The announcement last month from the Centers for Medicare and Medicaid Services (CMS) of the Comprehensive Care for Joint Replacement Model is a significant milestone on the road to payment reform. For the first time, the agency is using its waiver authority under the Innovation Center statute to mandate provider participation in one of its demonstrations.
Over the first four years of Innovation Center operations, Medicare provider participation has been strictly voluntary because CMS leadership wanted to minimize provider push-back during implementation of the Affordable Care Act (ACA). Now, that policy has changed, and, on balance, it is a change for the better. The new course may be the result of new officials at the helm of CMS and the Department of Health and Human Services (HHS), a feeling that payment reform has matured or gained momentum, or a recognition that alternative payment models are unlikely to prosper as purely voluntary options.
The Problem With Voluntary Programs
There are several problems with running alternative payment models as voluntary programs. The Innovation Center’s mission is to test potential policies, and testing implies some generalizability of the results. However, volunteers are not typical providers, and they may not be the providers that add unwarranted costs to the Medicare program. It appears that many of the early-adopters of new payment models were already advocates for efficient care, with some having agreed to take on risk for their commercial patients.
An evaluation finding that, for example, Geisinger Health System has successfully implemented a bundled payment would be no surprise. What is more important for policymakers to know is whether bundled payments could be implemented with quality outcomes and no gaming in a high-cost region with no or few large, integrated delivery systems, where many physicians own ancillary services. The Innovation Center’s ongoing Bundled Payment for Care Improvement demo, which includes only volunteers, casts no light on this important question. The Comprehensive Care for Joint Replacement model will.
Another problem with voluntary-only alternative payment models is that those providers who choose to pursue a volume-driven business model remain free to do so. Further, the experience with Accountable Care Organization take-up and drop-outs shows that even providers who are interested in moving to a value-based model will decline to participate if the terms are not attractive.
Impacts On Patient Experience
On the other hand, a mandatory demonstration raises concerns for beneficiary advocates. We do not yet know how the joint replacement demonstration’s episode-reconciliation payment model will impact patient experience. The Innovation Center has supported a similar demonstration in Arkansas through the State Innovation Models program. (That program is mandatory only for payers other than Medicare; CMS rejected the state’s request for a waiver to require Medicare’s participation.) Last year’s evaluation report on the Arkansas program contained no information on patient satisfaction or outcome measures, despite the program having been in place since 2012.
Beneficiaries can opt out of the Comprehensive Care for Joint Replacement model only by having their surgery performed in one of the randomly-assigned regions where the model doesn’t apply. In the long run, the benefits of providers taking on performance risk—such as the extra attention paid to the patient post-discharge to avoid complications—should outweigh the potential pitfalls of, for example, stinting on elements of care not needed by the “average” patient but necessary for a particular patient. Furthermore, with hospitals on the hook for the cost of complications, their financial incentive is to exclude surgeons with high rates of complications from performing joint replacements in their facilities at all. But in the near term, patients treated by providers with no experience in bearing risk for outcomes may need to be vigilant, especially with regard to the appropriate intensity of post-acute care.
The design of the Comprehensive Care for Joint Replacement episode dictates that it must be mandatory. The approach that CMS is taking here is not true bundling; it falls in a genre of methodologies that, in previous iterations, have been called “performance thresholding” or “differential update for outliers.” Its primary purpose is to claw back payments from the most expensive providers, and those providers, who probably know who they are, would be unlikely to submit to it if it were optional. As Harold D. Miller has noted, though, a drawback to such retrospective payment methodologies is that they don’t offer the flexibility to innovate within a straightforward bundled payment. But a mandatory episode payment may be necessary to spur wider participation in voluntary bundling arrangements.
In its proposed Fiscal Year 2016 Inpatient and Long-Term Care Hospital payment rule, CMS had solicited public comments on whether its Bundled Payment models would “best be expanded with voluntary participation or be most effective if participation were required within the chosen models, episodes, and regions.” This suggested that CMS officials remained wary of mandating alternative payment models on a nationwide basis. The Comprehensive Care for Joint Replacement model announcement signals that CMS may be more aggressive in using the secretarial expansion authority contained in the Innovation Center statute.
In my view, it is unlikely that Health and Human Services Secretary Burwell can achieve her goal of moving 30 percent of payments in the fee-for-service Medicare program to alternative payment models by 2018 without using expansion or 1115A waiver authority to mandate such models for multiple episode types. A number of hurdles will complicate the Administration’s ability to exercise these powers, but one of the biggest will be opposition by providers and suppliers. Over the coming weeks, as public comments responding to the Comprehensive Care for Joint Replacement initiative are registered, we should know the extent and vehemence of any stakeholder opposition to such a path.
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