CMS's Christmas Bundle

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In the last week, the Center for Medicare and Medicaid Services (CMS) posted a final regulation [1] initiating a demonstration project involving the bundling of care for two new diagnostic categories. First, acute myocardial infarctions (AMI) – heart attacks including their medical and minimally invasive treatment (coronary artery angioplasty and stents) and second, coronary artery bypass grafting (CABG) – surgery to improve/restore circulation to the heart arteries.

And I should care why?  For two reasons. First Congressman Tom Price the presumptive new Health and Human Services Secretary feels the regulations that mandate participation in this demonstration project are too far reaching and is expected to cancel the demonstration. Second, while this particular kerfuffle will make the news, it is probably more important to look at the underlying economics CMS envisions, because they are the savings part of Obamacare.

In the traditional payment model, fee-for-service, each service is charged separately. For CABG, that means fees from an anesthesiologist, a surgeon, perhaps a consulting specialist, the hospital of course, and then a variety of post-discharge services such as the visiting nurse, or a skilled nursing facility for rehabilitation. Lots of different providers and facilities with lots of variability in costs. The problem is while everyone gets lots of services, overall care is not well coordinated. Health care becomes a series of services. The essence of bundling is that healthcare can be better defined and managed as an overarching episode. Instead of a series of isolated uncoordinated services, there are 90 days of care, from diagnosis through treatment and recovery. Rather than pay each service, CMS determines a target cost for the entire episode of care. When the cost of care for an individual patient is less than the target, the savings are shared between CMS and the providers. When costs are exceeded, the providers and hospitals ‘eat’ the costs.

AMI and CABG were chosen primarily because while diagnosis and treatment have relatively invariant costs, the 90-day aftercare is quite variable and represents 50% of costs for managing AMI and 25% of the cost for CABG. The biggest post-discharge expense is far and away readmissions, about 14% for AMIs with a similar rate for CABG. Readmissions essentially double the cost of care and CMS believes too much money is spent on readmissions and too little on post-hospital care to prevent those readmissions. The regulations are aimed at guiding hospitals to redesign care to

•    Increase post-hospitalization follow-up and medical management through coordination of care between the hospitals and post-discharge services, providers and suppliers.

•    Conduct appropriate discharge plans that manage the chronic diseases and conditions associated with the admission, improve adherence to treatment and drug regimes, choosing the most suitable post-discharge care setting and thereby reduce readmissions and complications

Clearly, healthcare is not one individual or a team, but it is a village of services which by CMS mandate will be coordinated by the hospital acting as the episode payment model manager.

Sharing the savings - gainsharing has a history of being rancorous. After all, how do you divide the spoils? The hospital claims it is their staff and environment; the doctors claim it is their judgments and actions. CMS deftly avoids any of these considerations and simply keeps it's 50% of savings and then hands the remainder over to the episode payment model manager (a large hospital or health system with the administrative resources to ‘administer’ the program), to divide as they see fit. The division is between the hospital (and post-discharge facilities), the physician-providers, and oh yes, a new entity, the administrators charged with actually coordinating the program, they get a cut too. Do you believe that the hospital’s reward will trickle down to their staff – the teams that did the actual work, or will they have to be content with a celebratory pizza party? And if the costs are too great, the hospital/health system will take the loss (although not initially). It will be interesting to see how blame and loss are attributed and distributed. I bet it will not be the new episode payment model administrators.

[1] The final document is 1600 pages, I would avoid a careful review, as the abbreviations used alone take up 10 pages.