Jade Gong, Vice President of Strategic Initiatives

Bundled payment—a lump sum payment for a defined episode of care—offers post-acute providers an opportunity to proactively jump on the continuing wave of care delivery reform and demonstrate their ability to deliver cost-effective, high-quality patient care outside of the costly inpatient setting. Both private payors and the Center for Medicare and Medicaid Innovation (CMMI) are bullish on the bundling concept, viewing it as a narrower and more manageable approach to value-based payment than accountable care organizations (ACOs), which require effective management of an entire patient population. In contrast, bundled payment allows providers to identify a discrete group of patients—such as joint replacements, heart failure or strokes—and develop an evidence-based, standardized care protocol with a set price for care delivery. Providers then take on risk if the actual costs are greater than that price and have the opportunity to share in savings if actual costs are lower than that price. For hospital executives oriented to acute care delivery, adapting to and understanding the nuances within the various non-acute settings and how they can actively participate in accountable care delivery can be a daunting task. The topics below are offered as strategic actions to be taken to structure successful partnerships within your health provider community.

Bundled Payment: The Next Frontier of Cost Savings

With CMMI in the final stages of launching its Bundled Payments for Care Improvement (BPCI) initiative and expected to announce a new round of applications in 2013, now is an opportune time for postacute providers to reflect on whether bundling is a viable strategy to cement their role as a high quality, low-cost provider in a continuum of accountable care-ready providers. One of the key findings from the first round of the BPCI initiative was that the first post-acute care setting in which a patient is discharged was the most variable aspect of payment within the episode. Further, episodes in which a patient was discharged to an institutional setting (SNF, IRF or LTACH) resulted in higher episode payments.1 CMMI’s attention is undoubtedly turning to the cost savings opportunities within the post-acute sector, and it is eager to see a greater response from the sector during the second round of applications. Despite the large number of post-acute providers that submitted letters of intent under Model 3, very few actually applied. Similarly, hospitals that applied under Model 2 are recognizing the importance of post-acute care to cost management, and will likely engage post-acute providers to a greater extent in the care redesign process for the next round of applications.

While this provides an unparalleled opportunity for post-acute providers to participate in bundled payment, the application process remains an extensive undertaking. To assist providers in early preparatory efforts, Health Dimensions Group (HDG) is pleased to present the first in a series of papers on bundled payment. HDG has drawn upon its expertise from working with clients on the BPCI initiative to create a framework for deciding whether bundled payment is a good fit for your organization. We encourage you and your colleagues to use this paper as a springboard for discussion and to reach out to our staff, who have experience working with clients on the BPCI initiative, to assist with this selfassessment.

Bundled Payment: A Substantial Commitment of Organizational Resources

Preparing an application to participate in CMMI’s BPCI Initiative was an extensive undertaking for the post-acute providers that participated, and it doesn’t seem to get any easier once the application stage is over. Hospitals participating in CMS’s Acute Care Episode demonstration project (commonly referred to as the ACE demo, an inpatient only bundling project) report continuing to make new investments in staff and technology to effectively manage the bundle from a resource utilization and billing perspective once implemented.

Undoubtedly, both ACE demo participants and post-acute providers applying to the BPCI initiative have learned an immense amount about their care delivery systems and where they fall relative to the high-quality, low-cost, best practice care heralded by accountable care driven payment models. Participants refer to the ACE demo and BPCI initiative as a forcing function—a firm deadline that accelerated the organization toward accountable care readiness. In the long term the benefits of such early preparation will be immense, but the momentum for corralling the resources necessary for success today for a longer-term goal can be challenging.

Readiness Self-Assessment: An Essential First Step

Before charging down this path, HDG recommends evaluating where your organization stands relative to three characteristics: executive commitment, resource commitment and the size and diversity of service lines.

1. Executive commitment

Without widespread support across the executive suite of your organization, pursuing a bundled payment application will likely not be successful. While there should be one or two executives dedicated to leading the project, all executives should be fully educated on the mechanics of the process, the long-term benefits and the resource commitments necessary. Unforeseen challenges will arise throughout the process and having the immediate support of the executive team is vital to being able to quickly and successfully address these issues.

2. Resource commitment

A common occurrence across post-acute providers who applied for Model 3 under CMMI’s BPCI initiative was an underestimation of the human and financial resources necessary. At a minimum, organizations should dedicate one executive and one project manager to lead the application, with this being their principal responsibility across the application period. In addition, clinical leaders (director of nursing, unit managers, director of rehabilitation, etc.) will need to be engaged during care process redesign. Financial and IT leaders will need to provide feedback on current cost tracking capabilities and collaborate with external consultants to establish a cost tracking infrastructure and determine feasible discounts to propose to CMMI.

In addition to internal staff, practically all applicants hired an external data analytics firm to assist in running models of various bundled payment episodes to determine the discount at which each would be financially feasible. Many organizations also engaged clinical consultants to assist in care process redesign and strategy consultants to oversee the process in conjunction with an internal project manager. The vast majority of organizations participating in the BPCI initiative—even those routinely cited as the most sophisticated providers—recognized they simply did not have the internal expertise necessary to design a bundled payment episode.

3. Size and diversity of service lines

Bundled payment—like any risk-based payment model—requires spreading risk across a sizeable patient population so one costly outlier will not lead to financial stress. Since Medicare patients comprise, on average 15% to 20% of a nursing facility’s volume, many providers will simply not have enough Medicare volume to enter risk-based contracts. A payment bundle will target a subset of your patient population and within that population exclusion criteria may apply to even further reduce eligible patients. Under bundled payment your organization will have a set amount of funds for each patient and one high-cost outlier in a small group of patients could potentially be a financial loss under bundled payment.

In order to determine whether your organization has sufficient volume, start tracking the working Medicare Severity Diagnosis Related Group (MS-DRG) for all patients admitted to skilled care at your facility. This will provide a sense of which MS-DRG groupings you have adequate volumes of to consider accepting risk for and help define the target population for a potential bundle. A list of the MS-DRG groupings for common payment bundles is provided in the following table.

In addition to patient volumes, diversity of services is also essential. A substantial amount of cost savings within a post-acute episode of care comes from shifting patients to less-costly care settings. For example, BayState Health—a health system in Springfield, Massachusetts—implemented a payment bundle for joint replacements with the majority of savings coming from discharging patients to home health rather than a nursing facility. Having the ability to do that within your own organization, so you can capture the savings directly, is highly valuable and will lend your team greater creativity when redesigning care episodes to determine the most clinically appropriate care setting for patients.

If your organization does not own the entire post-acute continuum, this is by no means a deal breaker. Rather, it is an opportunity to form partnerships with complementary post-acute providers and jointly apply in the next round of the BPCI initiative and related initiatives.

Bundled Payment Status

Currently, CMMI is in the final stages of negotiation with the BCPI awardees and they are negotiating standardization of bundles and pricing. CMMI announcements of awardees are anticipated very soon.

It is also widely anticipated that CMMI will release four additional models under a second round of the BPCI initiative later in 2013, building upon the learnings from the first round.

Finally, the Affordable Care Act (ACA) also created the National Pilot Program on Payment Bundling, which was to be launched by January 1, 2013. The statute specified that care episodes include 30 days of Medicare reimbursed care following a discharge, bringing post acute care into the provider mix for this national pilot. Details about this pilot, including the procedures and conceptions to be included and actual timeline for launch are not known at this time.

Providers should expect continued momentum towards testing bundled payment approaches to providing care over a defined episode, which will include additional Medicare pilots, as well as private payor arrangements throughout the country.

Moving forward

In the next paper in this series, HDG will explore initial steps organizations can take today so they can hit the ground running when CMMI releases the second round of applications for the BPCI initiative. Recommendations range from analyzing your patient population by disease state to establishing a patient-level cost tracking system and educating staff. Such steps will ensure organizations understand where to focus their attention and have widespread internal support once CMMI releases guidance on round two.

We look forward to collaborating with you on this exciting aspect of payment and care delivery reform! For more information about bundled payment contracts or health care reform readiness in general, please contact Jade Gong, at jadeg@hdgi1.com.

Health Dimensions Group and several of our clients are cited in this article, which appeared in Leading Age Magazine. Click here read the full article.

By Debra Wood, R.N.

In health care, no one succeeds for long practicing in a vacuum. Ever-important collaboration with acute care facilities has become even more critical for long-term care providers as pay-for-performance reimbursement begins and health-care reform initiatives move forward.

“It’s a natural requirement for someone in the elder-care business to be connected to the larger health-care environment,” says Mark D. Weiner, president/CEO of CJE SeniorLife in Chicago, IL. “We’re extremely dependent upon referrals into our system from physicians, discharge planners, community organizations, etc., and through our system, we have significant levels of referrals to hospital emergency rooms, hospital inpatient facilities and ambulatory care facilities. So it becomes critical for us to have ongoing, strong and positive relationships with all of those referral sources.”

CJE received one of the first seven Centers for Medicare & Medicaid Services (CMS) transitional care grants and will pioneer a new program in three Chicago-area hospitals.

“Health-care reform is about pushing providers closer together,” adds Karen Reich, CEO of Bon Secours St. Petersburg Health System in St. Petersburg, FL, which has begun a Six Sigma project to redesign processes to reduce readmissions with one of its local hospitals.

“We need to be the answer to the hospitals’ problems in the health-care reform movement and be the best and most obvious choice when they are selecting a post-acute partner,” Reich says.

Communication, education and clinical pathways that are built for the continuum between and among facilities, she adds, will transform care for the better.

“Health-care systems are much more rapidly becoming integrated clinical entities, with physicians, payors, and post-acute and other providers,” agrees Kathleen M Griffin, Ph.D., national director of post-acute and senior services for Health Dimensions Group in Scottsdale, Ariz.

In the short term, health systems, she says, are integrating to prepare for the upcoming CMS penalties for rehospitalizations for heart failure, pneumonia and myocardial infarction. Further ahead, a value-based purchasing quality measure will include efficiencies in managing a patient three days prior and 30 days after the hospitalization.

“This will be a major culture change,” Griffin says. “It’s new and you are no longer a stand-alone campus. You are interdependent with multiple other providers. That’s the future of health care.”

Building Relationships

Relationships develop over time, says John Capasso, president and CEO of Catholic Health East Continuing Care Management Services Network in Newtown Square, PA. Honesty and keeping commitments come into play and contribute to an organization’s reputation for safety, quality and outcomes.

“You are not starting at zero,” he adds. “You have to assess the current relationship and build from there.”

Discharge planners influence transfer decisions, so they are key contacts, but so are physicians, such as hospitalists, and administrators.

Consultant Griffin recommends a three-part strategy, beginning with an assessment of your abilities to manage increasingly medically complex patients without rehospitalization. Secondly, she advises evaluating the health system and the issues and gaps it faces and how an aging-services provider might be able to partner with the system to resolve those problems. Then, she suggests, providers should consider what components of the care continuum they do not have and create affiliations or facilitate acquisitions to become a one-stop post-acute solution for the health system. However, she cautions, the health system will hold the partner it refers to responsible for all components, even care it outsources. Aging-services providers must measure readmissions and act on the data to ensure residents do not return to the hospital unnecessarily, Griffin adds.

“Metrics are important, and you won’t get in the door at a health system without some persuasive metrics,” Griffin adds. However, post-acute providers must demonstrate improvement on both subacute units and the long-term care units.

Bon Secours, jointly with its Six Sigma readmission project partner, reviewed its internal processes, identified challenges and barriers, and is working on issues to target systems issues, policies or actions that have a deleterious effect anywhere along the continuum.

“It’s broadening our perspective; it’s understanding the patient experience and making sure whichever [community] a person is in that there is consistency in the clinical care path, provider communication, and patient, family and staff education,” Reich says.

MorseLife in West Palm Beach, FL, is tracking outcome and readmission data throughout its campus. The senior-care organization also has developed clinical pathways in association with a physician advisory team for patients with certain conditions, such as hypertension, coronary artery disease, congestive heart failure, failure to thrive, chronic obstructive pulmonary disease and diabetes.

“If you want to be the provider of choice, you better know your numbers as it relates to rehospitalizations,” says Keith Myers, president/CEO of MorseLife.

CJE also measures results and shares that data with physicians and other providers to explain how a referral to a CJE program will benefit the patient and practice.

“It’s all about demonstrating value and positive outcomes,” Weiner says. “We’re in the business of solving people’s problems. … Our charge is to demonstrate we will help them solve their problems and meet their needs as quickly and effectively as possible.”

Making a Difference for Traditional Short-Stay Patients

About 20 percent of Medicare discharges from hospitals are transfers to skilled nursing communities, Capasso says. The majority of those patients are intended for short-term stays.

Griffin adds that the readmission rates for those patients going to skilled-nursing facilities are higher than for patients who go home. That concerns hospitals, since returning patients will cost them reimbursement money from CMS.

However, it’s a referral source skilled care providers rely on. Medicare patients are vital to nursing homes’ survival.

“Medicare reimbursement and private-pay reimbursement are two of the ways skilled [care providers] are able to continue to operate, because they help offset the deficit that occurs through Medicaid,” said Capasso, explaining that Medicaid pays approximately 86 cents for every dollar in cost and nationally 60 percent of residents are covered by Medicaid.

But to secure those referrals, the hospitals and the physicians have to have confidence in the skilled care provider delivering good outcomes.

“We have been able to demonstrate to hospitals, patients, family members and physicians that nursing homes can provide quality care for patients with complex medical conditions,” Capasso said. “The goal is person-centered care—what is the best setting for the patient at the lowest cost with the highest quality, safety and outcomes.”

Facilitating Good Outcomes

MorseLife has enhanced the training of its nursing team and added respiratory therapists to help care for the more complex patients coming to its skilled nursing community. Additionally, it is installing new early-warning, decision-support software that will evaluate and track patient trends, so clinicians can achieve the best possible outcomes.

“We’ve developed new clinical skill sets and are caring for higher-acuity patients today, and it has made the organization even stronger,” Myers says.

Catholic Health East has increased the number of registered nurses in its communities and boosted training.

In addition to skilled RNs, Griffin suggests that some providers bring on nurse practitioners or physicians assistants who are available 24/7 to work through a crisis, rather than calling 911 and sending a resident to the hospital.

The Catholic Health East facilities use handoff tools developed through INTERACT II (Interventions to Reduce Acute Care Transfers), a quality improvement program supported by the Centers for Medicare and Medicaid Services.

“It’s a comprehensive change in the way services are being delivered,” Capasso says.

Catholic Health East communities are developing expertise in the care of patients transferred from hospitals with certain service lines, for instance hip replacements or congestive heart failure. Hospital nursing educators will come and train the nursing home nurses, so they are familiar with care of patients with those diagnoses and can continue their plans of care, says Kathleen Glendening, director of clinical services for Catholic Health East.

Sometimes, the Catholic Health East community will invite the hospital’s physician for that service line to join the home’s medical staff to help develop protocols and policies. That improves continuity of care.

“They become part of the program within that facility,” Glendening says. “Because he comes into the community and sees what is happening with the residents, he goes back to the hospital and talks about it with other physicians.”

Those physicians often will recommend the nursing home to patients, based on past good outcomes, which creates positive momentum, Capasso added.

Catholic Health East monitors processes, errors, gaps in care or other outlier cases, and an interdisciplinary team at the Catholic Health East facility comes together to discuss what happened and what can be done to prevent the same thing from happening again. At one community, when leadership learned that readmissions occurred on weekends, they brought the interdisciplinary team together on Fridays to discuss at-risk residents and develop an action plan.

“We have found that has dramatically reduced readmissions and emergency department visits,” Glendening said. “Catching things early is best for the resident. You are assessing well and preventing negative outcomes from happening to that person.”

Preparing for the Future

As part of the CMS grant, CJE is working with three hospitals—Northwestern Memorial Hospital, Saint Joseph Hospital and Saint Francis Hospital—to facilitate aftercare to minimize the need for patients’ rehospitalization. CJE identified hospitals with high levels of readmissions and approached them with a plan to solve that problem. It took more than a year to work out the details.

Nurses from CJE will coach patients in the hospital and facilitate transportation and services, then make home and telephonic visits to manage the case and ensure the patients are following post-discharge orders.

“It’s all about demonstrating we will help them be more efficient,” Weiner says. “It’s a challenging opportunity for us, but it was important for us as an elder-care provider organization to say to the hospitals that we understand your challenges. We think it’s an opportunity to work better together.”

The Affordable Care Act includes opportunities for more formal partnerships through accountable care organizations (ACOs), which will be responsible for a population of patients across the continuum and share in any savings.

Some LeadingAge members are preparing now for ACOs, including MorseLife, which has developed a business plan to become the provider of choice for post-acute care services for ACOs. The organization is putting together a sophisticated health information exchange that will allow it to communicate with outside providers and is developing preventive health education materials for viewing on computers, iPads and smartphones. More information is available from the LeadingAge CAST Report, Preparing for the Future: Developing Technology-Enabled Long-Term Services and Supports for a New Population of Older Adults.

“We will be able to contract with managed care organizations, even if [ACOs] are not formed,” Myers says. “What we’ve done is a better foundation for good clinical outcomes.”

CMS expects between 50 and 270 ACOs will be created in the next several years, Griffin says, and it anticipates saving close to $1 billion. In addition, other payers have branched into integrated delivery systems.

“It’s not just Medicare pushing pay-for-performance, value-based purchasing, shared-savings and shared-risk payment agreements, but also the insurers,” Griffin says. “As Medicare Advantage plans put the risk on the hospitals, they will put the risk on post-acute providers as well. And if they don’t, the hospitals will.”

Catholic Health East communities in western Massachusetts already are working with a Medicare Advantage provider, and physicians from that network visit the homes on a daily basis. Capasso anticipates such relationships will continue to grow.

Collaborating with providers at other levels of the health-care continuum is not novel, but it is rising to a new level, with formal partnerships and people looking out for each other’s best interests.

“It’s a population issue of how do we manage the health and health care of expenses of older adults with chronic care needs, the very individuals LeadingAge members have on their campuses,” Griffin says. “It’s more than looking at yourself as a partner to a hospital for post-acute services; it’s looking at yourself as a partner for a health system that is or is going to be an integrated clinical delivery system that has taken some of the risk based on patient outcomes.”