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Money management: hospital penalties may increase

October 18, 2016
From the October 2016 issue of HealthCare Business News magazine
In April of this year, the Centers for Medicare and Medicaid Services (CMS) officially launched mandatory participation for approximately 800 hospitals under Medicare’s Comprehensive Care for Joint Replacement (CJR) reimbursement model.

This represents the first time that CMS has declared any form of bundling mandatory, demonstrating Medicare’s commitment to shifting the industry toward an increasingly value-based reimbursement model and holding providers responsible for both quality of outcomes and cost of care along the entire care continuum.

Enforcement of the mandate is double-sided — providing for both rewards and consequences tied to successful implementation. Providers who can utilize Alternative Payment Models (APMs) stand to be rewarded, with the Medicare Access and CHIP Reauthorization Act (MACRA) providing a 5 percent annual bonus payment to physicians participating in APMs.

In contrast, hospitals that do not successfully adopt the CJR model are at risk for serious financial penalties that increase over time. Ultimately, the progression toward mandatory bundled payments for specific populations represents the next wave of a payment reform program that continues to shift the burden of financial risk and responsibility onto the backs of providers and patients.

The path of risk migration
While a handful of national providers like Kaiser and Geisinger have been established players in the risk management game for a long time, the majority of providers have been scrambling over the past few years to assemble the strategies, infrastructure, analytics capabilities, culture and operating effectiveness required to successfully navigate their steadily increasing risk. The list of changes that have shifted risk toward providers since 2010 is long, and while the annual growth rate of health care costs in the U.S. did see a temporary decline, costs are still rising, and the 5.3 percent increase in the rate of spending in 2014 was almost double that of 2013.

Consider the following:
Insurance exchanges: payers are losing billions of dollars.
The federal government is subsidizing payer losses, but that may come to an end.
The increasing copays and deductibles are often not able to be met by patients.

For accountable care organizations:
Shared savings pools are derived from decreasing up-front reimbursement.
In 2015, only 31 percent of ACOs generated savings above their minimum savings rate. Like the other recent changes that came before it, the health care industry will doubtless spend many millions of dollars trying to figure out how to manage and scale bundled payment models, with no guarantee that the model will improve outcomes or lower costs to providers and patients.

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