Medicare Bundled Payments – The Story of ObamaCare

According to my dictionary, a mandate is defined as – To authorize or decree – as by an enactment of a law. Synonyms – command, fiat, decree, injunction, edict, ruling, regulation. Americans, who are currently deeply distrustful of government, with 61% saying the country is headed in the wrong direction, may not welcome further health care mandates.

When the story of ObamaCare is written, its success or failure will depend on the acceptance or workability of its mandates.
With ObamaCare, multiple mandates exist – individual mandates, employer mandates, religious mandates, now Medicare bundles payment mandates (Robert Mechanic, MBA, “Mandatory Medicare Bundled Payment Mandates – Is It Ready For Prime Time, “New England Journal of Medicine, October 1, 2015).

On January 1, 2016, CMS proposes to implement a 5-year program in 75 metropolitan areas for 750 hospitals. The program would cover bundled payments for total hip and knee replacements, covering hospitalization, professional fees, and all clinically related Part A and Part B services for 90 days after discharge, including skilled nursing care, home care, and hospital readmissions.

The rationale is clear: bundled paymen create financial incentives for providers to coordinate care over the full continuum of services and end spending that doesn’t benefit patients. But bundled payment is hard to administrate and costs money.

Comprehensive Care for Joint Replacement (CCJR) will be retrospective. It will continue to pay fee-for-service . At the end of each year CMS will reconcile pay with spending targets. If below target, providers will be rewarded with savings. If not, hospitals will pay the different between targets and excess costs. The formula for reimbursement is complicated, and hospitals stand to lose or gain a lot of money, and stop-loss limits are set.

In 2013, more than 4000,000 Medicare patients received hip-knee replacements at a cost of $7 billion for hospital stays alone. Initial hospitalization accounts for 55% of total episode costs. Medicare spends an additional $6 billion for the 90-day post-acute phase period. Altogether, Medicare spends $26,000 on average per joint replacement with average costs of $16,500 to $33,000.

Will bundled pay for hip-knee replacement work? It might. Joint-replacements are elective, relatively standardized, with low spending variations. But hip and knee replacements may not be a model for hospital episodes for procedures with greater clinical variation and lower patient volumes.

Standardizing pay for joint replacements could turn into a bureaucratic nightmare for government, hospitals, physicians, and nursing home, home care, and hospital re-admissions. On the whole, for hundreds of hospital procedures, bundled Medicare payments wil not ready in 2016 for prime time and Medicare’s proposal of shifting 30% of its payments to alternative payment models rather than fee-fee-service by 2018 is unlikely to be met.
It is uncertain whether the full gamut of ObamaCare mandates will survive the 2016 presidential and Congressional elections, which may depend on how middle class voters respond to sharp spikes in premiums and deductibles starting in 2016. American taxpayers voters may not look kindly upon more mandates that are confusing and difficult to implement. In the end, of course, you have to pay the Piper, but providers may be reluctant to pay the Piper, and the Piper may change and even change his clothes and his mandates.