Bundled Payments

With the fiscal year 2017 inpatient prospective payment system and outpatient prospective payment system (OPPS) rules implemented Oct. 1 and Jan. 1, respectively, virtually all payers are steadily and quickly marching forward. And, since many payers model the Centers for Medicare and Medicaid Services (CMS) reimbursement program, understanding the changes is crucial. This column focuses on bundling, or packaging payments, under the new rules. CMS defines bundling as an allinclusive Medicare payment for common tests, procedures and drugs, rather than paying for the components separately. Bundling comes into play in several scenarios, and it has been a part of CMS’ payment strategy for several years.

Bundles range from simple ones involving packaging of payment, to very complex models crossing over many service lines and patient care locations. To be successful, bundled payment models depend on the hospital’s ability to create tight networks of post-acute care locations and doctors who provide quality care. Bundled shared-risk arrangements become high-risk propositions if care coordination, clinical protocols and information systems are not aligned across all providers and sites of care. In all cases, hospitals are responsible for paying for the bundles, with payments dependent on the data fed into claims, IT and analytics systems. Therefore, awareness of who is responsible for what and how bundled payments are divided/allocated to cost centers at facilities is essential. And, because bundled payments are based on cumulated claims data, telling patients’ stories completely and accurately with correct International StatisticalClassification of Diseases and Related Health Problems (ICD)-10, current procedural terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes is one of the most vital steps for preparing bundled payments.

CMS Mandatory Bundled Payment Programs: Defined Episodes of Care

Bundled payments for knee and hip replacements. On April 1, 2016, CMS changed the way it pays hospitals for knee and hip replacements “because they are the most commonly performed Medicare inpatient surgeries and are expected to continue to grow as the population ages.”¹ This mandatory program for 67 select geographic markets currently includes major replacement for lower joint and surgical hip/femur fracture treatment, with expansion to other conditions such as surgical hip and femur fracture episodes being evaluated. Under the program, Medicare either penalizes hospitals by requiring them to partly repay the government if patients get avoidable infections and/or have other complications. Or, it rewards them with extra payments that are determined based on a composite quality score if patients do well. In addition, surgeries are treated as one complete service instead of a collection of services, which means hospitals bear the risk and are held accountable for care while patients are in post-acute facilities and for up to 90 days after discharge.

Cardiac care bundles. CMS has proposed mandatory bundled payments for cardiac care beginning July 1. 2 The proposal, to be phased in over a five-year period in 98 randomly selected metropolitan areas across the country, would hold hospitals accountable for the cost and quality of care for acute myocardial infarction and coronary artery bypass graft episodes in patients both during their hospital stay and for the first 90 days after discharge. Similar to the joint replacement program, a composite quality score would determine savingseligibility and lowered discount rates.

It should be noted that there may be overlap in required hospital participation in both programs.

Observation Patients: Packaged Payment

The Notice of Observation Treatment and Implication for Care Eligibility Act (H.R. 876) requires hospitals to provide Medicare beneficiaries who receive more than 24 hours of outpatient observation services with easy-to-understand written notification and a related verbalexplanation at discharge or within 36 hours, whichever is sooner, that states why they arereceiving outpatient observation care and the potential financial implications. Unfortunately, this rarely happens, and most patients are shocked when they receive their medical bills. Medicare covers outpatient care expenses only if the inpatient stay is at least three consecutive days, not counting observation days. Therefore, those admitted for observation often must cover the cost if they need additional care at a skilled nursing facility.

In addition, the act creates a new observation comprehensive ambulatory payment classification (C-APC). Virtually all associated services (emergency room visit, labs, radiology, infusions and injections) are included in this proposed payment of $2,111 with a new status indicator, J2.³

CMS Policy Packaged Drugs, Biologicals and Radiopharmaceuticals

CMS has finalized its proposal to continue the C-APC payment methodology made effective in 2015 that makes a single, all-inclusive prospective payment based on the cost of all individually reported codes packaged into the C-APC. These codes may include those for the provision of the primary service and all adjunctive services that support the primary service. While CMS is continuing to pay for the codes reported, payment is not separate for each, but is instead bundled into the packaged payment for the C-APC.

From a pharmacy perspective, those that are packaged, regardless of cost, include diagnostic radiopharmaceuticals; contrast agents; stress agents; anesthesia drugs; drugs, biologicals and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies when used in a surgical procedure.

This year, CMS has proposed 25 new C-APCs within 12 clinical families be paid under the policy created by the Notice of Observation Treatment and Implication for Care Eligibility Act discussed above. These packaged payments will include ancillary services that are integral, supportive or adjunctive to, or dependent on, a primary service, with a proposed payment of $2,111 and the new status indicator, J2.³

CMS Packaged Drugs Based on Cost

Each year, the OPPS sets a threshold and packages some non-pass-through drugs based on cost into the APC or service payment covering the visit in which they were administered. The threshold for 2017 rose to $110 per day from $95 per day in 2016. This means CMS will not pay separately for drugs costing less than $110 per day, but will reimburse them in a packaged payment. While CMS will pay separate fees for the administration of these drugs even if they are not separately paid for, intravenous (IV) drug administration fees are not paid if no drug is billed. All drugs and biologicals must be ordered, documented as given and billed for even if they are not separately payable. This is crucial because claims ask for reimbursement and provide data. Missing drug data leads to an erroneous assumption none was given and to a misrepresentation of actual treatment and its cost.

Drug Administration Fees

Although the drug administration fee packaging category is one of thefirst defined by CMS, it remains one of the least understood. Services included in the CPT IV drug administration codes are use of local anesthesia; starting the IV; accessing the IV, catheter or port; routine tubing, syringe and supplies; preparation of drug; flushing at completion; and hydration fluid.

Several changes to the 42 HCPCS codes that describe drug administration services are proposed, ranging from negligible changes of less than 1 percent to a 95 percent increase for three codes (96360, 96373, 96374) and a 43 percent decrease for two codes (96401, 96411).

A Philosophical Shift

The philosophical shift in healthcare payment reform is moving away from fee-for-service to a variety of models, including bundled payments that pay for value. An underlying theme is collaboration between providers and service locations with open communication and sharing of information. As costs rise astronomically for both routine maintenance medications and new specialty drugs, including immunotherapy and biologic classes, the payer also rises to a new level of importance. As we enter 2017 and a new outpatient payment year, bundling is an issue all facilities must monitor.

Editor’s Note: The content of this column is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.