With the advent of mandatory Medicare bundling and pay-for-performance programs, providers must get their arms around new reimbursement models right now – and not later. 

The Centers for Medicare & Medicaid Services (“CMS”) announced the proposed Comprehensive Care for Joint Replacement (“CCJR”) model this summer. Per the proposed rules, beginning on January 1, 2016, hospitals in selected metropolitan areas that perform knee and hip replacement surgeries must participate in CCJR.  Under CCJR, hospitals, physicians, therapists and rehabilitation facilities bill Medicare on a fee-for-service basis for Medicare beneficiaries receiving a knee or hip replacement. CMS tracks all Medicare Part A and Part B expenditures for those patients from the date of surgery through a 90 day post-surgery period. If the 90 days of expenses exceed a threshold set by CMS (based on hospital and regional data, generally speaking), the hospital owes Medicare money. If the expenses are under the threshold, Medicare shares a portion of those savings with the hospital – the amount of which depends on a discount rate and whether the hospital meets certain performance and patient satisfaction metrics. (CMS is proposing that during the first year of CCJR, hospitals are only responsible for the upside risk and not the downside).

While CCJR only affects hospitals’ provision of certain orthopaedic services, its mix of bundled payments and payment-for-performance is a harbinger of things to come for all providers participating in Medicare. Equally important is the fact that CCJR participation is mandatory for hospitals in the 75 selected metropolitan areas.

CMS has long indicated that the fee-for-service model is both inefficient and financially unsustainable. Prior to the Affordable Care Act, CMS began to roll out alternative payment models designed to limit fees paid for hospital-acquired infections and hospital readmissions. Under the Affordable Care Act, CMS made various Medicare Shared Savings Programs (MSSPs) available to participating providers.

For the time being, MSSPs are optional. But that does not mean that providers should wait on acting to embrace new reimbursement methodologies. Rather, providers should consider participating in those Medicare programs now, before participation is mandatory, to get comfortable with the transition away from the fee-for-service model. 

The following programs are options available to providers looking to take advantage of other payment models now (in addition to the CCJR):

  • Accountable Care Organizations (ACOs) are a type of MSSP: Providers across the continuum of care participate in efforts to coordinate and improve patient care, which efforts are intended to result in savings to Medicare. Medicare then shares a portion of those savings with the ACO. The ACO divides the monies received from Medicare among the participants based on participation agreements. (Conversely, an ACO is also responsible for the downside risk when expenditures exceed targets and must pay a penalty in such a situation.) Providers can form a new ACO or participate in an existing one. An ACO is also able to contract with commercial payors and enter into shared savings arrangements.
  • Comprehensive End Stage Renal Disease Care Model:  Providers and suppliers treating End Stage Renal Disease (ESRD) patients may form ESRD Seamless Care Organizations (“ESCOs”), which are essentially ACOs targeted at a specific patient population with a chronic disease. (Beneficiaries with certain chronic diseases are excluded from ACOs). ESCO participating providers are clinically and financially responsible for all care offered to a group of ERSD Medicare beneficiaries.
  • Bundled Payments for Care Improvement (“BPCI”):  The BCPI initiative is actually four separate models.
    • Model 1 involves participating hospitals receiving a discounted payment based on the Inpatient Prospective Payment System with physicians being paid separately. More hospitals have expressed an interest in Models 2 and 3. 
    • Models 2 and 3 involve retrospective bundling, which is similar to the CCJR: following an acute care hospital stay, Medicare pays fee-for-service for up to 90 days of services and then reconciles the payments against a target payment amount. Based on that reconciliation, Medicare either recoups money from the participant or pays money to it.  These models also require significant coordination and planning among the participating providers.
    • In Model 4, Medicare makes a single prospective bundled payment to a hospital that includes all services to be furnished during an inpatient stay. The physicians and other practitioners treating the patient submit “no-pay” claims to the hospital and are paid out of the prospective bundled payment. This Model is essentially a capitation model.

Of course, some providers are adopting a different strategy: get out of the Medicare business entirely. There has been an increase in private practice physicians opting out of Medicare and private insurance programs and opening concierge practices. Patients pay a membership fee and/or make cash payments to these concierge practices for services. Patients have the option of submitting claims to their health insurance carrier under their out-of-network benefit. These practices often offer flexible hours and sometimes home visits.

Similarly, a number of surgeons in high demand specialties have begun to opt out of payors as well. Concierge primary care doctors are beginning to organize new care networks with these surgeons and other specialists. This strategy presents a separate set of challenges than the Medicare system, but is an option being explored by some physicians. Those challenges merit another (future) blog post of their own…