Shifting Accountability: The Current State of Bundling Medical Costs

The Center for Medicare and Medicaid (CMS) announced that medical cost bundling may be a valuable tool for reducing medical costs.  The announcement was based on first-year findings from the Medicare Acute Care Episode (ACE) demonstration study.

CMS defines the objective of the study as to test the use of a “global payment for an episode of care as an alternative approach to payment for service delivery”.   (CMS Fact Sheet).  Payment will cover Medicare Part A and B services, including physician services, for inpatient stays associated with certain cardiovascular and orthopedic procedures.

The following hospital systems were selected to participate in the study (click the links to learn more about how each site is implementing the program):   Baptist Health Hospital LLC (Oklahoma City, OK),  Exampla Saint Joseph Hospital (Denver, CO),  Hillcrest Medical Center (Tulsa, OK), Oklahoma Heart Hospital, LLC (Oklahoma City, OK), and Lovelace Health System (Albuquerque, NM).    Medicare reimbursement rates were based on participating hospital competitive bids for each DRG listed for the cardiovascular and orthopedic procedures under study.   The applicable discount was expressed as a discount off the entity’s base DRG payment amount.

CMS established two incentive programs for study participants.   Patients are motivated to think economically when choosing hospital care providers as they can  share up to 50 percent of any Medicare savings realized.   These payments are designed to offset patient cost-sharing.  Hospitals may also offer rewards to clinicians and other hospital study who meet certain measures of clinical quality and service efficiency.   For example, physicians at Tulsa’s Hillcrest Hospital are guaranteed their regular surgical fees and receive  a 25% bonus from Medicare to keep costs down and reduce infection and readmission rates. (USA Today)

While a recent Annuals of Internal Medicine study indicates that surgeons express reservations about bundled payments (Internal Medicine News), the system is already being implemented in the private insurance sector.  Aetna, Cigna, Blue Shield of California and Health Net have signed contracts with a number of hospital systems, including Cedars-Sinai Medical Center and UCLA.   Payors will be charged global fees for the services associated with hip and knee replacements.  Payments will cover  hospital care, physician services, tests, and most other aspects of medical care from admission through 90 days after discharge.   Any savings realized in these contracts will be shared by the hospital facility and clinicians.

Geisinger Health System may have the most extensive experience with a bundled payment system.   Their experience has been cited by the Obama administration.  By managing patient compliance and rewarding staff high quality, Geisigner is being recognized as a possible model.   Geisinger has reduced hospital readmissions by 25%.

Fundamental changes to the business of health care

If you listen to the news pundits you are led to believe that health care reform is not a done deal.  Upon closer inspection we find that implementation is well underway and that current initiatives are changing basic assumptions about patient care.

The Steward Group finds that current initiatives are changing the basic assumptions about US health care

In anticipation of the full roll-out of the Patient Protection and Affordable Care Act, the executive branch of the federal government is steadily changing the conventions that have defined US health care.  In this issue of Verity Reports, we focus on two conventions that were knocked down within the last few weeks:

• Medicare providers don’t have to take fraud seriously.
• Health reform doesn’t give hard-working Americans a safety net.

Medicare fraud:  It is time to take it seriously

The medical billing community already knows that Medicare carriers have become increasingly vigilant, however, health reform has raised the stakes.  The Centers for Medicare & Medicaid Services (CMS) is changing from a “pay and chase” to a fraud prevention strategy.

In a press release the DOJ reports that the “Affordable Care Act requires providers and suppliers to establish plans detailing how they will follow the rules and prevent fraud as a condition of enrollment in Medicare, Medicaid, or CHIP.”

Suppliers of durable medical equipment, home health agencies, and Community Mental Health Centers (CMHCs) have been targeted as high fraud risks.

The Steward Group conducts trends analyses to predict how an industry and consumer needs might change over time.

Since May 2009, HEAT, the Medicare Fraud Strike Force, composed of federal and state staff from the Office of the Inspector General and Department of Justice, has charged 465 defendants with defrauding Medicare of more than $830 million dollars.

For example, Drs. Juan De Oleo and Rosa Genao face possible prison sentences of a maximum of 10 to 20 years for health care fraud, money laundering, and the destruction or alteration of records.  In addition, government agents are  recruiting the assistance of Medicare beneficiaries to help stop fraudulent charges to the program.  A fraud hotline can be called 24/7 to report program abuses.

Government funded healthcare:  Benefiting the middle-class

Only a few days ago, Kathleen Sebelius, Secretary of the Department of Health and Human Services announced that nearly 2,000 employers were accepted  into the Early Retiree Reinsurance Program (ERRP). Modern Healthcare reports that the “approved applications represent nearly every sector of the economy: 32% from businesses, 26% from state and local governments, 22% from union sponsors, 14% from schools and other educational institutions, and 5% from not-for-profits.  Reimbursements will begin this fall for the early retirees of these companies.  ”  Modern Healthcare.com.

New rules for new health care

With just these two programs, the landscape of US health care is already changed.

The White House administration has brought Medicare fraud penalties into the realm of street crime.  It has also redefined Medicare as a program that is not just for the elderly and may make supporters of the very people who are most likely to believe that health reform will not benefit to them.

Image:  Pete Souza