Cardiac bundled payments could yield big winners and losers, Avalere study finds

Eighty-five percent of hospitals required to participate in the new Medicare cardiac bundled payment models will not experience gains or losses that exceed $500,000 per year, based on their current spending patterns, according to a new study by Avalere.

In July, the Centers for Medicare and Medicaid Services mandated a new cardiac bundled payment program that will qualify for the advanced payment model for the Medicare Access and CHIP Reauthorization Act.

The fixed bundled payments pertain to patients admitted to hospitals with a heart attack or cardiac bypass surgery, from the time of initial hospital stay to 90 days after discharge.

Participation is mandatory for the 98 metro-area hospitals CMS will select at random.

The bundled payments will be based on historical spending levels on a hospital-by-hospital basis, but in time will transition to average regional spending levels, the Avalere study said.

While hospitals are distributed relatively evenly between potential winners and losers under the proposed program, some institutions could face significant penalties because their spending far exceeds the average spending for their region, the study said.

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The higher spending could be attributed to these hospitals treating sicker patients.

Bundles will be paid for three types of cardiac care, including: coronary artery bypass surgery; heart attack patients who are medically managed, meaning they are treated with drugs and other non-interventional therapies; and heart attack patients receiving percutaneous coronary intervention, including stents, angioplasty, or other interventions.

Avalere's analysis finds significant differences in the distribution of spending across the 90-day episode between patients who undergo a surgical intervention and those who do not. Sixty to 70 percent of spending for CABG and PCI episodes are incurred during the initial hospital stay.

In contrast, only 35 percent of spending for heart attack patients who are managed with drugs are related to the inpatient stay.

Avalere's analysis indicates that 47 percent of spending on these medically managed heart attack patients is linked to post-discharge care, including post-acute services and readmissions to acute care settings.

The new cardiac bundled payments are set to be phased in starting July 1, 2017.

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"Given the array of new cardiac bundles, there is no magic bullet to achieving savings. Instead, participating hospitals will need to pull multiple levers to drive down costs," said Fred Bentley, vice president at Avalere.

To support the alignment of incentives on cost and quality, CMS provided hospitals with greater flexibility to create gainsharing agreements with physicians and other provider organizations. The arrangements allow providers to share in the bonus payments that hospitals receive - as well as the penalties.

Recognizing the downward pressure this will put on prices, according to Avalere, many medical device manufacturers are reorienting their business around providing comprehensive solutions to support more efficient, coordinated care. While hospitals are still intent on driving down device costs, they may be open to additional support that device suppliers can provide.

"Medical device manufacturers and life sciences companies are rethinking supply chain and hospital contracting to focus on paying for value over an episode of care," said Mary Ann Clark, vice president at Avalere.

CMS is currently accepting comments through Oct. 3.

Twitter: @SusanJMorse