge the program’s potential impact and generalizability. More specifically, we describe national patterns of participation in the BPCI program, as well as the association between participation and providers’ structural and cost characteristics. 

METHODS
CMMI began accepting applications from hospitals and other providers for the BPCI initiative in 2011. The first participants began bearing financial risk in April 2013 (Model 1) and October 2013 (Models 2-4). CMMI briefly accepted new applications in late 2013 (Model 1) and early 2014 (Models 2-4), with many of these participants not yet having begun risk-bearing (ie, subject to financial gains and losses in the program). Program participants first enter a non–risk-bearing period preparing for implementation (Phase 1), followed by the start of a 3-year risk-bearing period (Phase 2), which is staggered among participants. Even for individual participants, risk-bearing may be rolled out over time; a BPCI participant may begin bearing risk for some of their selected conditions (ie, partial risk-bearing) before doing so for all of their selected conditions (ie, complete risk-bearing).

To describe program participation, we used BPCI participant lists from October 2013 (defined as early participants) and June 2014 (defined as current participants). Data on BPCI participants were first made publicly available in October of 2013.9 Because Model 3 focuses exclusively on post acute care, we examine Models 1, 2, and 4—the 3 models that included the index hospitalization and were open to acute care hospitals.

To describe the structural characteristics of BPCI hospitals versus non-BPCI hospitals, our sample included acute care hospitals eligible for program participation. We utilized the American Hospital Association Annual Survey 2012.10 We defined rural hospitals as those in areas with a population less than 10,000 and we defined teaching hospitals as major or minor (ie, members of the Council of Teaching Hospitals, hospitals with a medical school affiliation, or hospitals with residency or internship training approved by the Accreditation Council for Graduate Medical Education or the American Osteopathic Association). When examining Model 2 hospitals (BPCI participants vs nonparticipants), we defined nonparticipants as all acute care hospitals not participating in Model 2 of BPCI as of June 2014, identified in the 2010 version of the 100% Medicare Provider Analysis and Review File, excluding the Model 2 BPCI hospitals, Maryland hospitals, and federal hospitals.

Given concerns that providers might “cherry-pick” high-cost conditions for performance measurement (because it may be easier to lower costs for conditions with baseline costs above benchmark), we performed a sensitivity analysis of baseline costs of care for hip replacement—the most popular condition chosen. We describe the distribution of Model 2 BPCI hospital participants who selected hip replacement, across national cost quintiles. These cost quintiles were created by ranking all hospitals (all BPCI eligible nonfederal acute care hospitals that had at least 10 hip replacement cases per year and were not located in Maryland—which is exempt from the Inpatient Prospective Payment System and Outpatient Prospective Payment System—with payment rates set by the state) by their average 90-day risk-adjusted, price-standardized, reliability-adjusted total payments, and then dividing this into quintiles. Because almost no physician practices are risk-bearing yet, we did not conduct a similar analysis for hospitalized patients attributed to BPCI physician practices (vs non-BPCI physician practices).

For this work, we utilized Part A and B Medicare claims data from 2008 to 2011. We restricted our sample to acute care hospitals that cared for fee-for-service Medicare beneficiaries 65 years or older who underwent hip replacement (International Classification of Diseases, 9th revision, Clinical Modification codes 81.51 or 81.52, and diagnosis-related group codes 469 or 470) between 2009 and 2010. We included no more than 1 index admission per year per beneficiary. We price-standardized total episode payments from the procedure date through 90 days postdischarge, using a previously described methodology.11 We risk-adjusted payments using age, sex, race, admission acuity, and the 29 Elixhauser comorbidities.12

This study was declared not regulated by the University of Michigan Institutional Review Board. We conducted all analyses with SAS version 9.3 (SAS Institute, Cary, North Carolina).

RESULTS
The BPCI program has grown rapidly since its inception. Only 171 acute care hospitals were participating in Model 2 when the earliest participants began risk-bearing in October 2013 (Figure 1). Even fewer hospitals were participating in Models 1 and 4. Participation rose sharply after CMMI accepted new applications in early 2014. The number of Model 2 participants increased more than 3-fold. Even risk-bearing participation grew substantially during this same time period. In contrast, the number of Model 1 and 4 participants remained low—and in the case of Model 4, dropped.

Physician groups make up a growing and sizable proportion of BPCI participants (Table). While physician practices comprised just 3% of all Model 2 participants in October of 2013, they now make up many of the Model 2 participants. Most practices specialize in orthopedic surgery, hospital medicine, cardiology, or emergency medicine; the growth in physician groups has outpaced that of hospitals. Nevertheless, almost no physician practices have begun risk-bearing. About 10% of all eligible acute care hospitals are currently part of Model 2.

Model 2 hospitals (risk-bearing + non–risk-bearing) differ from nonparticipating hospitals (Table). For example, these hospitals are more likely to be large (500 beds or more) and to be teaching hospitals. Hospitals in the northeast are substantially overrepresented, while those in the south are underrepresented. Participating hospitals are also more likely to be nonprofit than their eligible nonparticipating peers. Risk-bearing Model 2 hospitals are an even less representative group than non–risk-bearing hospitals.

BPCI hospitals and physician groups in Model 2 chose from a menu of 48 eligible clinical conditions for performance measurement. These 48 episodes make up approximately three-fourths of all admissions at acute care hospitals for older fee-for-service Medicare beneficiaries. However, most early entrants limited their participation to a narrow subset of these conditions (Table). For example, nearly half of early Model 2 participants selected only 1 or 2 conditions: the most popular choices were major lower extremity joint replacement (selected by 86% of Model 2 participants), congestive heart failure (60%), coronary artery bypass grafting (CABG) (44%), and chronic obstructive pulmonary disease/asthma (43%). Later entrants were more likely to choose all 48 conditions. For example, about half of the Model 2 orthopedic practices chose all of the nonorthopedic conditions offered, in addition to all of the orthopedic conditions. When participants did limit themselves to a smaller number of conditions, orthopedic and cardiac conditions were favored.

Among current risk-bearing Model 2 hospitals that selected the most commonly chosen condition of hip replacement, more than 5 times as many Model 2 hospitals were in the highest compared with the lowest cost quintile (Figure 2). In contrast, the baseline costs of all current Model 2 hospitals (risk-bearing + non–risk-bearing) resemble that of nonparticipating hospitals.

DISCUSSION
We found that provider participation in the national bundled payment initiative for Medicare beneficiaries has grown substantially in the past year, with participation tripling for the most comprehensive model (Model 2). Although this growth is comprised primarily of non–risk-bearing participants, the number of risk-bearing providers has also increased. Physician practices—especially orthopedic practices—have increasing interest in the program, as evidenced by the rising number of physician practices in the BPCI’s non–risk-bearing phase. The clinical scope has broadened as well. Whereas many early participants selected 1 or 2 conditions, many current entrants have selected all 48 conditions offered.

Bundled payments are 1 of several “alternative payment models” that were highlighted by HHS Secretary Sylvia Burwell, when she described the federal government’s efforts to move toward paying for value.13 The size of the BPCI program dwarfs prior bundled payment initiatives, and is comparable in size to other CMMI payment reforms such as the Medicare Shared Savings Program (with 343 accountable care organizations [ACOs] as of January 2014). CMMI permits providers to enroll in multiple payment reform initiatives simultaneously (eg, BPCI, Next Generation ACOs). Of note, we found that BPCI hospitals share a number of characteristics with Medicare ACOs.14

BPCI builds upon earlier and ongoing efforts around bundled payments. As early as 1991, the Medicare Participating Heart Bypass Center Demonstration tested bundled payments with CABG at 7 hospitals.15 This was followed by efforts to implement bundled payments in other settings or for other populations; for example, Medicare’s Acute Care Episode Demonstration, which ran from 2009 to 2012, targeted orthopedic and cardiac conditions in 5 hospitals or health systems.6 The Geisinger ProvenCare program started with CABG in 2006 and now includes several other conditions and procedures,16 and the ongoing PROMETHEUS payment model offers many different bundles of care.

 
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