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Bundle up? Some Providers May be Left in the Cold!

Payment reform is on the move.  The Patient Protection and Affordable Care Act 2010 (PPACA) has charged the Secretary of Health and Human Services (HHS) with establishing a national pilot program on payment bundling.  The Secretary must implement this program no later than January 1, 2013.  The program will continue for a minimum of five years.  However, the Secretary has the ability to expand and extend the program indefinitely if certain conditions are met.  The pilot program will consist of various types of providers encompassing a wide range of health care delivery systems.  This group will consist of acute inpatient services, physician services, and post acute care, including inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), home health agencies (HHAs), and any other service the Secretary deems appropriate.

The focus of the bundling program is to move away from volume based fee-for-service payment. Goals of the new pilot program are to improve coordination of patient care, quality, and efficiency of health care services.   The Secretary will select and evaluate 10 conditions to be included in the program.  The Secretary must consider the following factors when selecting the conditions:

• A mix of chronic and acute conditions
• A mix of medical and surgical conditions
• Conditions for which there is evidence of an opportunity for providers of service and suppliers to improve the quality of care furnished while reducing total expenditures
• Conditions which have significant variations in readmissions and post-acute care spending
• Conditions with a high volume and high post-acute care expenditures
• Conditions deemed to be the most amenable to bundling across the spectrum of care given current practice patterns

The program establishes an episode of care related to treatment of such conditions.  Treatment may cover acute inpatient care, physician services, post-acute care from IRFs, LTCHs, SNFs, and HHAs, and other services.  An episode of care is defined as the three days prior to admission, the length of stay, and the 30 days following discharge from the hospital.  There is also a provision that allows the Secretary to establish any other period for an episode of care, that is deemed appropriate, related to this program.

The law requires the Secretary to establish patient assessment instruments to evaluate applicable conditions and determine the most clinically appropriate site for post-acute care of a given patient.  The Secretary is required to establish quality indicators in order to evaluate the pilot program.  The quality measures will evaluate the process, outcome and structure related to the care provided by the health care entity.  These will include measures of:

• Functional status improvement
• Reducing rates of avoidable hospital readmissions
• Rates of discharge to the community
• Rates of admission to an emergency room after hospitalization
• Incidence of health care acquired infections
• Efficiency
• Patient-centeredness of care
• Patient perception of care
• Other measures, including measures of patient outcomes, as determined appropriate by the Secretary

Providers will be required to submit quality data to the Secretary during each year of the program in a format specified by the Secretary.  To the extent practicable, the data should be submitted through the use of qualified electronic health records.

The Secretary will consult with a variety of hospitals including small, rural, and critical access hospitals, regarding their participation in the program.  The consultation should include discussion on different methods of implementing bundled payments, taking into consideration the challenges each type of hospital encounters.  Additionally, the law requires the Secretary to test alternative payment methodologies, which may include bundled payments and bids from participating entities for episodes of care.  The bundled payment will be paid to a contracting organization, which must include, at a minimum, a hospital, a physician group, a skilled nursing facility and a home health agency. The contracting organization will then have the responsibility of allocating the bundled payment to the applicable providers. This bundled payment will not exceed the aggregate payment amount the providers would have been paid if not participating in the pilot program.

The Secretary will be required to conduct interim reporting to Congress.  The reporting must include an independent evaluation of the program, including the extent to which the program has:

• Improved quality measures
• Improved health outcomes
• Improved applicable beneficiary access to care
• Reduced spending under this program

The first report will be due to Congress no later than two years after implementation of the pilot program, with a final report due no later than three years after implementation.

Currently, the Secretary is still in the planning phase.  There are several provisions under this section that are still unanswered.  With so much uncertainty it may be difficult for providers to prepare for this change.

An example of a possible bundled payment system is shown below:

Some issues for providers to consider are: Who will receive the bundled payment? How will the bundled payment be distributed? And, who determines the distribution methodology?  Hospitals must be very thorough when planning a patient's episode of care, to ensure that all delivery systems are accounted for, and to provide high quality, low cost care.  All health care providers will need to take an active role in this bundled payment system to ensure they are not left out in the cold.

HORNE LLP can assist you with operational assessments of the impact of Healthcare Reform on your facility. For more information, please contact David Williams, Partner, at david.williams@horne-llp.com.