The Centers for Medicare and Medicaid Services’ (CMS) responses to applications for the Bundled Payment Care Improvement (BPCI) demonstration program have raised more questions than they answered. While we understand the government’s need to reign in the myriad bundle definitions, the degree to which CMS has gone from “define your own” to non-negotiable specifics raises some significant concerns. CMS has:
- defined its own episode bundles and exclusions;
- created required bundle families;
- calculated regional average prices; and
- established an outlier methodology.
There is still time to provide feedback to CMS as it continues to develop the methodologies that will apply under the BPCI program. CMS is accepting questions and comments via email, and we suggest facilities review the information they receive and understand its implications. Many awardees have been granted interviews with CMS and they have until November 28 to notify CMS of their continued interest in participating in the program. CMS expects that the Excel workbooks it provided with its own bundle calculations will provide the necessary information for awardees to make these decisions, and that checking the calculations is unnecessary. Our best advice: proceed with caution and do your due diligence.
Episode Bundle Definitions and Prices:
Most hospitals expended considerable resources analyzing claims-level data to identify care patterns, calculate prices, and determine whether they could achieve savings under a discounted price. CMS has recalculated all episode prices using its own set of standard exclusions and outlier limits that are based on regional averages. Eventually, CMS will need to trend those prices forward to the program year. Awardees need to review these calculations for the following:
- Can you match the CMS number?
- We have confirmed that CMS used the entire United States to identify episodes and calculate prices for candidate awardees; and
- CMS is not currently using all of their stated methodologies in the calculations.
- Is there still opportunity to achieve savings after all of the exclusions have been applied?
- Are there additional exclusions that should be applied, such as cancer Diagnosis Related Groups (DRGs)? CMS has since issued new episode group definitions with some additional exclusions.
- What factors will CMS use to trend the data forward? Are they appropriate and complete?
- How does the application of outliers affect the price and the opportunity to create savings?
Does the inclusion of additional DRGs for a particular family create too much risk to manage?
Regional Average Prices:
The inclusion of low-volume DRGs in the required families of episodes creates the problem of establishing bundled payment targets based on limited (or non-existent) historical data. CMS proposes to solve this problem with the introduction of a blended pricing methodology, using regional average costs, or multi-years’ data, or both, combined with hospital-specific costs to increase the accuracy of the episode pricing targets.
The regional average prices are an interesting twist in the process. CMS had explicitly warned applicants not to look at any data for hospitals other than themselves. Now that data will be used to set outlier thresholds and “normalize” prices for those DRGs with significant variability. If CMS chooses to use multiple years of data, how relevant are those older data to current practice patterns and how will blended prices be calculated? CMS has not made those determinations yet, but they are proposing use of the Empirical Bayes statistical method. Applicant awardees need to consider:
- Can the regional averages be replicated/audited?
- Will the industry have access to additional years’ data if CMS chooses this approach?
- What is the range of potential prices for an episode, from lowest to highest, given different blend percentages?
- How will the regional averages be adjusted for different wage indexes? Will your hospital start out at a disadvantage because of this calculation?
- How does your hospital-specific price compare to the regional average? Will you start out at a disadvantage because your facility’s price is higher than others in your region?
The DataGen/Singletrack Team Approach:
According to CMS, the bundling and pricing methodologies are still preliminary and subject to change. With the proper analytic support, you can help CMS craft a BPCI demonstration program that makes sense and works. To be an active participant in the process, you need to understand it. Let our team provide the information you need to confidently evaluate and make a solid business decision.