Mandatory Bundled Payments Will Launch in July, Officials Say

Some provisions of Medicare’s first mandatory bundled payment model, Comprehensive Care for Joint Replacement (CJR), were recently delayed from February 18 to March 21, but new mandatory models still will launch in July, according to federal officials.

 

The delay did not affect the CJR expansion model—the Surgical Hip and Femur Fracture Treatment (SHFFT) model—or the Acute Myocardial Infarction (AMI) and the Coronary Artery Bypass Graft (CABG) model. These begin July 1, CMS officials said in a Feb. 22 conference call, according to industry participants. (“Despite Provision Delay, New Bundles on Schedule,” HFMA Weekly, February 24, 2017)

 

CJR currently has 860 participating hospitals. It launched in April 2016 and places hospitals at risk for all Medicare spending associated with hip and knee replacements and any charges within 90 days of discharge.

 

The delay in implementing the updated provisions of CJR stemmed from a January memorandum/executive order from the new administration that required 60-day postponements for further review of any published rule that had not yet taken effect.

 

Hospital executives and industry observers are closely watching CMS for any signs of delays in the coming mandatory models, with the SHFFT model scheduled to launch at existing CJR hospitals and the other two models slated for 1,120 other hospitals, including some CJR hospitals. (“Despite Provision Delay, New Bundles on Schedule,” HFMA Weekly, February 24, 2017)

 

Industry Concerns

 

Concerns about delay or even elimination of the mandatory models persist. The new secretary of HHS, Tom Price, has criticized mandatory bundles, and even though the recent delay was credited to the January executive order, some industry advisers noted that it occurred shortly after Price’s arrival at HHS. They are watching for further rulemaking or formal confirmation regarding the new models by March 21, the end of the 60-day time frame in the executive order.

 

However, one industry expert noted, “all of the indications that have been publicly put out so far…attest to the fact that the plan is to move forward with implementation.” (“Despite Provision Delay, New Bundles on Schedule,” HFMA Weekly, February 24, 2017)

 

The American Hospital is on record with its preferences: writing in a recent press release: the AMI and CABG models are “too much, too soon . . . we remain very concerned about several key issues, particularly the pace of change . . . While it is important to test new payment models, hospitals should not be forced to participate in complicated new programs if the government has not already proven that they will benefit the patients we serve. We will continue to urge that any new bundled payment programs be of a voluntary nature.” (Statement on CMS’ New Bundled Payments for Cardiac Care and Hip Fractures Final Rule, AHA Press Release, December 2016)

 

Hospitals designated for the new models have taken a wait-and-see approach, according to one expert. They are waiting for formal confirmation that the models will continue and for historical data from CMS on their past performance, against which they will be graded in the new model, he said.

 

 

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Health Spending Growth Expected to Accelerate

Healthcare spending increases slowed down in 2016. However, federal actuaries predict spending to increase at a faster rate in the coming years.

 

Here is a quick summary of spending increases in the last three years:

  • 2014—5.5 percent
  • 2015—5.5 percent
  • 2016—4.8 percent

 

Spending increases are expected to accelerate to 5.4 percent in 2017 and 5.9 percent in 2019, and averaging out to an annual rate of 5.6 percent over the next decade. (“National Health Expenditure Projections, 2016–25: Price Increases, Aging Push Sector To 20 Percent Of Economy, Health Affairs, February 2017)

 

The new projections do not assume any changes in existing laws, including the Affordable Care Act (ACA), which has been targeted for repeal and replacement by the Trump administration and congressional Republicans. (“Health Spending Growth Slows But Looks Set to Accelerate,” HFMA Weekly, February 17, 2017)

 

According to analysts, the main causes of the surges in healthcare spending will be driven by Medicare and Medicaid. However, growth in private health insurance will slow down.

 

Medicaid Spending Increases

 

Medicaid spending increases are expected to jump from 3.7 percent in 2017 to 5.9 percent in 2019 and are attributed to an expected end in the surge of relatively healthy enrollees from the ACA’s eligibility expansion. Medicaid expansion was adopted by 31 states and is credited with adding 16.4 million enrollees since the expansion started in October 2013.

 

“So as the enrollment growth slows in Medicaid you would expect that the aged and disabled would comprise a larger share since we’re not picking up these newly eligible enrollees like we did in 2014 and 2015,” said an economist in the Office of the Actuary at CMS.

 

Medicare Spending Increases

 

Medicare spending increases will to accelerate from 5.9 percent in 2017 to 7.1 percent in 2019. That increased spending also was credited to the larger numbers of older and sicker enrollees, with the oldest Baby Boomers now entering their 70s.

 

“Higher growth in the use of Medicare hospital services is expected in part as the downward pressure on growth attributable to the readmission penalties and the two-midnight rule that occurred during 2011-2015 is not expected to continue,” wrote the actuaries.

 

Private Insurers

 

Conversely, private health insurer spending increases are expected to slow from 6.5 percent in 2017 to 5.7 percent in 2019. That anticipated slower growth was credited to several factors, including a continued shift of out-of-pocket costs to enrollees, more prior-authorization requirements, and greater use of utilization review. (“Health Spending Growth Slows But Looks Set to Accelerate,” HFMA Weekly, February 17, 2017)

 

“Employers seem willing to increase cost sharing to help have their employees share in increases in health benefit costs; whether that shows itself in moving to high-deductible health plans [HDHPs] or whether it shows itself by staying in the same type of plan but imposing more cost sharing, that’s not something we specify,” said an economist for the Actuary at a media briefing.

 

The Role of Prices

 

Prices play a significant role in the acceleration of the increase in spending.

 

Medical prices: medical prices are expected to rise by nearly 3 percent annually by 2025. Medical price inflation is expected to increase from 1.3 percent in 2016 to an annual average of 2.7 percent from 2020 to 2025.

 

Healthcare employee wages: healthcare employee wages have grown faster than elsewhere in the economy and are expected to fuel overall price increases more so than they have in the recent past.

 

Note: the analysts wrote “countervailing trends include an expected slowdown in the growth of the use and intensity of medical services from recent 2014 and 2015 highs, which were credited to insurance expansions under the ACA.” (“Health Spending Growth Slows But Looks Set to Accelerate,” HFMA Weekly, February 17, 2017)

 

 

 

 

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Provider Hiring Cutbacks May Signal Response to Repeal and Replace

Provider hiring dipped in January, fueling speculation that “repeal and replace” efforts will affect hospitals’ and physicians’ financial health.

 

The totals for January, reported by the Healthcare Financial Management Association (HFMA), are as follows:

 

  • Hospitals—4,200 positions in January compared to 10,000+ jobs per month over the last two years
  • Outpatient settings—11,000 in January, compared with 20,000 per month over the last two years
  • Specifically, physician offices—800 jobs in January, compared with about 5,000 per month over the past two years

 

Industry observers, however, note that it is too soon to view the drop in new positions as indicative of a larger trend. It could just be a slowing down in hiring, said one analyst.

 

That said, these observers speculate that the slowdown could be attributed either to a leveling off of Affordable Care Act (ACA) coverage expansions, or the increased uncertainty around plans to repeal and replace the ACA.

 

If the ACA were repealed and replaced, the major areas affected would be the breadth of insurance coverage, the allocation of payments for hospital uncompensated care costs and the status of Medicare pay cuts that have been required by the ACA. In addition, hospitals could be particularly vulnerable to a reduction or elimination of the ACA’s expansion of Medicaid eligibility. (Hospital Hiring Slows in January,” HFMA Weekly, February 10, 2017)

 

The elimination of the expansion of Medicaid eligibility would directly affect funding to the 31 states that expanded eligibility; the loss of that $78.5 billion funding in 2019 would result in 451,000 fewer healthcare jobs that year, according to a new projection. Another 86,000 healthcare jobs would be lost in non-expansion states because of indirect economic impacts from expansion states.

 

“ . . . it would make absolute sense that hospitals are going to be tightening their belts at this point until they see what happens,” said Patricia Pittman, PhD, co-director of the GW Health Workforce Institute at George Washington University and an associate professor of health policy and management. (Read the report The Economic and Employment Consequences of Repealing Federal Health Reform: A 50 State Analysis, Milken Institute School of Public Health at George Washington University)

 

An HFMA executive noted, “It’s unclear if hospitals have tightened hiring in response to uncertainty related to the continued coverage of some portion of the expansion population. That said, cash conservation strategies are a reasonable response until there’s more clarity on health policy moving forward.” (Hospital Hiring Slows in January,” HFMA Weekly, February 10, 2017)

 

Another expert said that freezing hiring—a commonly used cost control measure—could shrink hospitals’ workforces by up to 20 percent in one year. He noted that hospital executives see repeal and replace as impacting jobs.

 

The latest hiring numbers thus may be the first indication of post-election caution regarding employment. (Hospital Hiring Slows in January,” HFMA Weekly, February 10, 2017)

 

 

 

iProtean subscribers, the advanced Quality course, Driving a Sustained Culture of Quality, What Works, What Doesn’t, featuring Larry McEvoy, M.D., and Stephen Beeson, M.D., is in your library. As always, Drs. McEvoy and Beeson take a cutting-edge view of the board’s role in overseeing quality—beyond the traditional processes and structures where boards customarily focus their oversight responsibilities.

 

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Financial Experts Assess Upcoming Changes to Health Policy

The Healthcare Financial Management Association (HFMA) released an assessment of possible and/or upcoming policy changes under the new administration. We have been waiting for HFMA to speak on ramifications to the non-insurance side of the Affordable Care Act (ACA), so we welcome the report and provide a portion of it here.

 

The new secretaries of HHS and CMS “have created a picture” of how the transition to value will be affected, how the Medicaid program might change and base rates to industry participants will be affected by other policy priorities.

 

HFMA notes the following:

  • The transition to value, particularly episodic payments, will continue but at a different pace and altered focus.
  • Medicaid will likely be changed, if not on a national level as a result of legislation, at the state level through Section 1115 waivers.
  • If policy priorities outside of health care are accomplished, they will likely trigger cuts to Medicare and Medicaid payments to reduce the deficit.

 

Center for Medicare & Medicaid Innovation

 

Innovative payment models, including bundled payments, have been developed by the Center for Medicare & Medicaid Innovation (CMMI). Republican health policy documents have called for eliminating CMMI, so policy experts have questioned its continued existence. HFMA wrote that, “With the Trump administration’s appointees running HHS and CMS, however, it is likely Republicans will think twice before shuttering CMMI. The latitude to experiment provided by CMMI—or some function within CMS—will be useful in testing and implementing conservative health policy ideas.

 

“Specific to episodic payments, even if CMMI is eliminated, Section 3023 of the ACA—which was not targeted for repeal in the reconciliation bill passed by Republicans in early 2016 due to a lack of direct budgetary impact—mandates a national pilot program on payment bundling. CMS therefore is legally bound to administer a bundled payment program even if CMMI is disbanded. Although the administration could let a bundled payment program wither from administrative neglect, that’s not likely. In general, voluntary bundles are viewed favorably on both sides of the aisle . . .” (“What to Expect From the New Administration’s Approach to Health Policy,” HFMA Magazine, February 2017)

 

Mandatory Bundles

 

HFMA notes that CMMI is likely to remain intact and continue developing episodic payment models. However, its focus relative to bundles will change slightly. Because HHS Secretary Tom Price is an outspoken critic of the mandatory payment models implemented by CMMI, it is expected that additional new models are not likely to be mandatory. “The episodes for coronary artery bypass graft (CABG), acute myocardial infarction (AMI), and surgical hip and femur fracture treatment (SHFFT) included in the Episode Payment Model final rule will likely be the last mandatory models implemented without legislation.” However, new (or at least improved) episodes will be rolled out with the next iteration of the Bundled Payment for Care Improvement program. Assuming the timeline discussed in the final rule implementing the Medicare Access and CHIP Reauthorization Act (MACRA) holds, this rollout is anticipated later this year. (“What to Expect From the New Administration’s Approach to Health Policy,” HFMA Magazine, February 2017)

 

 

New voluntary episodic payment models will likely focus on physicians or, at the very least, to provide more flexible options for physicians to participate and share savings and losses with alternative payment model (APM) entities. It appears that Price, with his background as an orthopedic surgeon, wants more models that help physicians—particularly specialists—to qualify for the advanced APM incentive payment under MACRA. (“What to Expect From the New Administration’s Approach to Health Policy,” HFMA Magazine, February 2017)

 

Forging Ahead

 

Many hospitals may welcome mandatory participation in episodic payment models, but the authors note, “ . . . it would be a mistake” for hospitals to abandon efforts to prepare for the spread of bundled payments for two reasons:

 

  • Episodic payment models are likely to be the vehicle that allows many specialists—on whom hospitals rely for patient volume—to qualify for the APM bonus payment. Therefore, the organization that can provide the best platform from which to successfully manage an episode will be rewarded with referrals from these physicians.

 

  • Employers, commercial payers and state governments will continue to view bundled payments as a vehicle to reduce variation in both the cost and quality of outcomes for high-volume procedures. Therefore, hospitals unable to meet purchaser demands risk losing volume. In response to these demands from both physicians and purchasers, hospitals should continue to focus on developing the analytic capabilities, care coordination staffing and tools, physician relationships and post-acute care networks necessary to succeed in an episode.

(“What to Expect From the New Administration’s Approach to Health Policy,” HFMA Magazine, February 2017)

 

For more from HFMA’s report, please contact clockee@iprotean.com for the link to the remainder of the report covering Medicaid program changes, Medicare and Medicaid payment reductions and adapting strategy.

 

 

iProtean subscribers, the advanced Quality course, Driving a Sustained Culture of Quality, What Works, What Doesn’t, featuring Larry McEvoy, M.D., and Stephen Beeson, M.D., is in your library. As always, Drs. McEvoy and Beeson take a cutting-edge view of the board’s role in overseeing quality—beyond the traditional processes and structures where boards customarily focus their oversight responsibilities.

 

And coming soon: an advanced Mission & Strategy course, When the Dust Settles, featuring Marian Jennings and Dan Grauman.

 

 

For a complete list of iProtean courses, click here.

 

 

For more information about iProtean, click here.