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The American Journal of Accountable Care September 2019
Achieving a Culture of Health: Steps for Engaging State Government
Dennis P. Scanlon, PhD; Jocelyn M. Vanderbrink, MHA; Mark Sciegaj, PhD; and Brigitt Leitzell, MS
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Richard J. Baron, MD, President and Chief Executive Officer, American Board of Internal Medicine and the ABIM Foundation
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The Cost of Learning: Participating in APMs Despite Projected Financial Losses
Jessica Walradt, MS; Hannah Alphs Jackson, MD, MHSA; Brian Walsh, BA; and David Manning, MD

The Cost of Learning: Participating in APMs Despite Projected Financial Losses

Jessica Walradt, MS; Hannah Alphs Jackson, MD, MHSA; Brian Walsh, BA; and David Manning, MD
This article explores Northwestern Medicine’s decision to participate in a Medicare alternative payment model (APM) despite projected losses.

When determining whether to participate in a voluntary alternative payment model (APM), many healthcare organizations consider financial performance to be the leading decision factor. That is, is the provider estimated to make money or lose money if it participates in the program? In this article, Northwestern Medicine (NM) discusses the alternate criteria that influenced its decision to enter a Medicare APM, Bundled Payments for Care Improvement (BPCI) Advanced, despite projected losses. Ultimately, NM determined that opportunity existed to further streamline care pathways and, in doing so, eventually break even financially. In addition, NM contends that participation in voluntary Medicare APMs provides a unique opportunity to build competencies such as strategic data analysis, high-risk patient identification, and strong inter–care setting partnerships. Finally, NM argues that although APMs hold promise, policy changes must be made to ensure the long-term sustainability of models such as BPCI Advanced.

The American Journal of Accountable Care. 2019;7(3):30-33
Over the past decade, the United States has experienced a large increase in the number of providers participating in alternative payment models (APMs), which are designed to incentivize the provision of cost-efficient and high-quality care. In 2018, the Health Care Payment and Learning Action Network reported that the percentage of healthcare payments reimbursed under shared savings, bundled payment, and/or population-based payment models had increased from 23% in 2015 to 34% in 2017. This climb was facilitated by the large number of new APMs, such as the recently launched Bundled Payments for Care Improvement (BPCI) Advanced model. With the increasing availability of voluntary models, providers have a number of factors to consider when contemplating participation. Using BPCI Advanced as a case study, this article explores these decision factors, as well as how much stock should be placed in projected financial performance. Finally, we present thoughts regarding the long-term sustainability of APMs such as bundled payment programs.

BPCI Advanced Overview

Under BPCI Advanced, participants may select between 1 and 37 clinical episodes for which to accept financial risk, meaning that they are accountable for the care that beneficiaries receive and the associated healthcare expenditures across a 90-day postdischarge period. If Medicare payments for services provided to beneficiaries during this time exceed a target price, the participant must pay back the difference to Medicare.

Meanwhile, if payments fall below the target price, participants are eligible to receive the difference as savings. Northwestern Medicine (NM) is participating in BPCI Advanced with the major joint replacement of the lower extremity (MJRLE) episode (eg, knee replacement, hip replacement). It is doing so despite the fact that it is projected to sustain a loss in this episode based on the current data made available to it by the Center for Medicare and Medicaid Innovation (CMMI).


Like many healthcare organizations, NM chose to enter its first Medicare bundled payment program with the MJRLE episode. Relative to other conditions, such as simple pneumonia, MJRLE is often viewed as comparatively easier to operationalize in a bundled payment model due to the relatively low variation in patient acuity; the mostly elective nature of the procedure, which lends to easier patient identification; easily identifiable efficiency opportunities; and ease of mapping out optimal care pathways from before to well after the procedure.

NM entered the original BPCI in 2015 and successfully executed a multidisciplinary, pre- and postoperative clinical pathway across the clinical care continuum with high provider adherence rates for patients undergoing MJRLE. Early in the program, performance was uneven, and NM even experienced a few quarters of losses, but its financial performance improved and became more consistent as it executed and refined interventions. To date, NM has averaged a 4% quarterly savings rate in BPCI MJRLE episodes.

Despite this fact, when NM received its preliminary BPCI Advanced target prices, it found itself in an unfortunate position, as did many other health systems with previous success in BPCI MJRLE or the mandatory Comprehensive Care for Joint Replacement program. When NM compared average episode payments from the most recent full year of BPCI Advanced baseline data (fourth quarter of 2015 to third quarter of 2016) with the 2018 preliminary target prices, NM was projected to lose approximately 9% over the course of a year.

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