Medicare’s bundled payment system arrives in Pittsburgh on Friday, the latest milepost in the still unfolding 6-year-old federal Affordable Care Act.
The payment model is not particularly new: In a nutshell, it takes the Medicare reimbursements for different services — from hospital admission to post-discharge home health and physical therapy — and bundles them into one payment.
The difference this time is that, as part of a five-year testing period, the payment model is mandatory for 67 metropolitan areas nationwide, including Allegheny and its six surrounding counties.
“We got drafted,” said Denis Lukes, chief financial officer for the Hospital Council of Western Pennsylvania, which represents the interests of the region’s hospitals.
The arrival of a bundled payment system should be almost imperceptible to patients, at least at first. This initial phase only applies to beneficiaries with straight Medicare, not Medicare Advantage, and it only applies to hip and knee replacement procedures.
But it’s also a realistic preview of what’s likely to come for everyone.
The model fundamentally changes how providers will get paid. Under the traditional model, doctors, hospitals, therapists, home health staff and others each got paid for the services they provided. The Centers for Medicare and Medicaid Services says this “fragmented” approach created an incentive to provide more care, but not necessarily the best care.
Now, CMS wants to hold hospitals responsible for how well patients do — not just during the hospital stay but for 90 days afterward — and how costs were managed in the process.
If patients have unexpected complications or if costs are considered excessive, the hospitals can be penalized at year’s end for missing their target price.
Expected outcomes and target prices will vary from hospital to hospital, based on a variety of factors including regional price data. Hospitals will not be penalized for outcomes this first year, giving time for facilities to make necessary adjustments.
Payment model raises questions
One consistent opponent to the payment model has been the Coalition to Preserve Rehabilitation, a Washington, D.C., group of consumer, clinician and membership organizations that push for access to rehabilitative care for injured and ill patients.
Attorney Peter W. Thomas, a coordinator for the coalition, says the model lacks good measures for judging quality of care, looking primarily only at medical complications and the patient’s experience.
“The incentives are clearly to push people in the least expensive setting of care,” he said in a phone interview Wednesday, “and if you don’t have sufficient quality metrics to make sure patients get the service they need, you may end up saving money on the backs of patients.”
The change, he said, could be as subtle as a shift in practice patterns “that sends patients home with home health care or outpatient therapy at a much higher rate than if they had no financial incentive.”
“The insidious part of this is that patients won’t have any clear idea why they’re being sent home instead of to a more intensive program,” said Mr. Thomas, a principal at the Washington, D.C. law firm Powers Pyles Sutter and Verville.
He acknowledged there is a certain inevitability to changing the current payment model given the desire to curb ever-increasing costs, but he thinks it would be better if the incentive program was voluntary.
Whether any hospital would volunteer may be another matter.
Jane Montgomery, hospital council’s vice president for clinical services and quality, noted that a patient undergoing a hip replacement may be hospitalized for only one or two days, but under the bundled payment model the hospital is fiscally responsible for 90 days’ worth of care.
Hospitals cannot force a patient to go to a particular rehab center or use a certain home health agency, she said. But if those centers or agencies fall short on quality or price measures, the hospital bears the cost.
In choosing joint replacement as the first test, CMS noted the procedure cost Medicare more than $7 billion for 400,000-plus operations in 2014 alone. At the same time, CMS officials noted that complication rates varied three-fold among hospitals and the average costs ranged from $16,500 to $33,000.
UPMC, AHN have programs in place
Anticipating the change, both Pittsburgh health systems UPMC and Allegheny Health Network began their own internal joint replacement bundling initiatives two years ago.
Through a combination of standardizing procedures, educating and physically preparing patients pre-surgery, close post-surgical follow-up, and coordinating protocols with therapists, UPMC cut its post-operative infection rate following joint replacement by more than half, from just over 1 percent to four-tenths of a percent, said Tami Minnier, UPMC’s chief quality officer.
The need for blood transfusions, meanwhile, dropped from 10 percent to 1.1 percent. All of this resulted in about $1 million in annual savings to the health system. More importantly, she said, “This is great for patients” as they recover more quickly and suffer fewer complications.
At AHN’s Diamond Care program for hip and knee replacement surgeries, a similar emphasis on educating patients before and after surgery also has brought improvement in both the quality of care and the patient’s experience.
“I think it forces us to tighten our protocols so we’re making sure that the patients are treated at an appropriate level of care,” said Mary Carmella, AHN’s director of clinical excellence and compliance.
Steve Twedt: firstname.lastname@example.org or 412-263-1963.