3 things a chief patient experience officer needs to know. Read post

At the Margins

Reactions to a curveball on bundled payment


Josh Gray, Managing Director, Financial Leadership Council
Brett Erhardt, Dedicated Advisor, Performance Technologies


Over the last two weeks, the Center for Medicare and Medicaid Innovation (CMMI) has notified select applicants for the Bundled Payment for Care Improvement (BPCI) initiative that they passed the Center's technical review process. However, for some applicants, this good news has been tempered by an unanticipated curveball.

Here's the catch

BPCI applicants had previously been invited to essentially design their own proposed bundles, selecting the DRGs to be covered, the relevant time period (hospitalization only or hospitalization plus 30+ days of post-acute care), and related ICD-9 codes to be included in the bundles for post-discharge care.

In preparing their applications, many providers invested considerable time—like the several we spoke with who incurred six-figure consulting expenses to help them conduct rigorous financial modeling in what is essentially uncharted territory. 

For other providers, the standardization of bundles will be welcome. Some applicants we have heard from feared that they did not have adequate resources to design their own bundles, and so the standardization from CMMI—along with the additional pricing guidance the Center will provide—will be helpful.

A review the past weeks' news

CMMI—faced with the operational complexity of managing numerous permutations of various bundles that had been proposed by hundreds of applicants—decided instead to move to 48 predetermined bundles with no flexibility on related ICD-9 codes and the choice of no more than four time periods:

  • Inpatient only
  • 30 days of post-discharge care
  • 60 days of post-discharge care
  • 90 days of post-discharge care

However, CMMI may allow only one or two of these post-acute lengths in some cases.

What your peers are saying

One executive who shared his feelings with us believes that he has expended considerable effort for, now, little gain:

"I feel like CMS just pulled the carpet out from under us. We spent all that time working through what we wanted to exclude, running analysis, writing the application, and they basically came back and said thanks we are going to do it our way. The bundle definitions are not all that different than what we proposed, but we now have a compressed time frame to re run analysis, fill out additional application elements, and work with clinical leaders all over again."

However, other executives we have spoken with believe that additional guidance from CMS will ease the anlytic burden they faced when designing their own bundles. Some providers had feared that—absent sophisticated modeling—they might not be able to accurately price bundles that include post-acute care. To the relief of those providers, CMMI will now be sharing its own pricing guidance with applicants.

Broadening the future scale

Perhaps more importantly, the standardized bundle design—while a disappointment to some providers—will allow CMMI or CMS to scale bundled payment more broadly in the future. 

The standardized approach might also enable interesting comparisons among providers. For example, if a number of providers across the country are implementing the same bundles, we should be able to make make apples-to-apples comparisons to understand why some have been profitable while others have not been.

Tell Us What You Think

We're eager to hear from any executives about their efforts to redefine bundles in response to CMS’ recent communications. Our team is also developing a tool that can rapidly model the financial impact of the updated model parameters.

Please email me at grayj@advisory.com if you are interested in sharing more about this initiative. 

More on Bundled Payments

Join us for a webconference on Nov. 2 at 1:00 p.m. ET to learn about changes to the Bundled Payments for Care Improvement initiative.