One in five eligible hospitals participated in Medicare bundled payments advanced model

Crystal Yednak Senior Manager, Health Research Institute, PwC US June 25, 2020

While 22% of eligible hospitals pursued the Bundled Payments for Care Improvement (BPCI) Advanced model for at least one clinical episode in its first six months, providers stuck to relatively few areas where they could likely achieve savings, according to an evaluation report released by CMS this week.

Hospitals participating in the BPCI Advanced model focused on an average of five clinical episodes, while physician group practices averaged about seven, the report found. Hospitals could try the bundled payments for 29 inpatient episodes of care and three outpatient episodes, but those that did tended to do so in clinical areas where their median episode payment was higher than hospitals that didn’t participate, suggesting that participating hospitals with higher prices may have had more room to reduce payments below the target price and earn a payment from CMS.

While hospitals leaned toward the bundled payments for medical episodes, such as congestive heart failure and sepsis, the episodes that physician groups trended toward were surgical, with the top one being major joint replacement of the lower extremity, according to the evaluation.

Started in October 2018, BPCI Advanced offers hospitals or physician groups the opportunity to initiate an episode and be held accountable for quality and price. Those that come in under the target price earn a payment; those that come in above will pay CMS.

Target prices vary by the provider and clinical episode, as they are based on historical episode payments for the particular provider, with adjustments made for provider peer group and patient case mix, with an additional 3% discount applied for Medicare.

The report also took note that some physician group practices may have chosen to have multiple tax identification numbers and submit claims through BPCI Advanced with one number when they expected to achieve that lower episode payment, and to another when they anticipated higher numbers, which the authors said “could limit the reductions in payments achieved under the model.”

HRI impact analysis

While the report suggested interest growing in value-based care, with participants saying they wanted to get more experience with bundled payments and pursue potential financial opportunities, it did not signal a clear answer on uptake more broadly nor whether linking Medicare payments to an episode of care will bring about greater savings for the Medicare program.

Applicants could choose which clinical episodes to pursue in the program, or whether they would drop out entirely, after learning what the preliminary target price per episode would be. Roughly 60% of hospitals and 90% of physical group practices included on applications ultimately decided not to pursue BPCI Advanced past the cutoff date after learning of preliminary prices. The report findings do not suggest that broad experimentation is occurring yet; providers appeared to be choosing clinical episodes of care where they had confidence they could share in the proceeds of cutting costs.

But COVID-19 has put new focus on the potential for value-based care as providers with known regular payments have weathered the losses forced by the pandemic better than those whose revenues were heavily dependent on Medicare Fee for Service.

The ongoing press toward price transparency also opens an opportunity for providers to get out front with bundled payments for a wider group of patients, packaging episodes of care with clear prices and in consumer-friendly ways that better address the patient experience.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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