Hospital Industry Braces for Cool-Down of Value-Based Care

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By Mike Stankiewicz

Hospitals are concerned a recent proposal to cancel several Medicare payment models could slow the health-care industry’s transition to value-based care.

The Centers for Medicare & Medicaid Services announced in a Aug. 15 proposed rule ( RIN: 0938-AT16) it was seeking to cancel its mandatory episodic payment models and cardiac rehabilitation incentive payment program and make drastic changes to bundled payments for joint replacements.

Bundled payments are part of a larger value-based approach to make Medicare payments based on results and outcomes instead of the number of services rendered. Hospital groups, whose reaction to the proposed rule was mixed, fear that impeding value-based care could increase Medicare costs and affect patient outcomes.

“If the CMS doesn’t revisit this soon, then the shift to value-based care is going to suffer,” Janis Orlowski, chief health-care officer at the Association of American Medical Colleges, told Bloomberg BNA Aug. 21. “If nothing additional comes out in the next few months, there will be an impact.”

The agency did not announce plans for alternatives for the canceled episodic payment models and the cardiac rehabilitation incentive payment program. Blair Childs, senior vice president of public affairs at Premier Inc., a group purchasing organization, said in a statement his organization was disappointed.

“We hope that the promise for a future program that builds on the Bundled Payments for Care Improvement program is quickly followed up on with a fuller, specific proposal,” he said.

The changes to the joint replacement model, which include reducing the number of mandatory geographic areas participating in the model from 67 to 34, will save Medicare only $204 million, instead of $294 million, over the remaining three years of the program, the proposed rule said.

The proposal was published in the Aug. 17 Federal Register. Comments are due Oct. 16. Companies that might be affected by the proposal include hospital corporations HCA Healthcare in Nashville, Tenn., and Tenet Healthcare in Dallas.

Future of Value-Based Care

Orlowski warned that patients and ultimately taxpayers might suffer under the proposal.

“If we stay in the fee-for-service world, it isn’t going to help us with providing better care for our patients,” she said. “Also, the costs of Medicare are going to continue to go up, and that’s going to hurt taxpayers who fund the program.” In 2016 Medicare covered almost 60 million people and expenditures were $678 billion, more than a $30 billion increase from the prior year.

Mark Reagan, managing partner in the health-care law practice of Hooper, Lundy & Bookman PC in San Francisco, said ending the programs would slow the transition to value-based care, but that mandatory models may not be the best way to improve care.

“With compulsion comes greater familiarity with greater value-based purchasing,” he told Bloomberg BNA Aug. 21. Forcing providers to participate would drive the changes faster, but is it necessary, he asked. “Markets are developing organically in the voluntary markets well, so the question is do you need compulsion.”

Michael Abrams, co-founder and managing partner at Numerof & Associates, a health-care consulting firm based in St. Louis, agreed the shift to value-based care would be impeded by ending the bundles and said if the CMS were to approach bundled payments again, it would have to start where it left off.

“The point of bundled payments is whether it can lower the overall cost of care, so it makes sense to target programs where prices are high, and that’s cardiac care,” he said. “If the agency were to revisit this, they would likely focus on making this a voluntary program.”

CMS Authority

Reagan said making the program voluntary may not be in the CMS’s jurisdiction.

“Making Medicare alternative payment programs mandatory goes into the realm of significant policy decisions,” he told. “Congress might have to be the one who ultimately can do that.”

Reagan also said the CMS isn’t likely to revisit bundled payments anytime soon.

The CMS said in the proposal it ended the models instead of making them voluntary, because it would “potentially involve restructuring the model design, payment methodologies, financial arrangement provisions and/or quality measures, [and] we did not believe that such alterations would offer providers enough time to prepare for such changes.”

Bundled payments were scheduled to begin for cardiac care and hip and femur fractures in January 2018, following multiple delays by the Trump administration.

Other Possible Changes

Reagan said the CMS is unlikely to make such drastic changes to other Medicare programs.

“Given the views within some in the administration about mandatory bundling, this type of action we’ve seen in the proposed rule is probably confined to these bundling programs,” Reagan said.

Health and Human Services Secretary Tom Price previously criticized the mandatory aspect of the bundles during his time in Congress.

“This administration is looking for opportunities for regulatory relief, but I think there was a lot of controversy about these mandatory bundling programs and a lot of concern expressed by members of Congress. It is fair to say this is more of an action about whether Medicare demonstrations should be made mandatory,” Reagan said.

To contact the reporter on this story: Mike Stankiewicz in Washington at

To contact the editor responsible for this story: Brian Broderick at

For More Information

The proposed rule is at

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