January 28, 2015
Dear Administrator Tavenner:
The Health Care Transformation Task Force (previously known as the Health System Transformation Task Force) is pleased to provide input on CMS’ recent announcement of methodological changes to the Bundled Payments for Care Improvement (BPCI) initiative.
As we described in previous communications, the Health Care Transformation Task Force (Task Force) is an emerging group of private sector stakeholders that is coming together to accelerate the pace of delivery system transformation. Representing a diverse set of organizations from various segments of the industry – currently including providers, health plans, employers, consumers and academic institutions – we share a common commitment to transform our respective business and clinical models to deliver the triple aim of better health, better care and reduced costs. We hope to provide a critical mass of policy, operational and technical support from the private sector that, when combined with the work being done by CMS and other public and private stakeholders, can increase the momentum of delivery system transformation.
The Task Force’s shared principles reflect our commitment to a specific timeline for the migration from fee-for-service toward payment models that promote patient-centered care and improved population health. Our outputs will not reflect the simple self-interest of any one organization or market segment, but rather agreement on common private and public approaches that will best facilitate transformation.
We sincerely appreciate the Center for Medicare and Medicaid Innovations’ (CMMI) responsiveness to date to participant feedback about the BPCI Initiative. The Task Force is deeply committed to achieving the triple aim through our participation in the BPCI Initiative and other programs underway as a result of the passage of the Affordable Care Act.
Based on the current concerns as it relates to our experience with the first reconciliation, we propose policy solutions that we believe would be well received by participants as well as operationally feasible for CMMI.
Details describing the proposal are outlined below, categorized by core operating policies.
Stabilize Baseline Prices
We believe a primary requirement for successfully moving markets towards value-based competition is the existence of price stability. The BPCI program has experienced dramatic swings in target prices. Price stability is very achievable and the Task Force recommends four important principles to improve the stability in the establishment of baseline prices:
- Lock -in the set of claims used to determine prices. The date range for claims used to calculate baseline prices should be fixed and never subject to change once CMS delivers target prices to participants.
- Calculations and algorithms for determining prices should be transparent. Transparency will engender trust and lead to systemic improvements in pricing methodology.
- Baseline prices should be locked-in for three years, as presently designed.
- Precedence rules should be eliminated from the baseline pricing calculations. Using the full data set results in the most accurate baseline prices and reduces price uncertainty. Pricing calculations should be designed to limit, not increase, the uncertainty of bundled payments.
The trending method has many key flaws including, but not limited to:
- Failure to directly account for changes in unit prices that occur at the beginning of each fiscal year,
- Failure to limit changes in the Winsorization thresholds from quarter to quarter,
- Failure to address the problems of low volume DRGs both with regard to the trend rates and the Winsorization thresholds,
- Inconsistency in trend rates among DRGs in a bundle which can and has resulted in DRGs with complications sometimes having a lower trended price than DRGs without complications,
- Failure to address the impact of catastrophic episodes on trend rates, both in the baseline and performance periods, and
- Unpredictability of final prices because the trend can change the price up to 14% from the time a bundle starts until reconciliation.
The Task Force strongly encourages CMMI to convene a special committee of industry experts to examine and to refine the trending methodology. The committee's mission should be two-fold; to recommend specific changes to the BPCI trending methodology that can be implemented quickly and to develop a method that can be used in any larger roll-out of bundled payments by CMS. The committee should include actuaries, statisticians, and others with experience and knowledge of trending methods commonly used in industry and government programs. The committee will need to adapt those practices and methods to the specific challenges of trending episodes of care.
Simplifying Pricing Rules
The BPCI pricing rules are excessively complex and difficult to follow, even for seasoned data analysts. One of the most important complicating factors is the so-called Empirical-Bayes (EB) calculation that applies to a very small number of episodes, but affects the calculation of all bundle prices. The objective of the EB calculation – smoothing outlier prices for low-volume episodes – is important. But the way it is implemented in the rule is complicated and increases the potential for data error. CMS makes a series of case mix adjustments for bundles to normalize hospital and state-level mean values for low-volume bundles. We suggest that CMS use the number of cases in the bundle to determine whether or not to apply the EB formula, but to actually apply the formula to each individual DRG in the bundle. This would eliminate the need for this complex case-mix adjustment and simplify the rule without reducing the impact of the policy.
Expanded Data to Support BPCI Care Management and Quality Improvement
Participants that have entered the at-risk phase of BPCI have made a significant commitment to coordinating care for their patients and should receive data that help them optimize care management. While initial applicants received claims data for all of their patients in the pre-application period, CMS has limited subsequent data sharing to selected at-risk bundles and only for the period of the bundle plus 30 days rather than for an entire year. We believe CMS should provide hospitals with 100 percent of claims for all inpatients and all 48 bundles for the previous 12 months. This will allow hospitals to assess patients’ prior conditions so that they can more effectively personalize care management to each individual patient. Doing so would also provide participants with a richer data set for evaluating the performance of partner physicians and post-acute care providers to help focus quality improvement efforts. Finally, an expanded data set would help them identify additional bundles where it would make sense for them to expand their participation in BPCI.
Reducing Volatility Related to Pass-Through Drugs and Technologies
The inclusion of transitional pass-through drugs and technologies in the calculation of episode-base prices and reconciliations represents a significant risk to participants. Similar to ESRD, patients that require these advanced treatments are likely to become extreme outliers with cost levels wildly beyond anything observable in historic claims data. Removing these patients and related costs from the program will protect the financial stability of BPCI, while still promoting the advancement of new therapy regimens. We suggest that CMS exclude the costs associated with transitional pass-through drugs and technologies from episodes, such as clotting factor replacement therapy. These items would continue to be reimbursed via current fee-for-service payment methods.
Participants should be able to drop episodes quarterly and add episodes annually, with the full benefit of baseline pricing data for all 48 episodes.
The most important objective of refining the program rules is to provide transparency and a confidence in the stability of episode prices, both of which would be achieved by adoption of the policies proposed therein.
We offer these suggestions from a group that represents a cross-section of the industry. We share CMS’ commitment to facilitating health system improvement. Thank you for all that you and your team are doing to improve our healthcare system for patients, payers and providers. We share your objectives and look forward to working in an aligned way to meet the promise of delivery system transformation.
Please contact Tonya Wells at firstname.lastname@example.org with any questions.
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