Cardiovascular Rounds

Episodic cost management: The prerequisite to bundled payment success

by Marissa Schwartz

With the continuing proliferation of bundled payments, including the new mandatory orthopedic bundling program from CMS, CV service line leaders face a clear mandate to prepare for episodic cost management. However, service line administrators often struggle to unpack post-hospital utilization and spending patterns—vital components of episodic costs.

To provide visibility into population-level spending patterns, we developed the Episodic Cost Profiler. Read on to discover how you can use this tool in the challenging but critical task of episodic cost management.

Mandatory bundling may well be just around your corner. With the BPCI initiative in full swing, CMS recently released the Comprehensive Care for Joint Replacement Model (CCJR), the first mandatory federal bundled payment program for hospitals. CCJR holds hospitals in 75 geographic areas accountable for the quality and costs for an entire hip and knee replacement surgery episode of care—from the surgery through 90 days after discharge. CMS’s rationale for starting with orthopedics includes the frequency and high, often variable costs of these procedures: factors which can also be applied to CV services, suggesting that CV may be a likely next target.

Bundling presents exciting opportunities—not just for cost reduction, but for improved collaboration among providers and higher quality care for patients. But episodic cost management presents many challenges, starting with the very first step: understanding cost.

How the Episodic Cost Profiler works

To help you get started on understanding episodic costs, we’ve developed an online tool, the Episodic Cost Profiler. The tool outlines national average Medicare spending by condition and site of service, including subsequent admissions, post-acute care, and outpatient services, providing you visibility into the distribution of costs within and beyond hospital walls. The tool allows you to select among various CV conditions and procedures and to view episode costs 30-, 60-, or 90-days post-admission.

The Episodic Cost Profiler is a powerful tool for not just understanding costs, but also developing strategies to succeed under bundled payments. For example, looking at procedural episodes, such as CABG and PCI, the index admission is the largest cost contributor. For CABG, index admission is about 70% of the episodic cost. Any bundled payment strategy for these types of conditions necessitates a strong focus on reducing costs during the initial hospitalization.

In contrast, for medical episodes such as CHF and AMI, readmissions are the single largest cost contributor. Adding in post-acute care, these two sources account for over half the total episode costs. Clearly, a well-defined strategy for a medical bundle must include strategies to coordinate with post-acute care providers to reduce costs as well as continuing to double-down on readmissions prevention.

Webconference: The 2016 outlook for CV services

As you set course for the new year, join us on Jan. 26 at 3 p.m. ET to hear our latest research on key trends affecting top-tier CV service line performance in 2016 and beyond.