This document summarizes bundled payment models used by Medicare and Medicaid. It describes the history of bundled payments, CMS's BPCI Medicare models which include inpatient and post-acute care bundles, and TennCare's Medicaid model. The TennCare model aims to coordinate care through designated accountable providers and uses gain-sharing incentives to reward high quality, cost-efficient care. An evaluation found the TennCare model reduced costs for perinatal care, asthma, and joint replacements in its first year.

1. BUNDLED PAYMENT
Medicare model vs Medicaid model
Chad You
Senior Research Data Scientist
Axial Healthcare
April 11, 2017

2. AGENDA
• What is Bundled Payment
• Why
• How
• CMS Medicare Models
• TennCare Medicaid Model
• CMS model vs TennCare model

3. • Episode of care, Episode-based payment
BUNDLED PAYMENT

4. • 1991, bundled payment demonstration project for coronary artery
bypass graft (CABG) surgery
• 2009, Acute Care Episode (ACE) demonstration to test prospective
bundled payment for cardiac and orthopedic surgery – little
evidence of changes in quality
• 2010, ACA – to reduce healthcare spending, to improve the quality
of care
• 2013, Medicare Bundled Payment for Care Improvement (BPCI);
TennCare Medicaid Episodes of Care
• CMS goal – 90% of Medicare payments linked to quality or value by
2018
• 50% tied to alternative payment models (Accountable Care Organizations
(ACOs), bundled payment, and medical homes) by 2018
HISTORY

5. NATIONAL TREND
• Paying for value and paying for outcomes
• Commercial insurers used value-based payment
• 2013, 11%
• 2014, 40%

6. Fee-for-
service (FFS)
Global
Capitation
Insurance risk on Payers Insurance risk on Providers
Bundled Payment
INSURANCE RISK
Balance risk

7. • Providers receive payment after services delivered
• All providers involved in continue to be paid through
current mechanisms
• Principle Provider “quarterback” receives rewards or
penalties based on overall cost of episode
• < target price of the bundle – share the savings
• > target price – lose money
METHODOLOGY

8. CMS MODELS
• Bundled Payment for Care Improvement (BPCI) Models 1-4
• Model 1: Inpatient hospital services (24 Awardees)
• Model 2: Inpatient hospital, physician, and post-acute services,
including readmissions (61 Awardees, 110 hospitals)
• Model 3: Post-acute services, including readmissions (20 Awardees)
• Model 4: Inpatient hospital and physician services (13 Awardees)
• Retrospective, Model 1, 2, 3
• Prospective, Model 4

9. • Savings: in Model 2, spending differences between BPCI and
control group episodes in 2 out of 6 clinical categories
• for orthopedic surgery (mostly hip and knee replacements),
payments declined more
• for spinal surgery, spending increased more
• for other clinical categories in all BPCI models, no significant
differences
CMS MODELS
REPORT

10. • Quality: no differences on quality outcomes in most clinical
episode groups. When differences detected, varied results by
several factors
• clinical episode groups (e.g., orthopedic, cardiovascular, etc.)
• whether or not beneficiaries had a surgical procedure
• whether or not beneficiaries received post-acute care
• Provider Participation: 2 of the 4 models grew steadily, other 2
models experienced multiple withdrawals
CMS MODELS
REPORT

11. TENNCARE MODEL
• Principles:
• Goal: Coordinated care
• Accountability: QB is designated as accountable
• Incentives: high quality and cost-efficient care is rewarded
• 70+ episodes by 2020
• Wave 1 episodes
• design period, 2013
• preview period, 2014
• performance period, 2015

12. TENNCARE MODEL
Source: http://www.tn.gov/assets/entities/hcfa/attachments/EpisodesOfCareSequence.pdf

13. TENNCARE MODEL
Source: http://www.tn.gov/hcfa/topic/episodes-of-care

14. TENNCARE MODEL
Source: TennCare_Payment_Reform_Initiative.pdf

15. TENNCARE MODEL
Source: TennCare_Payment_Reform_Initiative.pdf

16. TENNCARE MODEL
• Context for clinical exclusions and risk adjustment
• Targeted inclusion of spend in the episode
• Exclusion of episodes for business reasons
• Exclusion of episodes of certain patients
• Exclusion or winterizing of episodes with very high episode spend
• Quality metrics
• based on clinical input and practice guidelines
• some quality metrics will be linked to gain sharing
• others for information only

17. Average cost
per episode for
each provider
Cost per
episode
Example provider’s individual episode costs
Risk-adjusted average episode cost
for the example provider
Example provider’s average
episode cost
Average
Risk-adjusted costs for one type of episode in a
year for a single example provider
Low
cost
High
cost
Annual performance across all providers
Individual providers, from highest to lowest average cost
Gain sharing limit
Commendable
If average cost lower than commendable and quality benchmarks met, share
cost savings below commendable line
If average cost higher than acceptable, share excess
costs above acceptable line
If average cost lower than gain sharing limit, share
cost savings but only above gain sharing limit
If average cost between commendable and
acceptable, no change
This example provider would see
no change.
Acceptable
TENNCARE MODEL
Source: TennCare_Payment_Reform_Initiative.pdf

18. TENNCARE MODEL
REPORT
• Cost Reduction in first year
• $6.3 million
• 3.4% in Perinatal care
• 8.8% in Asthma exacerbation
• 6.7% in Hip and knee replacement
Source: https://www.tn.gov/tenncare/news/45975

19. BPCI Model 2
vs
TennCare Model

20. • Elevation Search Solutions
• Vanderbilt Heart & Vascular Institute
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