Is CMS doing bundled payment for hip and knee replacement all wrong?

Earlier this month, the federal Centers for Medicare & Medicaid Services proposed a five-year bundled-payment test program for hip and knee replacement surgeries.

At the time, CMS said its Comprehensive Care for Joint Replacement (CCJR) program would require 800 hospitals in 75 areas to test bundled payments for most of the 100,000 hip and knee surgeries that Medicare covers annually.

The proposal, which we covered here, would allow CMS to eliminate some of the widespread variation in costs and offer one more way for the Obama administration to squeeze out fee-for-service reimbursement by transforming payment from volume to value, CMS said. Currently the agency is soliciting comments on its proposal (PDF) until Sept. 8, and expects to implementt he program Jan. 1.

Among the comments CMS will get will be a blistering critique from Harold Miller, the president and CEO of the Center for Healthcare Quality and Payment Reform, In a policy brief, “Bundling Badly: Problems with Medicare’s Comprehensive Care for Joint Replacement Proposal,” Miller explained that the plan may not be as well designed as CMS would have us believe.

Among seven specific criticisms are two that are potentially detrimental to the health care system itself. First, the proposal would encourage further consolidation in health care, fewer choices for consumers, and higher prices, he wrote. Second, it would encourage unnecessary hip and knee surgeries while discouraging physicians and hospitals from developing innovative approaches to managing patients’ hip and knee pain, he added.

The four-page report is well worth reading because it explains bundled payment thoroughly and clearly and because it takes apart the CCJR proposal in detail. Here are Miller’s seven criticisms:

  1. True episode payment would be desirable, but this is just P4P (pay for performance)
  2. It may look like bundled payment but it isn’t really
  3. It’s a payment design that penalizes innovation instead of encouraging it
  4. CCJR will likely accelerate provider consolidation and increase prices for private payers
  5. Poorly designed risk adjustment could reduce access and result in more unnecessary surgeries
  6. There’s no reward for higher quality; just smaller bonuses if quality is low
  7. A mandatory “test” would preclude other, better approaches.

To assess whether Miller’s criticisms are on target or not, I asked Francois de Brantes, the executive director of the Health Care Incentives Improvement Institute, for his opinion. Few health policy experts know more about bundled payment than de Brantes given that HCI3 has been implementing its form of bundled payments (called the Prometheus Payment model) since 2007.

“He’s mostly right,” de Brantes said. “The one area I disagree with is that it will accelerate provider consolidation. There’s no real evidence of that in bundled payment programs, but the other points he brings up are correct. So while CCJR is a strong signal to providers that fee-for-service is ending, the design of the program is flawed.

“We’ve spent the past several years alerting CMS to the flaws in its Bundled Payment for Care Initiative program (on which CCJR is based), and they’ve ignored all of the comments and suggestions,” he added.

3 thoughts on “Is CMS doing bundled payment for hip and knee replacement all wrong?

  1. Norman Bauman

    One of the big problems with these incentive systems is that they don’t correct for risk factors, such as socioeconomic status, and patient risk factors like lung and kidney function.

    When you give providers an incentive to save money, you’re giving them an incentive to avoid high-risk patients.

    In his briefing, “Bundling Badly”, Harold Miller has a section headed, “Poorly Designed Risk Adjustment Could Both Reduce Access and Result in More Unnecessary Surgeries.” He points out 2 problems:

    (1) CMS doesn’t adjust targets for post-acute care. If one hospital had lots of patients who lived alone and had to go to a skilled nursing facility, they would be penalized for the post-operative care. So just as they have an incentive to save money, they also have an incentive to avoid high-risk patients.

    Miller says that CMS realized this, “but the regulations say that since there is no consensus on what the right risk adjustment system should be, no risk adjustment system at all will be used.”

    In the aircraft industry, if an engineer saw a statement like that, he would say, “We can’t build planes like that. We could have a disaster. Let’s figure out the risk adjustment system first.”

    In the health care industry, they say, “Politics is the art of the possible.”

    I know people in their 80s and 90s with mobility problems. There’s a big difference between getting to medical services for a patient who lives in a 6-story walkup and one who lives in an elevator building.

    (2) The patients who do best are the relatively healthy patients who need surgery the least. If a provider encourages a patient to first lose weight and exercise (like they do in Denmark), that patient doesn’t count in the provider’s surgical rating. So the providers are under an even stronger incentive to sell unnecessary surgery. In the best study I could find, 1/3 of TKRs were inappropriate. The best way to save money is to eliminate unnecessary surgery.

    Daniel L. Riddle, William A. Jiranek, Curtis W. Hayes. Using a validated algorithm to judge the appropriateness of total knee arthroplasty in the United States: A multi-center longitudinal cohort study. Arthritis & Rheumatology, 2014; DOI: 10.1002/art.38685

    Jeffrey N. Katz. Appropriateness of total knee replacement. Arthritis & Rheumatology, 2014; DOI: 10.1002/art.38688

    Every time I see a discussion of total knee replacement, I’m amazed that we’re doing 600,000 procedures a year in the U.S., we have never done a randomized controlled trial to demonstrate its effectiveness, and despite enthusiastic articles like Jane Brody’s, 10% to 34% of TKR patients (20% in the best studies) have untreatable long-term pain that left them worse off than they were before the surgery. That’s like Russian roulette for your knees.
    What proportion of patients report long-term pain after total hip or knee replacement for osteoarthritis? A systematic review of prospective studies in unselected patients
    Andrew David Beswick, Vikki Wylde, Rachael Gooberman-Hill, Ashley Blom, Paul Dieppe
    BMJ Open 2012;2:e000435 doi:10.1136/bmjopen-2011-000435

    How can we improve the outcomes of TKR if we don’t know how well it works in the first place?

    The Danish health system has finally started a randomized, controlled trial comparing best non-surgical treatment with TKR. We’ll have the results in ~10 years.
    Total knee replacement plus physical and medical therapy or treatment with physical and medical therapy alone: a randomised controlled trial in patients with knee osteoarthritis (the MEDIC-study)
    Soren T Skou, Ewa M Roos, Mogens B Laursen, Michael S Rathleff, Lars Arendt-Nielsen, Ole H Simonsen and Sten Rasmussen
    BMC Musculoskeletal Disorders 2012, 13:67 doi:10.1186/1471-2474-13-67

    I have a market-based solution. Let’s do what works. Let’s subcontract our health care system out to the Danes.

  2. Norman Bauman

    Here’s an article in this week’s JAMA that seems to show that the CMMS risk adjustment procedure doesn’t work. It’s penalizing major teaching centers that take difficult cases.
    Original Investigation
    Hospital Characteristics Associated With Penalties in the Centers for Medicare & Medicaid Services Hospital-Acquired Condition Reduction Program
    Ravi Rajaram, Jeanette W. Chung, Christine V. Kinnier, et al.
    JAMA. July 28, 2015;314(4):375-383. doi:10.1001/jama.2015.8609.
    Importance In fiscal year (FY) 2015, the Centers for Medicare & Medicaid Services (CMS) instituted the Hospital-Acquired Condition (HAC) Reduction Program, which reduces payments to the lowest-performing hospitals. However, it is uncertain whether this program accurately measures quality and fairly penalizes hospitals.
    Conclusions and Relevance Among hospitals participating in the HAC Reduction Program, hospitals that were penalized more frequently had more quality accreditations, offered advanced services, were major teaching institutions, and had better performance on other process and outcome measures. These paradoxical findings suggest that the approach for assessing hospital penalties in the HAC Reduction Program merits reconsideration to ensure it is achieving the intended goals.
    “These findings suggest that penalization in the HAC program may not reflect poor quality of care, but rather, these findings may be due to measurement and validity issues of the HAC program component measures.”

  3. Pingback: AHCJ webinar will address how payers, providers are implementing bundled payment | Association of Health Care Journalists

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