Toward Accountable Payment

Bundled payment update: CMMI converging proposed episode definitions

by Rob Lazerow

Get the latest news on the Bundled Payments for Care Improvement initiative, particularly CMMI's recently announced plan to converge the care episodes proposed by applicants into a limited, standardized set of clinical conditions and episode definitions for the bundling initiative. We outline six key implications of the announcement.

Rob Lazerow and David Clain

On Wednesday, Sept. 12, the Center for Medicare and Medicaid Innovation (CMMI) hosted a webconference offering new details about the selection and implementation process for the Bundled Payments for Care Improvement (BPCI) initiative. During the webconference, CMMI announced that hundreds of providers submitted applications for the voluntary bundling initiative, collectively proposing thousands of episode definitions.

In a somewhat unexpected turn, CMMI also announced that it will develop a limited, standardized set of bundle definitions based on what it calls “convergence” of similar proposals. For a select set of clinical conditions, or anchor DRGs, CMMI will now define the Part A and Part B services excluded from the bundle and may limit the length of the post-acute portion of the episode. CMMI explained that these converged episodes are necessary to minimize the operational complexity that the agency faces in administering the program.

The potential for standardizing elements of the BPCI initiative is not wholly surprising. In the Request for Applications (RFA) officially introducing the program last year, CMMI noted that developing a standard set of bundles would ultimately allow it to “test similar models in different settings.” Although CMMI previously indicated that certain elements of bundles would be standardized across providers—such as quality measures and risk-adjustment methodologies—we were surprised by the extent of the convergence CMMI is now pursuing.

Next steps for BPCI applicants

During the webconference, CMMI also explained the upcoming schedule for evaluating applications and helping implement bundling programs at the organizations selected for participation:

  • Technical review: In late September 2012, technical review panels convened by CMMI will begin reviewing applications. CMMI declined to provide information about specific selection criteria but reiterated that it will review the criteria discussed in the RFA, including the financial model, patient-centeredness, quality improvement opportunity, and organizational readiness.
  • Candidate awardee notification: In early October 2012, candidate awardees—applicants who have been recommended by the technical committee but not formally accepted by CMMI—will be notified of their status and begin the implementation process.
  • Implementation period: In early October 2012, CMMI will provide candidate awardees with the proposed episode definitions. CMMI has extended the Data Use Agreement so providers can re-analyze their data in light of the converged bundle definitions. CMMI has committed to working closely with candidate awardees to refine bundle definitions and discuss various operational details.
  • Program launch: In late spring 2013, CMMI anticipates beginning to reimburse participating providers through bundled payments.

Key implications of CMMI’s announcement

Providers face six key implications following CMMI’s new BPCI initiative announcements:

1. Providers may be unable to pursue clinical conditions they initially proposed.
Many of the applicants we have spoken with proposed bundles covering a limited range of DRGs, focusing on cardiac and orthopedic service lines and displaying clear preference for bundling surgical cases rather than medicine admissions. Although CMMI did not reference specific clinical conditions during their webconference, we expect that CMMI will offer bundles for many of the most commonly proposed DRGs.

However, providers that proposed bundles for more esoteric DRGs—or proposed more DRGs than CMMI is likely to select—may not be able to engage in bundling for all of the clinical conditions they initially specified. CMMI suggested that it would accept compelling applicants even if the clinical conditions they proposed during the application process are not ultimately included in the initiative.

2. Providers face more limited diversity of bundle definitions than initially expected.
BPCI’s application process was notable for the flexibility it afforded providers: CMMI allowed substantial leeway in proposing bundle definitions, with limited or no restrictions on DRGs providers could propose, unrelated services they could exclude, or the duration of post-acute care include in the episode. The initiative will still offer providers selectivity in determining which bundles to adopt, but the variation of the bundles implemented will be substantially less than the diversity of those proposed during the application process.

3. Awardees must review their claims data in light of new episode definitions.
Before agreeing to a bundled payment contract under BPCI, awardees will need to re-analyze their claims data and financial modeling to reflect CMMI’s converged episode definitions. This makes the decision to proceed or withdraw more complicated than applicants might have expected: rather than tweak their financial projections in response to CMMI’s upcoming guidance, applicants may need to begin their analysis anew with new episode definitions in mind. For some providers, the converged bundles may be more attractive than those they initially proposed; others might find elevated risk in the final episode definitions.

4. CMMI preparing for a collaborative implementation period.
The recently announced BPCI evaluation and implementation process recognizes the administrative complexity of a large-scale rollout of bundled payment, and as a result will enable CMMI to work closely with candidate providers to refine episode definitions and finalize key operational details. Providers will also be asked to share their thoughts about other billing and administrative aspects of the program between their acceptance and the time they begin accepting bundled payments.

5. Providers should expect a delay before bundled payment goes live.
The substantial complexity facing both CMMI and awardees will prolong the time before providers can begin receiving reimbursement through bundled payments, with the initiative now likely to launch late next spring. Awardees will face a longer period of deliberating and preparing before having the opportunity to realize the anticipated benefits of bundled payment.

Hospitals and health systems should communicate the new implementation process and timeline clearly to participating physicians and other key stakeholders who may expect an earlier launch—and whose ongoing support for bundled payment will be critical for the program’s success.

6. Episode convergence may enable broader scale in the future.
CMMI is significantly reducing both the number and diversity of bundle definitions it accepts, which may ultimately enable a broader rollout of bundled payments in the future. Developing a limited set of converged episodes will ease CMMI’s administrative burden in the near term and could eventually offer a scalable set of bundles that providers could adopt without needing to individually define and construct care episodes.

Additional resources for evaluating and implementing bundled payment

The Advisory Board has developed a library of bundled payment resources for health systems evaluating or preparing to implement bundled payment.

The Health Care Advisory Board’s Succeeding Under Bundled Payments provides an overview of early experiments in bundled payment, along with assistance for working with physicians, developing gainsharing mechanisms, and engaging partners and patients across the care continuum. Additionally, the Medicare Payment Innovation Project offers resources on a variety of Medicare payment reform programs, including bundled payment.

The Financial Leadership Council’sFinance Road Map for Bundled Payment provides guidance for finance executives as they consider whether and how to adopt bundled payment. Further, the Council’s Identifying Clinical Targets for Bundled Payment discusses six criteria for evaluating which clinical conditions are worthy candidates for bundling.

As always, please feel free to call or email me with any questions or comments.