Synchronization of Coverage, Benefits, and Payment to Drive Innovation

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.

As a general rule, Medicare requires entities participating in payment reform initiatives such as MSSP10 and BCPI11 to have processes in place that document and support adherence to evidence-based medicine payment initiatives. The intent is to ensure that efforts to redesign care actually result in clinically effective care. Tensions arise, however, when new payment incentives conflict with traditional coverage and benefit policies that have not changed. For instance, based on review of clinical evidence, a PAB’s medical leadership team may find that although a particular medical innovation is reasonable and medically appropriate for its patient population when provided following the medical team’s clinical pathway the service cannot be offered because it: (i) is not covered by Medicare; (ii) is not a Medicare benefit; or (iii) does not comply with a payment policy requirement. The net result is an unintentional stifling of innovation, not due to payment concerns, but because coverage and benefits are not synchronized to cooperate with the change in payment to allow an alternative treatment without roadblocks to payment.

A case in point is CMS’s recent negative response to public requests to convert coverage of innovative remote access technologies (eg, telemonitoring, Web-based technologies, nurse hotlines, and other similar services) from the status of supplemental benefit to a basic benefit because CMS does not have the authority “to define Part C basic benefits as being broader or different than the Parts A and B benefits provided under original Medicare.”12

CMS has experience modifying payment requirements and coverage policies to support more bundled methods of payment, but to date, the approach has been ad hoc. Some examples include developing customized waivers for each payment model, and reviewing each request for a new supplemental benefit in the MA program. With new payment reforms emerging, a one-by-one review approach will soon become unwieldy, and implementation of payment reforms will be delayed. What’s more, an unintended consequence of an ad hoc approach is that it often lacks transparency. For example, little is known about the waivers requested and offered under MSSP and BPCI.13 It is an opportune time for CMS to adopt a more systematic and transparent approach to modifying coverage and benefit constructs to support the goals of payment reform.

As we will see, most coverage, benefit, and payment policy decisions are currently made centrally by CMS or regionally by local Medicare Administrative contractors, while decisions on how to spend the “bundle” are made by the PABs. The failure to delegate decision making to PABs regarding policies that are core to medical managementm is understandable in these early stages of payment reform, since current bundled arrangements with either Medicare or commercial payers include only limited financial risk for most PABs.14,15 As payment reform moves ahead and PABs assume more financial risk, they will also want more authority to redesign all aspects of care; they will, for example, want to take on a greater role in designing all policies that impact medical management.15 

In our recommendations below about how we believe the path forward should develop, we note that sharing more authority with PABs does not mean abandoning all existing coverage, benefit, and payment policies, but rather allowing PABs to modify these policies when they meet the conditions designed to ensure beneficiary protections. Examples of such conditions might include: (i) requiring

PABs to meet baseline performance thresholds; (ii) having evidence-based decision-making processes in place, including a consensus-based approach by the PAB’s medical leadership team, accompanied by ongoing evaluation mechanisms; (iii) ensuring transparency of these processes and policy modifications to providers and patients; (iv) establishing opportunities for appeal; and (v) using patientcentric decision-making tools (eg, shared decision-making tools) to ensure that patients are empowered to make informed decisions. If the PAB meets these conditions, CMS would not necessarily be required to approve every policy modification, but could transition to a role of monitoring performance and enforcement of these conditions. In order to create a plan for synchronicity, it is helpful to review CMS’s past efforts to adapt coverage, benefit,  payment policies to payment innovation. The discussion begins with a review of Medicare coverage policies. We then provide an examination of CMS’s experience with MA, the BPCI, and the introduction of the inpatient rehabilitation facility prospective payment system. We conclude with recommendations to guide steps forward, illustrated with examples from private payers who are facing similar challenges.

Targets and Criteria for Medicare Coverage Policies

CMS focuses most of its attention on developing formal coverage policies for items and services that are likely to have a major impact on quality, safety, and the government budget. Although many items and services do not reach this level of attention, CMS is tasked with meeting the statutory requirement for Medicare services that “[n]o payment may be made under Part A or Part B for any expenses incurred for items or services, which...are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”16 Notably, this language has never been amended, or interpreted through public rulemaking.17,18

CMS determines what is reasonable and necessary based on whether there is “adequate evidence to conclude that the item or service improves health outcomes.”19,20 CMS ranks the quality of clinical studies based on numerous, coherent, and sensible criteria that help assess the reliability of the data generated.21 When there is no specific coverage policy, a local Medicare Administrative Contractor (MAC) may remain silent or may decide to cover the service or item on a case-by-case basis.

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Issue: August 2014
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