The Centers for Medicare & Medicaid Services (CMS) recently announced a new, voluntary bundled payment program, designed to curb Medicare costs for 32 different medical episodes by paying providers a single payment per episode. The new program puts hospitals and physicians in the driver’s seat, enabling them to select or convene care delivery partners and distribute financial benefits earned as a result of reducing the costs to Medicare. The new model, Bundled Payments for Care Improvement Advanced (BPCI Advanced), will replace existing voluntary BPCI models, including BCPI 3, which put skilled nursing providers in charge of care episodes. BPCI Advanced includes several incentives for participation among hospitals and physician groups, but not without drawbacks. If BPCI Advanced gains traction, skilled nursing providers may have to adapt to benefit from the model or risk being left out.

Much like prior BCPI iterations, BPCI Advanced aims to lower Medicare spending for 32 specific conditions, three of which are outpatient procedures. Many of these covered episodes were included in the now-defunct mandatory bundled payment models scrapped last year before they were ever initiated. In BPCI Advanced, hospitals and physician groups may apply to CMS to participate for their desired care episodes. Those entities will then be responsible for coordinating all related care delivery, including post-acute care. The entities will take on both upside and downside financial risk in this model. Participants will also be subject to certain quality of care standards.

Post-acute providers take a backseat

With the introduction of BCPI Advanced comes the termination of the previous BPCI models. Post-acute care providers were eligible to participate as partners with hospitals under BCPI 2, and were given the reigns to control costs and reap maximum benefits under BPCI 3. Participating skilled nursing providers in BPCI 3 may be disappointed to be taken out of the driver’s seat, since many providers adapted systems and made investments in staff and capabilities to maximize the benefits under the voluntary model. CMS has not given any indication that a post-acute driven model should be expected in the future. Former BPCI 3 participants may have enjoyed controlling their own destiny as it related to episodic care, but will now only be eligible to participate as a downstream provider, and only if an existing or potential partner opts into the model.

BPCI offers incentives for participation…

BPCI Advanced offers a number of enticing incentives for hospitals and physician groups to participate. First, these convening entities will be eligible for up to a 20 percent bonus if they keep the cost of care under the target price. That sizeable bonus also comes with downside risk, also capped at 20 percent. Because this model includes both upside and downside risk, participants will be considered to be following the Advanced Alternative Payment Model under MACRA. Those providers will then be exempt from providing quality reporting metrics and eligible for additional bonuses foregone under the traditional Medicare fee-for-service model. Physician groups are newer to the bundled payment space, though they are experienced in Advanced Alternative Payment Models under MACRA.

… But not without drawbacks

The assumption of risk is certainly one potential reason for hesitation for providers. But others exist.  Notably, participants will choose the episodes for which they wish to be included under BPCI Advanced and will be locked into that decision for two years. This rule may steer conveners away from experimenting with episodes, thereby limiting participation. Furthermore, convening hospitals and physician groups are still subject to quality standards, meaning they will have to collect and report data. Readmission rates will count against the convener two-fold, both as a quality measure that could impact bonus payments and by requiring the convener to absorb associated costs. Potential conveners have a short window in which they can chose to participate; applications are due in March 2018.

Skilled nursing under pressure

On the one hand, the introduction of this new bundled payment program will open doors for skilled nursing providers to develop new partnerships. On the other hand, those partnerships may be defined by pressure on providers to keep lengths of stay to a minimum while maintaining quality standards set by the convening partner. Furthermore, as hospitals and physician groups join BPCI Advanced, overall admissions to skilled nursing could decline as these entities may want to limit post-acute care spending to reap the maximum benefit from CMS. Convening entities may look to home health agencies in place of skilled nursing altogether, and when possible, may even opt out of any post-acute care services.

Skilled nursing providers that can offer partners low cost, high quality care that avoids rehospitalization may be in the best position to participate in bundled payment arrangements. Some opportunities may exist for skilled nursing operators to gain upstream traction by partnering with home health and coordinating post-acute care. Those providers with previous BPCI experience may have the greatest advantage in joining BPCI Advanced arrangements, while those providers who are new to the game may require initial investments in equipment, data collection, and staff. Likewise, providers already demonstrating good outcomes and low readmission rates for specific conditions may be valuable to partners aiming to participate in BPCI Advanced for the same conditions.

As with other bundles and alternative payment models, there is a fine line to walk between lowering costs and improving quality. This holds true for BPCI Advanced; the best skilled nursing providers that can achieve good outcomes at low cost will be valuable partners for participating conveners.