Six Quick First Impressions of CMS’ Bundled Payment for Care Improvement Initiative (BPCII)

Vince Kuraitis

First posted 8/23/11 on e-CareManagement Blog

This afternoon CMS announced the Bundled Payments for Care Improvement Initiative (BPCII). For details, start reading here.

Here are six quick first impressions:

1. It’s very creative and innovative. CMS has demonstrated out-of-the-box thinking and leaves a lot of room for applicants to propose their own approaches. Expect to have to read the materials 2-3 times to wrap your thinking around it.

Unlike the Medicare Shared Savings ACO rule, the BPCII is flexible. Expect some innovative and non-traditional proposals from diverse applicants. Unlike the Medicare ACO Shared Savings rule, the BPCII invites flexibility in:

  • Definition of care bundles
  • Proposal of specific financial terms
  • Participation by diverse care providers (see below)
  • Risk adjustment of beneficiaries

2. Discounted payments and downside financial risk will discourage almost all local care providers from applying. Applicants are at risk for repaying CMS for costs above targets; applicants will need to provide irrevocable letters of credit that guarantee their ability to repaying CMS.  CFOs will balk. Anyone remember Medicare Health Support?

3. Broad eligibility criteria and potential for financial upside will attract entrepreneurs, regional and national care and care management providers, and niche care providers.

The Medicare Shared Savings ACO rule allows a narrow scope of care providers to apply. As a practical matter, hospitals and physicians will be the core of ACOs.

Model #3 of the BPCII explicitly allows applications from:

  • Physician group practices
  • Acute care hospitals
  • Health systems
  • Inpatient rehabilitation facilities
  • Home health agencies
  • Skilled nursing facilities
  • Physician-hospital organizations
  • Conveners of participating health care providers

All 4 models allow applications from this last category of “conveners”. It will be interesting to see who applies under this open-ended label.

4. Hospitals will be threatened. Many will see the primary savings target of the BPCII as avoiding hospital readmissions.

The message from CMS to hospitals seems to be “disrupt your own business/care models or we will enable others to do so.”

While hospitals are invited to be applicants, model #3 (accepting risk for post-discharge services only) likely will attract applicants that have little interest or need to involve the local hospital.

Based on a first read, I also see little potential for hospitals to gain volume from the BPCII. Why would a hospital want to provide a discount on existing business if there is no potential to make it up through volume?

5. Physicians will be intrigued, but most won’t have the financial strength to take leadership roles.

6. How will CMS resolve mixed messages in the BPCII?

On one hand, CMS is encouraging creative and flexible proposals. This invites entrepreneurial thinking along the lines of geographic cherry picking, carve-out delivery approaches, and tight focus on niche diseases/conditions.

For example, a national care provider might think about developing a proposal along these lines:

We are a home health company that operates in 50 markets. We will submit BPCII proposals in the 10 highest cost markets for 3 high cost conditions. That’s where we will have the opportunity to achieve the greatest cost savings.

On the other hand, CMS expects applicants to collaborate with local care providers, particularly physicians. Such collaboration will create tension for applicants thinking along the lines of geographic cherry picking, carve-out delivery approaches, and tight focus on niche diseases/conditions. I foresee the potential for unintended consequences and fragmentation of care delivery.

Vince Kuraitis is a health care attorney and analyst, writing at e-CareManagement Blog.

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