CMS Finalizes Changes to Joint Replacement Bundles; Verma Promises Shift to Voluntary Models

CMS on Thursday finalized changes to one of the most ambitious payment reform efforts of the Obama era—the mandatory bundled payment program for hip and knee replacements, which affected 67 markets and was once poised to expand.

Instead, the administration of President Donald Trump has canceled those plans, along with a proposed bundled payment program for cardiac care that was set to start January 1, 2018. The shift marks a change in philosophy that the Trump administration says will give smaller hospitals and practices more flexibility. Others say the change will slow payment reform, at the expense of better care and savings.

It all comes down to whether one believes healthcare transformation should be mandatory or voluntary. The Trump team prefers the latter.

“While CMS continues to believe that bundled payment models offer opportunities to improve quality and care coordination while lowering spending, we believe that focusing on developing different bundled payment models and engaging more providers is the best way to drive health system change while minimizing burden and maintaining access to care,” said CMS Administrator Seema Verma in a statement. “We anticipate announcing new voluntary payment bundles soon.”

Called the Comprehensive Care Joint Replacement Model (CJR), the mandatory program launched in 2015 required 67 markets to take part in a bundled payment initiative to weed out variation that CMS said at the time could make surgery costs vary from $16,500 to $33,000. The first full year of the program started in April 2016.

CMS’ rule came after years of published studies showed savings of varying amounts, depending on how much of the aftercare period was included in the bundle. Savings typically accrued from fewer days in the hospital and fewer readmissions, studies found. In early 2016, Horizon Blue Cross Blue Shield of New Jersey announced that it had wiped out readmissions after knee replacements through its episodes of care program.

A February 2017 study by Navathe et al appearing in JAMA Internal Medicine, based on 3942 patients in a single hospital system under 2 separate bundled models over 5 years, found the programs caused the average spending per Medicare episode to decline 20.8%. But an adjoining commentary, by Katherine Baicker, PhD, and Michael E. Chernew, PhD, co-editor-in-chief of The American Journal of Managed Care^® (AJMC^®), noted earlier demonstrations had saved just 4%, and that “the effectiveness of these alternative payment models in improving quality and lowering spending hinges on design and implementation choices.”

As the 2016 election approached, CMS proposed expanding the model to include hip fractures, along with a new cardiac care bundle. Hospitals said it was too much, too soon. On Thursday, CMS finalized a rule that cuts in half, to 34, the number of markets where CJR is mandatory; it will be voluntary in the rest. According to information released by CMS, rural and low-volume hospitals in the mandatory markets and all hospitals in the 33 voluntary markets can let CMS know during January 2018 if the plan to participate; their decisions will take effect on February 1, 2018. (The regulation also includes an interim final rule with a comment period, for input on how CMS should handle episode costs in areas affected by hurricanes.)

This change in philosophy was personified by Trump’s first HHS Secretary, Tom Price, MD, who stepped down in late September. As a Georgia Congressman, Price, an orthopedic surgeon, had complained that the Center for Medicare and Medicaid Innovation had overstepped its authority with the bundled payment program. While many expected Price to move away from mandatory models toward voluntary ones, the rollback of an existing program surprised some.

Although Price has left, CMS Administrator Seema Verma appears to be moving toward greater reliance on a voluntary model, the Bundled Payments for Care Improvement Initiative (BPCI). The program began in 2013 and has been set to expire on September 30, 2018. Writing in Health Affairs earlier this year, authors led by Tim Gronniger, MPP, MHSA, a former CMS official now at Caravan Health, argued that mandatory models needed time to work, even if the new administration wanted to find ways to give physicians a stronger role.

In an interview, Gronniger said Thursday's result was not a surprise, given Price's opposition to mandatory bundled payment programs. "To me, what's interesting is what this does to bundled payments as a long-term healthcare project," he said. Years of work, including input from Congress, went into the mandatory rule, and some practices and hospitals saw great success. Yet as things stand today, Gronniger said, "there are no pathways to adoption on a large scale in Medicare."

Today, he said, it appears that accountable care organizations, or ACOs, offer the best vehicle for payment reform, and their growth both within and beyond Medicare has been rapid.

Other healthcare experts have said that while CMMI models need to be less bureaucratic, healthcare transformation in Medicare will not happen if the chief concern is making everyone comfortable. A 2016 report by McKesson found a sizable “readiness gap,” among hospitals preparing for cardiac bundles.

Darcie Hurteau, director of the healthcare data analytics and policy firm DataGen, said in an email that the arrival of mandatory bundled programs offered opportunities for those who had been trying launch changes. Others were less prepared, and, "not everyone has worked out to be as successful."

"This new change offers a chance to reevaluate what initiatives have and have not been working well. Deciding to stay in the CJR program comes down to how participants view some critical factors: the return they’re seeing on investments in infrastructure and care management processes, how engaged their physicians are, and how the program is performing financially. Participants will all have different experiences when it comes to those factors, so that decision will need to happen at the individual organization level," Hurteau said. Providers need a full grasp of the target shifts that occur as the program proceeds, she said.

In an interview with AJMC^® earlier this year, Michael Abrams, MA, of Numerof Associates said that going forward, commercial payers and employers will drive new payment models. Hospitals have used the BPCI to learn the “business discipline” they would need to make the transition to what’s coming, which are advanced alternative payment models under the Medicare Access and CHIP Reauthorization Act. For hospitals, Abrams said, BPCI “was basically a low-risk way to force them to pay attention to creative new capacities they didn’t really have,” Abrams said.

Now, “the genie is out of the bottle,” Abrams said. Employers, in particular, are ready to try new ways of paying for healthcare to drive down costs, not just shift premium. “Employers,” said Abrams, “are speaking with the loudest voice.”