Bundled payments are a step in the right direction when it comes to moving away from a fee-for-service payment structure. They have been proved to cut costs, and providers are responding by producing significantly better outcomes. naviHealth, a postacute care benefit manager, will test one bundled payment model using 11 hospitals in 5 states.
Regardless of the broader controversies, parts of the Patient Protection and Affordable Care Act—also known simply as the Affordable Care Act (ACA) or Obamacare—are working. As a result, the Centers for Medicare & Medicaid Services (CMS) is introducing new demonstrations. Specifically, within the Medicare population, there is a new focus on the quality and cost of postacute care (PAC). PAC consists of skilled care, therapy, and other services provided by home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs). PAC is currently one of the least structured parts of the healthcare delivery system. Briefly, by the numbers, PAC is increasingly part of the healthcare spend conversation:
• A recent report published by The Associated Press-NORC Center for Public Affairs Research suggests that the population of those over age 65 will nearly have doubled by the time the last baby boomers turn 65.1
• The Institute of Medicine recently reported:
o If regional variation in PAC spending did not exist, Medicare spending variation would fall by 73%.
o 43% of Medicare patients utilize PAC services following a hospitalization.
o 23% of total medical spending is spent on PAC.
o Medicare spending on PAC grew at 8% annually from 2001 to 2012.
o In 2013 alone, Medicare spending for PAC services exceeded $62 billion.2
The primary initiative focused on utilization and transparency of outcomes within PAC is the Bundled Payment for Care Improvement (BPCI) initiative from the Center for Medicare & Medicaid Innovation (CMMI). Our company, naviHealth, a PAC benefit manager, is participating with a handful of the hospitals engaged in BPCI. Specifically, naviHealth is a convener for Model 2: Retrospective Acute & Postacute Care, and is partnering with 5 health systems that span across 5 states.
Background on BPCI
The CMMI was created as part of the ACA, and has produced several models to advance the bipartisan support of bundled payments. Regardless of political affiliation, the bundled payment programs—the ultimate bundle being Medicare Advantage—offer significant improvement over the current Medicare fee-forservice payment structure. Incentives and penalties are driving providers to manage beneficiaries beyond the 4 walls of the acute-care setting.
Bundling of payments allows Medicare to align incentives for all providers, across the continuum, based on an agreed-upon episode of care. Providers are responding by producing significantly better outcomes. Bundled payment for care improvement consists of 4 models:
1. Retrospective Acute-Care Hospital Stay Only. The episode of care is defined as the inpatient stay in the acute care hospital.
2. Retrospective Acute-Care Hospital Stay Plus Postacute Care. The episode of care includes the inpatient stay in the acute hospital, all related services during the episode, and either 30, 60, or 90 days after the hospital discharge. Participants can select up to 48 different clinical condition episodes.
3. Retrospective Postacute Care Only. The episode of care is triggered by an acute-care hospital stay and will begin at the initiation of postacute care services with a participating SNF, IRF, LTCH, or home health agency for 30, 60, or 90 days. As with Model 2, participants can select up to 48 different clinical condition episodes.
4. Acute-Care Hospital Stay Only. The episode will be based on a selection of 48 clinical conditions, and CMS will make a single, prospectively determined bundled payment to the hospital that encompasses all services during the inpatient stay by the hospital, physicians, and other practitioners.
Under Models 1, 2, and 3, Medicare will pay the hospital an agreed-upon discounted rate based on the payment amount established under the Inpatient Prospective Payment System (IPPS) used in the original Medicare program. Medicare will continue to pay physicians separately for their services under the Medicare physician fee schedule. Part of the retrospective reconciliation includes an opportunity for hospitals and physicians to share gains arising from the providers’ care redesign efforts. Under Model 4, physicians and other practitioners will submit “no-pay” claims to Medicare and will be paid by the hospital out of the bundled payment. Related readmissions for 30 days after hospital discharge will be included in the bundled payment amount.
naviHealth as a Convener
On January 1, 2014, naviHealth and our 11 partner hospitals launched our BPCI program in the following markets: Dignity Health in San Bernardino, California; Lovelace Health System in Albuquerque, New Mexico; Hillcrest Healthcare System in Tulsa, Oklahoma; Saint Thomas Health in Nashville and Murfreesboro, Tennessee; and Lourdes Health System in Camden, New Jersey. In coordination with each of these partners, our care managers will coordinate care for qualifying beneficiaries (based on clinical condition) for 90 days after their acute hospital discharge.
While the acute-care stay and discharge planning is part of the episode, the 90 days following the acute discharge is where naviHealth utilizes more than a decade of experience with almost a million patients to meaningfully change the behavior and outcomes for Medicare beneficiaries. In partnership with the hospital, we identify the beneficiary by day 2 of their acute stay, if not prior to their acute stay (identification prior to acute stay is easier for elective surgeries), and begin the dialogue about their projected PAC needs. We will provide an evidence-based road map to the beneficiary and caregivers on how to navigate the upcoming transitions of care, ensuring that the patient is in the right setting and receives the right intensity of care, for the right amount of time, to improve patient satisfaction and patient outcomes, and at a lower cost.
Continual evaluation and management of the beneficiary’s care plan ensures the delivery of the most appropriate care. We are targeting a subset of 48 clinical conditions (surgical and medical), staffing accordingly, and partnering with PAC providers to enhance the coordination features. An episode consists of a “bundling” of diagnosis related groups (DRGs) related to a like clinical condition. Eligible beneficiaries must fall within one of the clinical episodes and be enrolled in Medicare Part A and B. They can be a dual-eligible enrollee (Medicare and Medicaid) as long as Medicare is the primary payer, and they cannot have an identified diagnosis of end-stage renal disease (ESRD) or be enrolled in a Medicare Advantage plan.
The Role of the Care Managers
As part of our care coordination approach, we have hired and trained over 150 care managers, who are trained RNs, LPNs, PTs, OTs, and social workers, and will be partnering at the acute-care level to impact the discharge process as well as follow the beneficiary for the 90 day continuum postdischarge. Prior to discharge, and in conjunction with the hospital discharge planning process, the care manager will perform a “live safe,” which is naviHealth’s predictive technology tool to inform the discharge process based on function score (basic mobility, applied cognition, and daily living skills). We also have a series of risk-screening assessment tools that help us predict the likelihood of a readmission, which provides us information with which to tailor the intensity of our interventions, based on the beneficiary’s needs. These interventions are delivered telephonically or face-to-face in the beneficiary’s home, or in an acute or PAC setting.
The creation and execution of a care plan that can be modified along the continuum allows for continual calibration of our care managers’ interventions and beneficiary contact. Our care managers have undergone several orientations, including hospital orientation and introductions to the PAC providers in their respective market. We believe this level of integration will drive our partnerships and is critical to our success. To build the PAC network in each market, we hosted town hall meetings and invited PAC providers to learn about BPCI and meet our staff, who will be making rounds in their facilities to ensure the beneficiary is achieving functional improvement. We consistently collect data to inform the creation of a severity-adjusted dashboard, allowing us to identify the top-performing PAC providers based not only on efficiency, but also quality. We are high “touch” and high tech.
Retrospective Reconciliation of the Payments
As mentioned above, under Model 2, the hospitals will continue to bill under the traditional IPPS, and there will be a retrospective reconciliation of savings accrued. Part of our contract with CMS includes a guaranteed savings to CMS, and any savings accrued on top of the guaranteed amount to CMS will be split among naviHealth and our provider partners. naviHealth will impact the total cost of care within an episode by reducing readmissions and employing our evidence-based methods to identify the most appropriate PAC setting and services to be delivered for an entire episode of care.
What Is the Future of Bundled Payments?
In Washington, DC, we have seen an increase of activity around a broader and more permanent adoption of bundled payments. Recent activity includes the introduction of bipartisan legislation, the Comprehensive Care Payment Innovation Act, in December 2013 by Congressional representatives Diane Black (Tennessee) and Richard Neal (Massachusetts) and, in January 2014, David McKinley (West Virginia) introduced the Bundling and Coordination Post-Acute Care Act of 2014. The Medicare Payment Advisory Commission (MedPAC) has also strongly urged adoption of new payment models to manage PAC spending while improving the quality of care. In February 2014, CMMI announced the opportunity to expand the current BPCI initiative, with the ability to add episode initiators and episodes. And, on March 4, 2014, President Obama released his Fiscal Year 2015 budget proposal, which included the implementation of bundled payment for PAC providers, starting in 2019, and would account for a projected savings of $8.7 billion. The recent savings projection will make it increasingly likely to be used as a “pay-for” for physician payment form.
With all of this activity, it is not a matter of if, but rather when. CMS just needs to take the time to thoughtfully define the payment methodology, and private payers will follow. Regardless of political affiliations, bundled payments are a step in the right direction. They are happening—the reform is inevitable. We close with a story from one of our case managers regarding the most important part of these new payment and delivery models—positively impacting the lives of beneficiaries:
One of our care managers called one of the Medicare beneficiaries enrolled in our BPCI program to confirm an upcoming follow-up home visit appointment during lunch hour the following day. The beneficiary’s daughter is a nurse and resides next door. Our care manager arrived at the home, approached the front door (which is glass), and could see the beneficiary slumped over in his recliner. Our care manager knocked hard on the door, but the beneficiary did not answer or acknowledge our care manager’s arrival. Because the care manager had confirmed the appointment and the door was unlocked, our care manager proceeded to enter the home. The beneficiary was not breathing and our care manager was unable to resuscitate him. Given that the daughter was at work, our care manager proceeded to call the ambulance. The beneficiary’s blood sugar was 23. Upon dispensing glucose, the beneficiary became conscious again, and the family was very grateful that a care manager was there to check on him.Author Affiliations: Tom Scully, JD, is a general partner at Welsh, Carson, Anderson & Stowe, a New York City private equity firm, and senior counsel at Alston & Bird, a Washington, DC, firm. From 2001 to 2004, Mr Scully served as the Administrator of the Centers for Medicare & Medicaid Services. From 1995 to 2001, Mr Scully served as president and chief executive officer of the Federation of American Hospitals. He also held health policy positions in the White House from 1989 to 1993 for President George H. W. Bush. Kelsey Mellard is vice president, partnership marketing and policy, at naviHealth. Prior to joining naviHealth, Ms Mellard was vice president of policy for health services at UnitedHealth Group. At the Centers for Medicare & Medicaid Services, she served as Special Assistant to the Director of the Center for Medicare and Medicaid Innovation.
Author Disclosures: The authors report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.1. Thompson T, Benz J, Agiesta J, Junius D, Nguyen K, Lowell K. Long-term care: perceptions, experiences and attitudes among Americans 40 or older. The Associated Press-NORC Center for Public Affairs Research website. http://www.apnorc. org/PDFs/Long%20Term%20Care/AP_NORC_Long%20Term%20Care%20Perception_ FINAL%20REPORT.pdf. Published 2013. Accessed March 1, 2014.
2. Variation in health care spending: target decision making, not geography. Institute of Medicine website. http://iom.edu/Reports/2013/Variation-in- Hea l th-Care-Spending-Target -Decision-Making-Not-Geography/Report- Brief072413.aspx. Published July 24, 2013. Accessed March 1, 2014.