Robin Raiford and Jordan Stone
Merger and acquisition (M&A) strategies are no longer the exception among providers; whether motivated by financial insecurity or the need to integrate care across the continuum in response to risk-based payment, many health systems are actively seeking consolidation.
However, acquiring systems could be placing their meaningful use (MU) trajectories at risk in the acquisition process. More specifically, acquirers stand to lose millions of dollars in incentives and may face negative payment adjustments if the newly consolidated entity fails to meet MU thresholds.
What is meaningful use?
Meaningful use refers to requirements—specified in the 2009 HITECH Act—that hospitals, eligible professionals, and critical access hospitals must meet to qualify for Medicare and Medicaid incentives aimed at promoting electronic health record (EHR) use.
MU requirements are phased in across three stages of increasing responsibility and complexity. Systems eligible for “Stage 1” must complete the attestation process by Nov. 30, 2012 to receive EHR incentives for 2013.
Based on readiness in FY2013, all eligible, non-compliant providers will be at risk for “payment adjustments”—1% cuts to Medicare reimbursement—if they have not met MU targets. These penalties will be assessed starting in FY2015 and will increase by 1% annually through FY2018.
M&A strategy: Assess meaningful use early to prevent losses
Bundled payment has received growing attention in the last few years, especially in the wake of health reform. With applications for the Medicare Innovation Center’s Bundled Payments for Care Improvement (BPCI) initiative due on May 16, 2012, many health systems are now turning from a strategic perspective (why should we consider bundled payment?) to more tactical concerns.
As part of the application process, health systems interested in BPCI must select the subset of Medicare DRGs to cover through bundled payment. This is a critical step, since the potential for savings may vary drastically from one DRG to another.
We have recently published a new white paper that includes a number of criteria we believe should guide the selection of DRGs to be bundled:
- High implant and device costs
- Long length of stay (or high variability in length of stay)
- Significant potential for spillover benefits (i.e., lower costs and higher quality realized for commercial as well as Medicare patients)
- Physicians with high strategic value
Clinical targets for bundled payment—what you should consider
As the final application deadline for Models 2-4 approaches, the Center for Medicare and Medicaid Innovation’s (CMMI) Bundled Payments for Care Improvement Initiative (BPCI) has generated plenty of buzz around the industry. Many providers that submitted letters of intent last November have received their data from CMS and are now rigorously analyzing the possible financial outcomes for their organization.
Bundled payment update