Medicare Proposes First Mandatory Bundled Payments for Cardiac Care

Hospitals would receive quality-adjusted pricing for heart attack and bypass care

Medicare has announced a program for cardiac-care bundled payments. Under the proposed rule, these payments would begin in July 2017 in 98 randomly selected metropolitan areas, according to a report from HealthLeaders Media.

During a conference call with members of the media, Patrick Conway, MD, Acting Principal Deputy Administrator and Chief Medical Officer at the Centers for Medicare and Medicaid Services (CMS), described three policies included in the proposal:

  • New bundled payment models for cardiac care and the extension of the joint model to include treatment for hip and femur fractures
  • A new model to increase cardiac rehabilitation
  • A proposed pathway for clinicians and physicians in bundled payment models to qualify for payment incentives under the Medicare Access and CHIP Reauthorization Act

Under the proposed cardiac-care bundled payments, hospitals would receive quality-adjusted pricing for heart attack and bypass episodes of care, including 90 days after a hospital inpatient stay, according to a CMS factsheet.

The CMS recognizes that hospitals will need time to adapt to the new models and to establish processes to coordinate care. Therefore, the proposed rule includes a number of measures to ease the transition, including gradually phasing in risk.

Downside risk (possible repayments to Medicare) would be phased in as follows:

  • July 2017–March 2018 (performance year 1 and first quarter of performance year 2): No repayment.
  • April 2018–December 2018 (quarters 2 through 4 of performance year 2): Capped at 5%
  • 2019 (performance year 3): Capped at 10%
  • 2020–2021 (performance years 4 and 5): Capped at 20%

Gains (payments from Medicare to hospitals) would be phased in as follows:

  • July 2017–December 2018 (performance years 1 and 2): Capped at 5%
  • 2019 (performance year 3): Capped at 10%
  • 2020–2021 (performance years 4 and 5): Capped at 20%

The first performance period would run from July 1, 2017 to December 31, 2017. The second through fifth performance periods would align with calendar years 2018 through 2021.

In its factsheet, the CMS offers the following example of how the bundled payments would work:

Consider hospitals in model years 4 and 5 in a region where Medicare historically spent an average of $50,000 for each coronary bypass surgery patient, taking into account the costs of surgery as well as all related care provided in the 90 days after hospital discharge. Target prices would reflect the average historical pricing minus the discount rate based on quality performance and improvement.

  • Hospital A is performing at the highest overall level on quality measures, and its discount rate is 1.5% for the episode. As a result, its quality-adjusted target price for bypass surgery is $49,250 (or $50,000 minus the discount of $750). By taking measures to avoid readmissions and other unnecessary costs, Hospital A is able to reduce average total hospitalization and related 90-day post-discharge costs for bypass surgery patients to $48,000. Hospital A would be paid average savings of $1,250 per patient.
  • Hospital B in the same region also reduces its average costs to $48,000 per patient. However, it achieves only acceptable overall performance on quality measures. Its discount rate is 3%, and its quality-adjusted target price is $48,500 (or $50,000 minus the discount of $1,500). Hospital B would be paid average savings of $500 per patient.
  • Hospital C also achieves only acceptable performance on quality measures (a discount rate of 3%) and has a quality-adjusted target price of $48,500. However, Hospital C has average costs of $50,000 per patient. If Hospital C is unable to improve its cost and/or quality performance, it would have to repay Medicare an average of $1,500 per patient.

Sources: HealthLeaders Media; July 26, 2016; and CMS Factsheet; July 25, 2016.