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CMS Bundled Payment Proposal Critiqued

Walter Eisner • Thu, August 6th, 2015

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The Centers for Medicare and Medicaid Services' (CMS) hip and knee bundling proposal (CCJR) will raise prices and limit choice, says Harold Miller the CEO of The Center for Healthcare Quality and Payment Reform.

Bundling Badly

In a policy brief, “Bundling Badly: Problems with Medicare’s Comprehensive Care for Joint Replacement Proposal, ” Miller says that the proposal will limit choices and raise prices for consumers because bundling will encourage more industry consolidation. He also says the proposal will result in unnecessary hip and knee surgeries and discourage innovative approaches to managing hip and knee pain.

The CMS proposal, according to Miller, is primarily a plan to "penalize hospitals when patients receive higher-than-average amounts of post-acute care services after knee or hip surgery."

Miller has seven specific criticisms of the proposal to require 800 hospitals in 75 areas to test bundled payments for most of the 100, 000 hip and knee surgeries that Medicare covers annually. Those criticisms are:

  1. True episode payment would be desirable, but this is just P4P (pay for performance)
  2. It may look like bundled payment but it isn’t really
  3. It’s a payment design that penalizes innovation instead of encouraging it
  4. CCJR will likely accelerate provider consolidation and increase prices for private payers
  5. Poorly designed risk adjustment could reduce access and result in more unnecessary surgeries
  6. There’s no reward for higher quality; just smaller bonuses if quality is low
  7. A mandatory “test” would preclude other, better approaches.

Joseph Burns, a Massachusetts-based independent journalist and health insurance topic leader for the Association of Healthcare Journalists asked Francois de Brantes, the executive director of the Health Care Incentives Improvement Institute (HCI3), for his opinion about Miller's criticisms.

HCI3 has been implementing a form of bundled payments called the Prometheus Payment Model since 2007.

“He’s mostly right, ” de Brantes told Burns. “The one area I disagree with is that it will accelerate provider consolidation. There’s no real evidence of that in bundled payment programs, but the other points he brings up are correct. So while CCJR is a strong signal to providers that fee-for-service is ending, the design of the program is flawed.”

“We’ve spent the past several years alerting CMS to the flaws in its Bundled Payment for Care Initiative program (on which CCJR is based), and they’ve ignored all of the comments and suggestions, ” he added.

Try Again

Miller wants CMS to go back to the drawing board. He writes, "The inescapable conclusion is that CMS should go back to the drawing board on this proposal. Rather than truly reforming payment systems, the proposed Comprehensive Care for Joint Replacement program would add a problematic layer of new incentives on top of the undesirable incentives in the current fee-for-service payment systems, and the undesirable consequences of those new incentives could easily outweigh any of the benefits that are intended."

Currently the agency is soliciting comments on its proposal until September 8, and expects to implement the program January 1. Kevin Lobo and David Dvorak, the heads of Stryker Corp. and Zimmer Biomet Holdings, Inc. have both said that the bundled payment proposal will have very little impact on device manufacturers.

The CMS proposal is 394 pages of preamble and 45 pages of regulations. You can read Miller's four page critique here.

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