Medicare’s Poorly Designed Joint Replacement Bundle Payment Program

Submitted by on Thursday, September 17, 2015 - 02:39

Newtown, CT – September 18, 2015

The comments are in and they're not good for CMS but, by and large, they're fair and important. We hope CMS will finally pay attentionOf the 396 comment letters sent in on the recently announced Medicare Joint Replacement Bundled Payment program, the one from Harold Miller encapsulates the spirit and content of most of the others. Even MedPAC, which is a formal advisory board to Medicare, was critical of the proposal and suggested a number of important modifications. And for the record, MedPAC has been a very strong and vocal proponent of payment reform in Medicare. One recurring theme in all of these comments is the lack of severity adjustment in Medicare's proposal. This, of course, is the most common of all common sense. Patient severity varies, and ignoring it carries the significant risk of hurting those who do care for the more severely ill patients. To compound the problem of using average, non-severity adjusted costs, CMS' adherence to using DRGs as the way to identify patients in need of a joint replacement, blends all kinds of patients who require surgery of the lower extremities, not simply joint replacements. In its proposed rule, Medicare argues that it couldn't find a way to adjust for the severity of patients at the episode level and so it decided not to include any such adjustment. According to its statement, Medicare officials looked to States like Arkansas, Tennessee and Ohio, which are implementing bundled payment programs, and noticed that there wasn't a standard way of adjusting for severity of patients, so no need to bother. I'm telling you, you can't make this stuff up.

What this means to you – There are right ways and wrong ways to design incentives programs and Medicare has chosen the wrong way in its proposal for Joint Replacement Bundles. If it were the first time, we might find some excuse, but this has become a very concerning pattern. Beyond the wrong design there are inexcusable judgment lapses, and the statements on severity adjustments are illustrative of those lapses. While CMS was supposedly looking far and wide for methods to adjust for patient severity at the episode level, they omitted to look within their own organization. As it happens, Medicare has been engaged in a multi-year contract to create an episode of care cost analysis system to power the physician value modifier. That system includes a comprehensive and well-designed method to adjust for patient severity…at the episode level. Beyond its walls there are other episode systems that also adjust for patient severity. These include the Cave Grouper, Optum's ETGs, Truven's MEGs, and our own PROMETHEUS Analytics. So to state that there aren't ways to adjust for patient severity is simply false, and 300 or so organizations are calling CMS out on that and other points. Unfortunately, this myopia is not unique to this situation. Today, RWJF is releasing its final report on the State of HIT in the U.S. In it, we have a chapter that focuses on the important link between payment reform and the demand for interoperability of medical records. The upshot is that high degrees of provider integration create a barrier to interoperability. And so while ONC is trying to figure out how to stimulate interoperability of EMR systems, CMS is promoting more and more integration with its badly designed payment reform models. Once again, you can't make this stuff up. But perhaps, if CMS was to adopt the wisdom of Pogo, there might still be a chance.