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by Josh Mast
Published on January 11, 2018

The Centers for Medicare and Medicaid Services (CMS) just announced a new Alternative Payment Model (APM) on Jan. 9, 2018, that not only reaffirms CMS and this administration’s commitment to a continued march toward value-based care (VBC), but also the continuation of bundled payments as a viable APM option. CMS announced the creation of a new bundled payment program modeled called Bundled Payments for Care Improvement (BPCI) Advanced, which is largely modeled after the Bundled Payment for Care Improvement Program (BPCI). This is the first major APM and VBC program announced during this administration, showing their commitment to continuing the journey toward health care payment reform.

The BPCI program began in 2013 and is currently wrapping up, but has not accepted new applicants since 2014. Since 2014, the only bundled payment programs a Medicare provider could participate in were the Oncology Care Model, which is restricted to specialists, and the Comprehensive Care for Joint Replacement program, which was mandated for specific hospitals only. Before announcing BPCI Advanced, the most recent bundled payment program CMS released were the Episode Payment Models, which were subsequently canceled before they began.

The journey to value-based care

The announcement of BPCI Advanced is a further step down the road to VBC and APMs for health care organizations. Many APMs are focused on the care for the patient over an extended period, typically for several one-year periods. The goal of these programs is to maintain or improve the patient’s health, while maintaining or improving quality, for a lesser total amount to the payor. Typically, that means avoiding high-cost items, such as unnecessary or preventable hospitalizations.

Bundled payments or episodic payment programs have the same overall goals of lower cost, high-quality care and improved patient health as VBC and other APMs, but these programs tend to focus on shorter periods (usually, a specific episode of care) in which the patient has, or will soon, enter a higher cost setting of care. In this way, bundled payments are different than many of the other APM options, and can allow a more gradual entry into the world of APMs for organizations that are new to the world of APMs and want to begin their journey. Bundled payments are also a good option for organizations looking for APMs that focus on the hospital setting. The episodic nature of a bundled payment program encourages continuity of care across the spectrum, including partnerships between provider types and facilities that might have a more limited interest in partnering without the impact to payment.

The BPCI announcement gives more health care organizations the opportunity to engage in APMs. As organizations consider the long road to payment reform, it’s important for them to identify APM programs that are a good fit for their needs. Most organizations have already begun the journey and are in a VBC program such as the Inpatient Quality Reporting program, the Meaningful Use program, the Merit-based Incentive Payment System or a Value Based Purchasing program.

The diagram below illustrates how a progression of health care payment from fee-for-service, or payment for delivery of a service without any connection to quality, to population-based payment may look – though an organization’s progression typically isn’t this linear. Though most health care organizations have progressed to a VBC program and are connecting some percentage of their payment to quality or reporting, some have stopped there and others have jumped around. It’s possible for providers and organizations to jump from VBC to population-based payments by entering an agreement with a payor (commercial insurance or Medicare Advantage being the most common), but most progress more slowly by taking on some level of shared savings, and eventually shared risk, before moving into the population based payments.

BPCI Advanced Graphic

Bundled payments, such as the BPCI Advanced program, are a shared savings and risk program. This program also gives organizations and providers options on what clinical episodes to focus on. This allows organizations to focus on areas in which they believe they have the best opportunity to succeed, which is a necessary motivation for those that may not have moved into the world of APMs, but are looking for a fitting entry point, a way to dip their toe in the pool of APMs. This program also gives opportunities to provider types that don’t have as many APM options such as Ambulatory Surgical Centers that perform the outpatient procedures. Ensuring that health care reform stretches across the entire spectrum of health care providers.

Assessing options for VBC and APM programs

So, what does it all mean and what preparations can be made? The first step is learning and assessment. There are quite a few good resources available for those wanting to learn more. The Center for Medicare & Medicaid Innovation has a plethora of information on its various programs.

Not only do health care systems and hospital leadership need to learn about the program options, but they also need to learn about the best options for their own organizations. This is where an assessment fits. A solid understanding of the organization’s payor composition, common procedures and services, specialty types and patient population mix is essential to knowing which VBC and APM program would be the best fit. Once an organization understands which APMs would be the best fit for them (including any affiliated facilities and locations), then leadership can dive into those APMs and keep an eye open for future opportunities.

The next part of the assessment would be at an individual APM level, such as for bundled payments. Part of this assessment should include an analysis of where organizational efficiencies could be created. This aspect of the assessment would tell an organization if they have an opportunity to focus on specific clinical episodes in the bundled payment program, if they need to partner with specific facility or provider types to ensure a solid continuity of care or if bundled payments might not be the best fit. If none of the APM program options available are a good fit, the assessment can still lead to more informed discussions with commercial insurance and Medicare Advantage payors about future options.

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