Bundled Payment Success: Expert Advice from the Ex-Head of Medicare

With over 800+ hospitals across the US mandated to implement CJR bundled payments this year, hospital administrators are being forced into unfamiliar territory. Rallying to align the interest of hospital physicians, out-of-house providers and patients to deliver unified healthcare will seem overwhelming at best and impossible at worst.

To better understand the state of the union and address some commonly heard questions by hospital c-suite teams, we spoke to former acting administrator of the Center for Medicare and Medicaid (CMS), Charlene Frizzera. Before taking over the top spot at CMS, Charlene was COO, having worked for the federal health care system for more than 30 years. This unmatched experience makes her one of the most knowledgeable people about Medicare on the planet.

Currently, Charlene is President of CF Health Advisors, advising corporate, government and non-for profit organizations about health care policies and reform like bundled payments and CJR. Read on to learn what Frizzera had to say about succeeding in bundled payments, avoiding common pitfalls, and where the future of CJR is headed.

Below is an interview with former acting administrator of CMS and bundled payments expert, Charlene Frizzera.

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Q: What impact do you think the CJR bundle will have on hospitals across the US?

CF: It’s obviously going to have a significant impact—it already has. If you look at the way CMS designed these bundles, they started out with a couple of specific bundles (like lower extremity) which they considered the low-risk procedures for beneficiaries that included a lot of post-acute care that could be improved. Procedures paid under a bundled payment started small, but as you’ve seen over time CMS added more procedures to the bundle, they’ve made it mandatory in certain MSA’s, and issued a proposed regulation with even more changes.

The impact of CJR bundle is growing as CMS gathers data about the effectiveness of the bundle—there has been a lot of data about how effective the bundle has been.

CMS is confident that the bundle is saving money and improving the quality of care. Hospitals that perform joint replacement procedures and used to depend on a patient requiring a hospital stay, will need to re-evaluate the length of stay paid for in the bundled payment. In addition, the impact on hospitals to manage the post-acute care services provides hospitals the opportunity to ensure that a shorter hospital stay will not decrease quality of services provided.

Q: What are the common characteristics of hospitals that will succeed with bundled payments?

CF: You know, it’s interesting, bundled payment models that are successful with CJR really stem from the culture of the organization. Your really need a leader and physicians in the organization that believe this new payment model is here to stay and are committed to make whatever changes are necessary to make it work. It requires significant changes on the part of the providers like how and what services are provided, how they interact with patients and so on. It really does takes a strong leader to make this happen.

Hospitals that already have team integration in their delivery and payment incentives have shown this works in improving quality and decreasing cost. Geisinger Medical Center has been able to make the necessary changes to deliver health care in the new payment models effectively. They have a lot of experience in practicing health care as a team and they are a progressive provider always looking for new ways to do business. We’ve really found that culture has to embrace the change, not just the leaders, but the providers.

The second thing I’ll say, is the hospitals have to develop relationships with pre and post-acute care providers in order to really make this work. It takes a bold hospital leadership team to not feel threatened and to embrace the value of pre and post-acute. If hospitals are not working on developing relationships now, they’re going to have to do so in the future as combining the payments to include more than the hospital setting becomes more prevalent.

It’s not easy to get providers to change behaviors and it’s not easy to convince a whole hospital team to do business differently. Those that are successful have been doing this quite a while, they didn’t just start yesterday. They saw this coming and were ready for some changes in the payment system.

Q: How does CJR affect physicians and episode care teams?

CF: What I find interesting is if you look at CMS rules, it doesn't really talk specifically about providers or individual physicians-it addresses settings ( hospitals, skilled nursing factilities, home health agencies, etc.). However, in this continuum of care, the patient has to stay healthy for some period of time to avoid penalties. Physicians are integral to ensuring patients stay healthier and require less hospital visits and are the key to managing transitions of care among various settings.

As we see CMS moving more to health outcome measures that include pre-hospital, hospital and post-hospital, the physicians will have to be a part of that, and ultimately they will be a part of the risk and savings that come out of these bundles. You can clearly see in the Medicare Access and Children’s Reconciliation Act (MACRA) legislation that CMS will be paying physicians differently. In addition to the Merit Incentive Based Payment, which ties reimbursement to quality measures, there is an option to get paid under an Alternative Payment Model (APM). Participation in an APM gives physicians the ability to receive an additional 5% incentive bonus payment. CJR Bundles are one of the APMs specified by CMS to qualify for the 5% bonus.

CMS is moving towards everyone who takes care of a patient being apart of the bundled payment space—those within in the institution and outside of it.

Q: Do you see that the most successful hospitals are those that bring doctors into CJR planning and strategy development?

CF: Yes. Kaiser is a great example. They have been effectively paying physicians and surgeons on a negotiated payment which has required them to provide incentives for the overall health cost of patients to decrease. They also have an ACO that pays based on shared savings to providers. They have long been an example of a health care system that embraces change. Those that have already embraced that changes in payment are necessary, have shown over time (even before bundled payments), that their care delivery needs to evolve to provide the right incentives for behaviors to change.

I haven’t spoken to any groups lately who believe they don’t have to change. Most providers know that they are going to have to make some changes, they’re just not sure what they are or how to do them.

Q: Where do you see the future of bundled payments heading? (After the 5 year timeline has ended).

CF: As you’re seeing, CMS is building on the information they learn from the bundled payments to design payments that incorporate more settings and services. They’ve already put in the advanced payment models in the MACRA payment system. In the Accountable Care Organizations, Skilled Nursing Facilities have been included to be a part of an ACO. I think ACOs will eventually include all care, whether in the institution or home. These bundled payments will all be a part of a bigger payment system that focuses on healthcare outcomes and on paying providers for this continuum of care—not just for a particular event.

Q: What is the biggest lever hospitals have to reduce episode costs?

CF: The biggest lever they have is to get patients to be as healthy as they can when they enter the hospital so that they have to spend less time in a hospital and recover more quickly. Patients entering a hospital with fewer conditions will have a decreased length of stay which reduces the risk of the patient getting a hospital acquired infection and/or be readmittted—both of which have payment penalties. In addition, fewer conditions will increase the ability of the patient to recover more quickly and require less post-acute care services.

Patients with chronic conditions also benefit from better pre-acute care services. Providing a care plan that addresses all of the chronic conditions and focuses on the root cause of these conditions is important. A well thought out care plan that incorporates strategies for dealing with chronic conditions progressively—both in the hospital and in other settings—provides the opportunity for hospital admissions to be targeted and effective. Keeping these patients out of the hospital or limiting their inpatient stay provides the same reduction in risk for hospital acquired infections and readmission.

Q: Are there any “hacks” or best practices for winning at CJR bundled payments?

CF: There are definitely organizations that are trying to figure out how to make this bundle work before the patient gets into a hospital. The idea of getting a patient as healthy as they can before going in for surgery is a critical part of making this work better.

The best practice that I’ve seen is the physician spending more time educating patients about the procedure and advising the patient on how to improve the chances of a successful surgery. Many patients are responding very positively and agreeing to making changes necessary to improve their health. No one wants to have a surgery that won’t be successful. The success is in: 1) getting patients healthier and ready for surgery and 2) once you do that, to keep patients engaged in their post-acute care in order to stay healthier longer.

Q: What advice would you give hospital administrators strategizing over how to make CJR profitable?

CF: It's important to make sure patients and providers get engaged in the process and understanding what CJR is, how it works, and what the goal is, so that everyone can contribute whatever they need to in order to make surgery successful.

Hospital administrators need to pay attention and really watch what CMS is doing with the bundles as they incorporate more procedures and settings. A good strategy is keeping your eye on the ball and keeping up to date on what these changes are. They aren’t going away. CMS is going to continue to put more payment and quality incentives into the delivery system to ensure patients receive better quality of care care at a lower cost.

Lastly, the changes that will occur over the next few years in the post-acute care delivery and payment system will be significant. From the implementation of quality measures to site neutral payments, all providers of post-acute care will have to change their delivery model. Engaging the right partners for the pre and post-acute care services that drive these changes will make a difference.

Q: Do you believe bundled payments will cause cases to shift to bigger hospitals in certain regions?

CF: The advantage that local regional hospitals have is their close relationships to the community and post-acute care providers in the area. In the quest to provide a seamless transition of care for patients that move from setting to setting, the relationship of all providers in the region is important. The more incentives all providers have to provide better value and share in savings, the better the partnership.

One of the challenges in effective health care delivery has been the social needs of patients. CMS has issued proposals to test the efficiency of incorporating reimbursement for social services into the payment system. Regional hospitals that have strong ties to community services will be better equipped to incorporate these services in a plan of care.

Q: What will happen to small to mid-size hospitals under bundled payments?

CF: In the proposed CMS regulations, payments are being changed from patient-specific payments to regional payments. This change has been proposed to reduce the geographic variation in payments for the same services. Under traditional fee-for-service payments, providers were paid what they spent. This caused wide variations across the country in reimbursement, which was attributable to more spending, not better care. The proposal is to move from the current patient-specific payment to a regional payment in 2020. For regional hospitals that have the highest costs, this could provide a considerable decrease in reimbursement. This may seem easy to change—"just spend less"—but it isn’t that easy.

Providers need to change the way that they practice to be more efficient and patients need to understand that some of the services they were receiving will no longer be provided. The key is in engaging providers and patients to provide a more efficient and effective plan of care. Encouraging patients to be healthier before they enter the hospital and providing well coordinated post-acute care is an important part of the plan.

Some people are concerned that the overall changes in healthcare may prevent smaller providers from existing—whether it be smaller home health agencies, physician practices or skilled nursing facilities. There is agreement that a health care system that requires more team coordination (where the hospitals receives and distributes the payment to providers) will take time to fully implement. However, the benefits for smaller hospitals is there.

Q: Anything else you want to add about bundled payments?

CF: CMS is just going to put more services into a bundle because of the success of CJR. CMS is very happy with the results of the CJR bundle and that’s what gave them the confidence to make it mandatory in the 67 MSA’s they’ve identified. Bundles are here to stay.


Are you a physician, care provider or hospital administrator looking for help succeeding with CJR Bundled Payments? Sign-up to learn how PeerWell can help you manage bundle costs and steer patient outcomes.

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Hi, I'm Grace. I write all things surgery for the PeerWell blog. You may remember me from such titles as: "Diabetes & Joint Replacement 101" & "Sex After a Joint Replacement".

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