By Khin-Kyemon Aung
There’s no time like now to test new ways to pay for specialty care, and the federal government has offered immense support in this endeavor. Earlier this year, the Center for Medicare and Medicaid Innovation (CMMI) sought input from stakeholders to develop payment models for diseases cared for by specialists. CMMI is also in the midst of testing bundled payments for 48 different episodes of care, launching a new accountable care organization (ACO) model for patients with end-stage renal disease, and developing an episode-based payment model for oncology care. Additionally, through Health Care Innovation Awards and State Innovation Model funding, the Centers for Medicare and Medicaid Services is aiming to further drive innovation around how specialty care is delivered and paid for to incentivize improved outcomes and higher quality at lower costs.
With the rapid development and uptake of innovative payment schemes, it’s important to learn from early adopters of these new methodologies. How do payment methods help an organization achieve their clinical goals, and how does an organization go about selecting a payment method that is appropriate for their institution?
A recent article in Healthcare: The Journal of Delivery Science and Innovation explores the lessons learned from two academic medical centers as they adopted alternative payment methodologies for congestive heart failure (CHF) care. These centers—Duke University Health System and University of Colorado Hospitals—aimed to improve patient outcomes, enhance care coordination, and decrease preventable hospital readmissions for patients with CHF.
To achieve their clinical goals, Duke elected to form a community-based, physician-led ACO and enrolled in the Track 2 Medicare Shared Savings Program. As a result, Duke was eligible for shared savings if it reduced the costs of care for beneficiaries below a target benchmark and liable for shared losses when costs exceeded the benchmark.
The University of Colorado health system, on the other hand, chose to participate in the 30-day Model 4 Bundled Payments for Care Improvement (BPCI) Initiative. This payment scheme provided Colorado with a fixed, prospective payment meant to cover all the CHF-related services delivered to patients within 30 days of their initial CHF hospitalization. If costs of care exceeded the payment provided, Colorado would need to cover them on their own. Of note, Colorado chose the 30-day option over 60-day and 90-day bundled payment alternatives, which would have provided an even stronger incentive to reduce re-hospitalizations.
There were a number of considerations made when Duke and Colorado selected their payment arrangements; the article highlights some key lessons learned:
Context matters. Duke and Colorado selected their payment arrangements based on their organizational readiness and the type of care transformation they hoped to achieve. Duke noted that shared savings payments allowed them to better focus on post-acute care and chronic disease management. They highlighted variability in costs of management of CHF among patients as one of the reasons they selected an ACO model. As the authors describe, one of the strengths of bundled payments is to provide “predictability and standardization of care and costs,” and Duke felt that the complexity of CHF made it much more difficult to match a bundled payment methodology to CHF care.
Duke also acknowledged that “CHF is not an isolated acute care episode with a clear beginning and end that lends itself to developing a fixed payment per episode.” Heart@home, one of the key initiatives Duke developed to reduce preventable hospital readmissions, takes care of patients longitudinally, beyond fixed durations offered by the BPCI Initiative, and this played a role in their decision to form an ACO. Finally, Duke believed that an ACO framework would give them greater flexibility to make long-term investments in primary care, prevention, and population health.
Alternatively, Colorado felt that the 30-day bundled payments best allowed them to take on risk for acute care services nd gain experience working with fixed, prospective payments. Though Colorado only estimated to save about $40,000 in the first year of the BPCI Initiative and only about 100 patients were eligible, Colorado believed working with fixed budgets would set them up for success in the long term. Their previous experience with bundling in Medicaid also provided an incentive to adopt a bundled payment methodology.
Lesson learned: When selecting a payment arrangement for specialty care, a number of factors must be considered, such as the ease with which an episode of care can be defined, the predictability and variability in the costs of care and clinical pathways, and the organization’s familiarity with the payment models.
Infrastructure and start-up costs matter. Colorado chose a 30-day Model 4 Bundle as it readied itself “to take accountability for post-acute care services and hospital readmissions.” Their decision to select a bundle focused on acute care services only underscores the considerable training, start-up costs, and time necessary to build the appropriate infrastructure necessary to manage post-acute care services, even for well-resourced academic medical centers.
In response to this, the authors recommend establishing “long-term funding for technical assistance and startup costs” for organizations in the process of ramping up their infrastructure. Currently, CMMI is testing advanced payment for ACOs, and private solutions like Aledade—a start-up health care company helping independent primary care physicians form ACOs—may be part of the answer for long-term funding for specialty care.
Lesson learned: Organizations must factor in the start-up costs and consider long-term funding options for maintaining infrastructure and technical assistance.
Khin-Kyemon Aung is an ORISE Fellow at the Center for Medicare and Medicaid Innovation and Managing Editor of Healthcare: The Journal of Delivery Science and Innovation. The views represented in this article are her own and do not necessarily represent the policy or views of the Department of Health and Human Services, Centers for Medicare & Medicaid Services. She can be reached at firstname.lastname@example.org.