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SCA Economics and Governmental Affairs Committee Update

The Medicare Episode Payment Models Initiative

The 2017–18 agenda for SCA’s Economics and Governmental Affairs Committee was outlined in the June issue of the SCA Bulletin. This month we will present a focused assessment of one of the subjects referred to briefly in that agenda: the Medicare Episode Payment Models (EPM) initiative.

The EPM initiative is the latest in a series of programs sponsored by the Center for Medicare & Medicaid Innovation. The center was established by Congress in 2010 for the purpose of testing innovative payment and service delivery models. By statute, the Secretary of Health and Human Services is granted broad authority under this program to implement new compensation models that either reduce spending without reducing quality of care or improve quality of care without increasing spending. The EPM initiative is perhaps the most ambitious trial to date from the center, and the concepts embodied by this program may hold significant implications for how hospital-based specialists will practice in the future.

The initiative will be implemented in more than 1100 hospitals in 98 metropolitan regions around the country beginning on January 1, 2018. The trial involves the retrospective bundling of payments for 3 groups of inpatient admission: coronary artery bypass graft (CABG), acute myocardial infarction (AMI), and hip fracture. For affected institutions, all Medicare Part A and Part B costs from the date of admission through 90 days postdischarge will be included in the bundling. The major expenditures are anticipated to be acute inpatient hospital charges, physician reimbursements, and post–acute care (rehabilitation) services. The average total cost of care for each admitting diagnosis will be calculated for individual institutions and compared to a benchmark. The benchmark will initially be weighted toward an institution’s historical performance but will shift over 3 years to the regional average for all participating institutions. An average total cost of care below the benchmark will result in a windfall for the hospital; an average total cost of care above the benchmark will result in financial penalties to the hospital.

Note that under this model each hospital will be held accountable for the total longitudinal cost of care for those patients admitted with one of the specified diagnoses. This holds true regardless of the formal contractual relationship between the hospital and any of the other entities contributing to the total cost of care—physicians, rehabilitation facilities, etc. Under the EPM, safe harbors are created that allow hospitals to arrange both gain-sharing with, and recoupment of losses from, independent entities. Although independent facilities and physicians are not required to enter formal risk-sharing financial arrangements with participating hospitals, the geographic concentration of the initiative’s affected institutions will provide a distinct competitive advantage to those who are willing to do so.

Also note the administrative elegance of the program from the perspective of the Centers for Medicare & Medicaid Services. Because of the retrospective nature of the bundling, the traditional fee-for-service system of reimbursements remains in place. There is no requirement for patients to be identified as participating in the initiative immediately at the time of the index admission. The established system of care and reimbursement to each provider can continue unperturbed in every one of the affected regions. The burden is exclusively on the participating hospital to prospectively identify and manage cost vs benefit along the entire care pathway for each of these patients.

Capitalizing on the potential gains and avoiding the penalties associated with this initiative will require hospitals to engineer far more cohesive process management structures than typically have been employed. Physicians with intimate knowledge of bedside care and institutional workflows will need to be brought to the table and empowered to make changes. Their charge will be to identify common high-cost, low-value practices as well as those high-value, low-cost interventions being underutilized. They will be required to take a leading role in instituting changes that reduce the former and promote the latter. They will need to be provided with the tools to monitor the system-wide effects of actions taken and to steer their teams toward higher performance.

An important aspect of this model is the need for mass customization. Although there likely will be commonalities and consistent themes to the most effective changes each hospital can introduce to its systems of care, the precise combination of solutions and the methodologies used to incorporate them will be specific to each local circumstance. The most efficient route to success likely will not come from blind implementation of set pathways or algorithms fashioned by distant authorities. The cultural peculiarities, the existing resources, and the current practices existent in each hospital environment will require careful consideration, and changes will need to be prioritized accordingly and modified expertly by local physician leadership.

For hospital-based specialists, especially those with a proclivity for logistics and team-based performance, this may serve as a golden opportunity to enhance their value proposition. Early leadership and demonstrated efficacy in managing the evolving systems of care will not only serve to expand the domain of recognized expertise for these physicians, but will increase their influence within their healthcare systems as reimbursement models evolve. Although the EPM initiative is the single most ambitious experiment with bundled payments for hospital-based care so far, there is significant and growing interest amongst all payers to move toward similar models and away from fee-for-service reimbursement.

Both the Merit-Based Incentive Payment System (MIPS) program (described in the June SCA Bulletin) and EPM initiative provide either penalties or windfall profits based on some combination of total cost of care and quality of outcomes. An effective response to these new reimbursement systems will require anesthesiologists to develop a thorough understanding of their underlying principals, an enhanced emphasis on system management and continuous performance improvement, and active engagement across disciplines and with institutional leadership teams. Maintaining attention mainly on the volume of services provided will result in gradually, but inexorably, dwindling revenue streams. Present-day efforts to develop expertise in improving the quality of care and eliminating ineffective care will deliver disproportionate financial rewards in the future.

One of the objectives of the Economics and Governmental Affairs Committee for the coming year is to serve as a coordinating resource for those who are beginning to grapple with the challenges associated with bundled payments. Throughout the coming months, in cooperation with the Committees for Quality and Safety Leadership and Clinical Practice Improvement, the Committee will work to begin gathering the evolving wisdom of SCA’s membership and to share both real-world successes and failures. The hope is that such crowdsourcing of collective experiences will accelerate the learning process and provide the tools for cardiovascular anesthesiologists to continue to play a leadership role in the evolution of hospital-based systems of medical care.

SCA Salary Survey Data

Cases Using Tee graph Who Provides Intraopertive TEE

Data are reported as the percentage of SCA members providing each categorical response for the survey years 2010 through 2016.

Gordon Morewood, MD MBA FASE
Chair, Economics and Governmental Affairs Committee

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