Practice Economics

Everything You Need to Know About the Bundled Payments for Care Improvement Initiative


The gradual movement from fee-for-service payments to compensation based on the totality of care provided has been water-cooler conversation for hospital-based physicians since long before the term “hospitalists” existed.

As far back as 1983 —13 years before the birth of HM—Medicare created what was then called an “inpatient prospective payment system,” which essentially let Medicare pay a fixed amount for the entirety of a hospital stay, based on diagnosis. Then in 1991, the Centers for Medicare & Medicaid Services (CMS) introduced one payment for coronary artery bypass graft surgery, and even included 90-day readmission in the check.

Fast forward to the past 10 years when accountable care organizations (ACOs) and value-based purchasing (VBP) have been the focus of HM executives looking to take the lead in how to make bundled payments work for them.

The Bundled Payments for Care Improvement (BPCI) initiative was introduced by CMS’s Center for Medicare & Medicaid Innovation (CMMI) in 2011 and is now compiling its first data sets for the next frontier of payments for episodic care.

For rank-and-file hospitalists who have felt inundated by the regulations and promised payment reforms from ACOs and VBPs, why is this program so important?

“The reason this is so special is that it is one of the few CMS programs that allows providers to be in the driver’s seat,” says Kerry Weiner, MD, chief medical officer of acute and post-acute services at TeamHealth-‎IPC The Hospitalist Company. “They have the opportunity to be accountable and to actually be the designers of reengineering care. The other programs that you just mentioned, like value-based purchasing, largely originate from health systems or the federal government and dictate the principles and the metrics that as a provider you’re going to be evaluated upon.

“This model, the bundled model, gives us the flexibility, scale and brackets of risk that we want to accept and thereby gives us a lot more control over what physicians and physician groups can manage successfully.”

BPCI might be a game-changer for HM because it’s the first of the bundled-payment initiatives that truly falls direct to the care provided by hospitalists. In short, the plan covers 48 defined episodes of care and would parse out payments for those episodes in a holistic—and some say more appropriate—way. Currently, a hospitalist would get paid for a patient’s stay in the hospital and a primary-care physician (PCP) could be paid for some follow-up. If the patient ends up back in the hospital quickly, the hospitalist could get paid again and, upon discharge, a PCP could, too.

But under BPCI, pay would be determined based on the episode of care. The details of who gets paid what and the rules that apply are all likely to evolve, of course, but it’s hoped the basic premise of bundled payments would lower the overall cost of healthcare.

How It Works

Under the Patient Protection and Affordable Care Act (ACA) of 2009, it was mandated that the government establish a five-year pilot program by 2013 that bundled payments for inpatient care, according to the American Hospital Association.

The program has now ramped up to include more than 650 participating organization, not including thousands of physicians that then partner with those groups, over four models. The initiative covers defined episodes of care, both medical and surgical, that begin at the time of inpatient admission and stretch 30, 60 or 90 days post-discharge.

And hospitalists are poised to take the lead on how payment models, especially bundled payments, are shaped over the next few years, says John Nelson, MD, MHM, a co-founder and past president of SHM and and principal in Nelson Flores Hospital Medicine Consultants in Bellevue, Wash. Nelson says his consulting firm has seen an uptick in calls over the past two years dealing with alternative payment models (APMs).

“Hospitalists find themselves at a vitally important nexus of performance and success on new payment models,” he adds.

Dr. Whitcomb

Win Whitcomb, MD, MHM

Win Whitcomb, MD, MHM, chief medical officer of Remedy Partners in Darien, Conn., agrees that BPCI and future iterations of bundled payment programs “are likely to be a potent driver of an evolving hospitalist specialty.” His hypothesis is that APMs such as BPCI are an important way for Medicare to reach its stated goal of having 50% of its fee-for-service payments running through APMs by the end of 2018. To further entice that process, physicians who document at least 25% of their revenue as coming through APMs will get a 5% bonus.

“The stakes are high now,” says Dr. Whitcomb, a past SHM president whose employer is an Awardee Convener in the BPCI initiative, meaning it administers the program. “Medicare [has] laid out the

course for the next two and a half, three years and beyond… It will be crucial for hospitalists to have a path to participate broadly in APMs..”

Dr. Whitcomb says BPCI is the program that should excite hospitalists most because it is more applicable to them moving forward than ACOs, heralded by many healthcare executives several years ago as the future of payment reform.

“With a focus on ambulatory care, ACOs have not broadly involved hospitalists,” he says. “If you look at the State of Hospital Medicine surveys, you look at how many hospitalists are meaningfully working at a system level on ACOs and committees and so forth to improve the performance of the ACO, and it’s very low.”

In fact, just 13.9% of HM groups serving adults only had formed or were participating in a functioning ACO, according to SHM’s 2014 State of Hospital Medicine report. Another 6% were in the process of forming or participating, the paper reported.

“ACOs have not yet widely worked alongside hospitalist teams to optimize where patients go after hospitalization, which is arguably the most important way to deal with post-acute-care utilization” Dr. Whitcomb adds. “whereas nearly all hospitalists working in bundle payments are focusing on a ‘high-value’ transition out of the hospital.”

Improving Care

Patrick Conway, MD, MHM, MSc

Patrick Conway, MD, MHM, MSc

While BPCI is focused on payment structure, the program could breed process improvements as well as improve care, says hospitalist Patrick Conway, MD, MHM, MSc, CMS’s chief medical officer and deputy administrator for innovation and quality.

“In addition to assessing the quality of patient outcomes and patient experience, CMS is also monitoring for unintended consequences, including whether there is an increase in the number of specific clinical episodes [such as specific elective surgeries] that would not have been expected in the absence of BPCI,” Dr. Conway says. “CMS can audit and intervene if it detects unintended negative consequences for beneficiaries.”

Dr. Whitcomb says two main ways that hospitalists can use BPCI to calculate value is by having better metrics on post-acute facility utilization and reduced readmission.

Dr. Harrington

Robert Harrington Jr., MD, SFHM

Immediate past SHM President Robert Harrington Jr., MD, SFHM, says that BPCI is a major stepping stone to merging quality and payment, along the lines of using Physician Quality Reporting System (PQRS) data in the value-based payment modifier.

“CMS is saying to all of us in the provider world, ‘We want to get out of the business of unit economics, and we want to start paying for episodes of care and providers should be at risk for quality outcomes,” he says. “BPCI, to me, is one of the rungs in the ladder.”

Dr. Harrington, chief medical officer at Reliant Post-Acute Care Solutions in Atlanta, says that the program’s inclusion of acute-care hospitals, skilled nursing facilities (SNFs), physician group practices, long-term care hospitals, inpatient rehabilitation facilities, and home health agencies working together is what differentiates it from past attempts at payment reform.

“Population health is sort of where this is headed,” he adds. “You sit in a CFO seat at a hospital or healthcare system right now, and five years ago, they’d buy an MRI machine and they wanted throughput through that MRI machine and they wanted as many people run through that MRI machine in the fee-for-service world as they could get to go through that machine. Nowadays, you start to look at it from a population health standpoint and the CFO is going to say to you, ‘I don’t want anybody going through that MRI machine unless they have to.’

“So it’s a total reversal of perspective when hospitals either become joined at the hip with the payors or become the payors and they start taking risk on population health and I think BPCI is one way that Medicare has allowed all of us to test the waters and get comfortable with that.”

Getting Involved

Dr. Weiner is aware that some hospitalists are nervous about bundled payments because their reimbursement is, in part based on care provided outside of their control. Take a surgical procedure where a hospitalist managing the post-surgery care is left to deal with any potential mistakes made. Or the process works fine until there is poor management by ambulatory care once the patient is discharged.

“That is the reason this program exists,” he says. “It poses the question, who is going to be accountable for the care outside of the traditional site of care that providers have been practicing in, your traditional boundaries? I would argue that physicians are more or are just as valuable as any other segment of the healthcare system in managing the transitions of care and in managing the gaps in the system.”

Given how HM has moved into post-discharge care via SNFs and other post-acute care facilities in recent years, Dr. Weiner says that while hospitalists can’t actually deliver all of the care in an “episode,” they can shepherd that process.

Hospitalists “have control over where the patient goes after they leave the acute-care facility, for example,” he says. “They write the orders on what level of care is needed, and they should have the intimate knowledge about what’s available in their community to ensure the patient gets the best care possible. As long as they have the accountability and the power to direct care, then they have the ability to negotiate and recommend care that is best for the patient, so they can select the better facilities in the community, the better agencies in the community, the better resources in the community to ensure that there is better care once the patient leaves the hospital.”

Dr. Conway suggests HM practitioners view BPCI as a model based on “quality and value.” He says early participants helped define clinical episodes, length of episode, and risk track, making the program better suited to address the actual needs of hospitalists.

“I would encourage hospital medicine physicians and care teams to view bundled payment models as an opportunity for them and their patients for better care and smarter spending,” he adds. “CMS continues to explore ways to pay for value and not just volume. Many of the organizations that are participating in BPCI have partnered with their physician communities and established gainsharing agreement. …Most importantly, this model focuses on care coordination for patients across episodes of care.

And that’s the key for Dr. Weiner.

Hospitalists who embrace BPCI can shape it as the predominant inpatient funding model for hospitals over the next five or 10 years. HM administrators and practitioners who don’t seize the opportunity to flesh out the program tacitly cede control to people outside the hospital who may not tailor the program nearly as well, he says.

“Those who have accountability in the end, the systems, the people, the entities, the providers that have the ability, the accountability for it will ultimately design it,” Dr. Weiner adds. “I think physicians, especially hospitalists, should be at that table. We should play an active role in designing the system.” TH

Richard Quinn is a freelance writer in New Jersey.

The ABCs of $$$s

Hospitalists whoaren’t in leadership, administrative or committee positions may not be familiar with the latest round of alphabet soup that is tied to payment reform and Medicare’s announced push to have 50% of its payments not by fee-for-service by 2018. Here are the most important ones:

  • APM: Alternative payment models. The catch-all phrase for a variety of programs and initiatives that are outside the traditional fee-for-service model.
  • MACRA: Medicare Access & CHIP Reauthorization Act of 2015. The act ended the hated sustainable growth rate (SGR) formula and combined CMS’s existing quality reporting programs under one system.
  • MIPS: Merit-Based Incentive Payment System. The new program combines parts of the Physician Quality Reporting System (PQRS), the value modifier (VM, or value-based payment modifier/VBPM), and the Medicare electronic health record (EHR) incentive program into a single program.

Source: Centers for Medicare & Medicaid Services

By Richard Quinn

Will Payment Reform Lead to Consolidation?

Bundled payments could create a scenario where hospitals or hospitalist management companies look to buy firms that provide post-acute care , says immediate past SHM President Robert Harrington Jr., MD, SFHM.

Dr. Harrington says that as healthcare reimbursement irrevocably moves to a system where an episode of care covers everything from admission to three months post-discharge, that major healthcare providers will be incentivized to coordinate care more effectively. Owning more services along the continuum makes that easier.

“As hospitalists or post-acute-care providers, [we] have to face that build versus buy versus partner decision across that continuum of care,” says Dr. Harrington, chief medical officer at Reliant Post-Acute Care Solutions in Atlanta. “Either we build a system that we then own and operate that encompasses the entire continuum of care…or we potentially partner with others out there but we lose a little bit of the element of control when we partner with people.”

The issue of who controls the system may still be a few years off, says John Nelson, MD, MHM, a principal in Nelson Flores Hospital Medicine Consultants. But he says that smart healthcare executives have already looked at buying opportunities.

Take Sounds Physicians’ acquisition at year-end 2014 of Cogent Healthcare, a deal that Reuters estimated the sales price to be $375 million. The deal created the largest hospitalist companies in the country, but one of the one of the sale’s highlights was the immediate ability to expand Sound’s post-acute-care programs to hospitals where Cogent already had a presence.

“Say Sound had decided not to [deal], well in five years from now everybody would be doing bundled payments and Sound would not have as a unique thing to offer,” Dr. Nelson says.

Dr. Harrington says he wouldn’t be surprised to see more consolidation of firms.

“I could absolutely see more of those groups potentially bringing under their umbrella other potential service lines throughout the continuum of care,” he adds. “So would it surprise me if TeamHealth [Holdings] went out and bought a large home health company? No, it wouldn’t. Does it surprise me that TeamHealth and IPC Healthcare merged for those reasons? Absolutely not. The success of folks in this new environment is going to be dependent on their ability to control the healthcare dollar, and the more services you have throughout that continuum, the better your ability to control that healthcare dollar.”

Richard Quinn

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