“Healthcare reform” has had the industry abuzz for several years, and many of the changes are having a significant impact on how healthcare is delivered in the United States. Through the use of long and complex legislation, there are many goals that healthcare reform seeks to achieve. Improving quality of care and reducing operational costs remain paramount. In cath labs across the country, numerous efforts, including gainsharing and other collaborative approaches, have proven successful in lowering costs. More broadly, across the cardiovascular service line, numerous quality metrics have been devised to reward physicians for their achievements in obtaining cost and quality goals. Several aspects of healthcare reform seek to expand these efforts, taking them beyond their present-day status to make greater strides in care delivery improvement.
Accountable care organizations and bundled payments
Perhaps the greatest means for reducing costs and improving quality is through the accountable care organization and bundled payments, respectively. An accountable care organization (ACO) is a healthcare organization characterized by a particular payment and care delivery model. An ACO ties provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. A group of coordinated healthcare providers form an ACO, which then provides care to a group of patients.
The effectiveness of these affiliations, in a large part, is dependent on the number and type of specialists who join the ACOs. The fundamental design of ACOs is based on primary physician care. However, the essential role that specialist involvement ultimately plays in determining the success of an ACO cannot be underestimated. Specialists, not primary care providers, are responsible for the majority of spending in medicine. In cardiology alone, the country spent $273 billion in total direct costs in 2010 and will spend an expected $818 billion in 2030.1 Accordingly, physicians specializing in cardiac-related services will no doubt play a key role in the ultimate success of ACOs.
Under a bundled payment methodology, organizations enter into payment arrangements that include financial and performance accountability for episodes of care. Providers choose from 48 episodes of care, including interventional cardiology, cardiac surgery, electrophysiology, and structural heart repair. The 48 conditions for bundling represent about 70% of spending on episodes of care.2 Of the 48 choices available, the organization determines which ones are achievable in terms of providing more cost-effective care across a continuum of services. Corazon believes that if an organization is diligent in better coordinating care, this arrangement will lead to higher quality care at a reduced cost. Tables 1-2 show episodes relating specifically to cardiovascular care. These bundles include care provided three days prior to admission through 30 days post discharge. Under a bundled payment methodology, there are four models for providers to choose from:
- Model 1: The episode of care is limited to services provided during an acute care inpatient hospitalization. Medicare will pay participants traditional fee-for-service payment rates, less a negotiated discount.
- Models 2 and 3: Includes the inpatient hospitalization, physician care, and post-discharge services. Medicare will pay participants their “expected” Medicare payments, less a negotiated discount.
- Model 4: Applies to all services during an acute care inpatient stay, along with all related readmissions within 30 days after discharge. Unlike Models 2 and 3, under Model 4, CMS will make a single, prospective payment at the target price to the acute care hospital upon a beneficiary’s hospitalization for the selected conditions.
Regardless of the model chosen, we advise hospitals to consider some key areas of focus at the outset of transitioning to a bundled payment environment, which will ultimately determine success within a new financial mode. First, and perhaps most crucial, participants must be able to identify, understand, and eliminate variations in care. Evaluating the level and source of variation on a cost-per-case basis will be helpful in understanding how and why such variances are taking place. Episode types with enough variation to provide opportunities for cost reduction should be selected, but not so much variation as to pose excessive risk to the organization.
The danger in choosing a type of episode with too many variations rests in the fact that these are more likely the type of episodes that are hard for the organization to manage. In the event the hospital and the physicians are unable to successfully work together to reduce the average cost of the episode, they would be at risk for those costs above the negotiated budget.
As a 2012 study has demonstrated, a readmission can more than double the “episode” cost.3 By not properly managing the patients post discharge, costly and preventable readmissions will lead to the hospital incurring a significantly higher cost to providing care to the patients. Therefore, evaluating not only length-of-stay but also cost and quality of the services being rendered is important as a means to optimize this model.
Understanding internal hospital costs and quality will provide the foundation for bundled payment success; however, Corazon experience proves that it is imperative for organizations to likewise understand the impact that physician practice patterns have in this type of arrangement. Reviewing variations among physicians will lead to better standardization of care, which will ultimately have the potential to improve quality and lower costs — the ultimate goal of any new payment structure. Specific areas to review for consistency in cost and quality include supplies, drugs and devices, length of stay, follow-up care, readmissions, and complication rates.2
Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care, with minimal coordination across providers and healthcare settings. In the traditional scenario, payment rewards the quantity of services offered by providers, rather than the quality of care furnished across the continuum for the patient. On the other hand, research has shown that bundling payments into episodes can align incentives for hospitals, physicians in the hospital setting, and post-acute care providers, allowing them to work closely together across all specialties and settings for optimal patient benefit.
While Medicare’s Bundled Payments for Care Improvement (BPCI) initiative is seeing participants bundling across a wide range of clinical conditions, the Medicare Acute Care Episode (ACE) project has already shown significant savings in cardiovascular services with this approach.4 But despite bundled payment success within cardiovascular services, some hospitals have encountered difficulties, which is to be expected with a new payment paradigm that causes such drastic change to traditional methodologies.
One of the main obstacles we have witnessed is the inability for hospitals to accurately project cost distributions, mostly due to inefficiencies in the data collection and reporting. These difficulties include delays in receiving data from CMS, lack of IT integration to combine administrative and billing data, and the inability to interpret episodic data in a meaningful manner.5 It has always been Corazon’s contention that cardiovascular services especially must have an accurate and useable data collecting and reporting system. With the additional data being required for measuring quality, cost, and the complexity of the data itself, it is imperative that proficient reporting systems are in place.
Bundled payments are based on MS-DRGs, which are based on physician documentation. Thus, accurate physician documentation is vital to ensure proper and appropriate payment for services rendered. As Dr. James Kennedy points out, “in percutaneous transluminal coronary angioplasties and coronary artery bypass grafts, this may be coronary atherosclerosis or an acute myocardial infarction (MI). The coders therefore may not report uncertain diagnoses (e.g., chest pain probably due to gastroesophageal reflux disease or syncope likely due to ventricular tachycardia) unless physicians document them at the time of discharge.”5 Likewise, since MS-DRGs have different relative weights for implementation of stents (drug-eluting vs. non-drug-eluting), the physician therefore must document specifically which one they used.4
A common problem is that physicians routinely under-document illness severity. Indeed, proper and thorough clinical documentation must be rigorously adhered to at all times. The intricacies of documentation cannot be ignored. In fact, Corazon often recommends that hospitals and cath labs in particular utilize certified coders specific to specialty services.
Following are some additional aspects pertaining to healthcare reform and their expected impact on cardiovascular programs across the country.
Under the value-based purchasing program, a percentage of a hospital’s Medicare payment is tied to the hospital’s performance, based on quality measures related to common and high-cost conditions. Initially, these incentives are based at least five conditions or procedures, including 1) acute myocardial infarction; 2) heart failure; 3) pneumonia; 4) surgeries; and 5) healthcare-associated infections. Cardiovascular services play a major role since they are among the highest volume and highest cost services performed at the hospital. Corazon advises that administrative, physician, and program leaders at all levels of an organization know the quality scores, particularly in heart and vascular. By doing so, the hospital can ensure maximized incentives by achieving the necessary quality measurements.
Hospital Readmission Reduction Program
Medicare began the Hospital Readmission Reduction Program in 2012 to encourage hospitals to implement strategies that will assist in reducing the number of costly and unnecessary hospital readmissions. There is no increased payment; rather the opportunity here is to avoid payment cuts by failing to adhere to the reduced readmissions. Initially this program included heart failure, heart attack, and pneumonia. In 2015, the program will expand to include acute myocardial infarction (AMI), coronary artery bypass graft (CABG), percutaneous transluminal coronary angioplasty (PTCA), and vascular issues.
Medicare began the program in 2012 to provide incentives for hospitals and established a payment system that reduces on a dollar value, based on percentage of preventable Medicare readmissions measures: heart attack, heart failure, and pneumonia.
As a result of this new policy, cath labs need to closely examine their operations to identify and eliminate the causes of readmissions post-procedure. One issue relates to whether physicians are performing staged procedures, where patients are brought back to the hospital multiple times to repair several lesions. For angioplasty patients, the concern is restenosis of the treated vessel within the 30-day period. Furthermore, many patients still leave the hospital without a prescription for a platelet inhibitor, which can lead to stent thrombosis — and an eventual readmission. It is imperative that hospitals continue to address these issues; financial viability of the cath lab (or of the entire cardiovascular service line) can be placed at risk for those centers whose readmission rates are not reduced.
Payment adjustment for Healthcare Acquired Conditions (HAC)
Medicare will impose a payment penalty of 1% if the hospital falls within the top 25% for hospital-acquired conditions determined by a risk-adjusted national average. Corazon recommends that hospitals take the necessary steps to properly train their staff, and once again, proper documentation is key. First and foremost, the staff must properly code all existing conditions upon admission, so that the hospital is not subsequently penalized for an unjust acquired condition. Also, it is very important to properly train staff to understand the ways to reduce additional complications, such as infections or complications associated with vascular catheterizations, for example.
Disproportionate Share (DSH)
Funding for the Medicaid Disproportionate Share Hospital program (DSH) is being reduced by $17.1 billion between 2014 and 2020. The decrease in available funding reflects the expected reduction in uncompensated care costs relative to an increase in insured patients. As of March 31, 2014, the White House announced that it had successfully achieved its initial goal of enrolling over 7 million people into the healthcare exchange program. Accordingly, as the number of insured increases, the Medicaid DSH will decrease.
As is evident, reforms occurring in healthcare are quite profound and are having a significant impact on how hospitals and physicians deliver care. This is already happening now, and the upheaval will continue to occur well into the future as hospitals, physician practices, insurers, and patients/consumers adjust to the new paradigm shift across the industry. Success in this new environment will only be achieved through an ongoing, organization-wide focus on quality and cost reduction. It is therefore Corazon’s belief that administrators must ensure that all the proper training and processes are in place at all levels in order to maximize reimbursements and avoid financial penalties.
- Peabody JW, Huang X. A role for specialists in resuscitating accountable care organizations. Harvard Business Review: HBR Blog Network. November 5, 2013. Available online at http://blogs.hbr.org/2013/11/specialists-can-help-resuscitate-accountable-care-organizations/. Accessed April 21, 2014.
- Issue brief: moving towards bundled payment, 2013. American Hospital Association. Available online at http://www.aha.org. Accessed April 21, 2014.
- Dobson A, DaVanzo J, Heath S, Shimer M, Berger G, Pick A, Reuter K, El-Gamil A, Manolov N. Medicare payment bundling: insights from claims data and policy implications: analyses of episode-based payment. Report submitted to American Hospital Association and Association of American Medical Colleges, 2012. Available online at http://www.aha.org/research/reports/12bundling.shtml. Accessed April 21, 2014.
- Kennedy JS. Cardiovascular bundled DRG payments: healthcare reform’s ACE in the hole. JustCoding News: Inpatient. 2010 May 26. Available online at http://www.hcpro.com/HIM-251504-3288/Cardiovascular-bundled-DRG-payments-Healthcare-reforms-ACE-in-the-hole.html. Accessed April 21, 2014.
- Mason C. Medicare acute care episode demonstration for orthopedic and cardiovascular surgery. Centers for Medicare & Medicaid Services. Available online at: http://www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/downloads/ACEFactSheet.pdf. Accessed April 21, 2014.
- The Advisory Board Company. 2013 Accountable Payment Survey. Available online at: http://www.advisory.com/Research/Financial-Leadership-Council/Resources/2013/Accountable-Payment-Survey. Accessed April 21, 2014.
- The Advisory Board Company. Bundled payments. Available online at: http://www.advisory.com/topics/strategy/market-trends/bundled-payments. Accessed April 21, 2014.