Bundled Payments and Imaging: Education and Practice for ACOs to Come

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Ed GainesMissy LovellAs the momentum concerning accountable-care organizations (ACOs) continues to mount, forward-looking radiology groups already are anticipating participation in bundled-payment initiatives, according to Ed Gaines, JD, CCP, chief compliance officer for Medical Management Professionals (MMP). “There are large hospital systems, nationwide, that have been running bundled-payment models for years, and there are significant data out there about the improved outcomes and lower costs that can result from these models,” he says. “Radiology is not being confronted with the problem just yet, but there is growing recognition that the specialty needs to be prepared and educated on the subject.” Early experiences with bundled payment—from those of health systems to the Medicare Acute Care Episode (ACE) Demonstration to the CMS Bundled Payments for Care Improvement (BPCI) Initiative—have been more about education than incentives. “People who are participating in these demonstrations are doing it because they want to learn the ropes,” Gaines says. “Most of the CMS payment demonstrations are based on a fee-for-service model, making the barrier to entry for providers much lower than it is for ACOs.” Getting Involved Gaines notes that the cost of establishing an ACO has been estimated at between $3 million and $5 million, making it unlikely that any health-care entity smaller than a hospital would initiate the process. “Participating in a payment-bundling demonstration has huge advantages,” he says. “You do not have to create a new entity, buy software, figure out risk, or do any of the other things you have to do for an ACO. It is common sense that bundled payment would be more acceptable both to the hospital and to hospital-based providers.” Missy Lovell, BSN, MBA, RN, compliance manager for MMP, notes that the OIG has issued advisory information about gain sharing in bundled payment, helping organizations coordinate the process without running afoul of regulators. “The physicians and organizations are permitted to share the gains that arise from redesigning their care processes,” she says. One MMP client, a radiology practice, has had just such an experience, serving a hospital that participated in the ACE Demonstration. Gaines explains that the hospital and affiliated provider organizations, including the radiology practice, formed an LLC to receive Medicare A and B payments and set financial targets for certain procedures. “For instance, the fee-for-service cost for a hip replacement might be $40,000, so if we can hit a target of $35,000, we will share the leftover $5,000 on a 50–50 basis,” Gaines explains. “For the patient who has to stay an extra day, making the cost go over the target, they take the money and mix it into the overall savings pool. It is upside-only shared savings.” The radiology group contracts with the LLC, meaning that the group first bills Medicare for the imaging related to the procedure and then informs its Medicare administrative contractor that it is part of the ACE Demonstration. “One of the issues you have to deal with is that there is a lot of follow-up work that has to be done, with the LLC and the hospital, to get paid,” Lovell notes. “Medicare pays quickly—in 14 days, on an electronic claim. One of the things radiology groups should be prepared to negotiate with the LLC is how quickly they will be paid.” Remaining Questions Both the ACE Demonstration and the BPCI Initiative focus on cost reduction and outcome improvement for selected episodes of care. The BPCI Initiative expands the focus, offering participating organizations the choice of 48 episodes of care (including stroke, acute myocardial infarction, revision of hip or knee replacement, and renal failure). Great strides can be—and have been—made in cost reduction for these episodes, Gaines says, but as any provider knows, they represent merely the tip of the iceberg when it comes to the variability and complexity of modern health care. “A big outstanding question is what happens next,” he says. “You can reduce the costs of your implants, substitute plain film for MRI wherever appropriate, move to generic drugs, and eliminate some repeat services, but all that is your low-hanging fruit. Maybe it gets you to your savings targets, but then, what do you do?” Another question is what happens when the model moves from upside-only shared savings to upside and downside sharing—which is to say, shared risk of the sort that will eventually be built into ACOs. “Physicians are being incentivized to get involved by the upside-only model, but at some point, that will have to transition to upside and downside sharing, which is more like an ACO,” Gaines says. “Once you have stripped away the low-hanging fruit, capturing the remaining savings will get tougher and tougher.” With both of those caveats stated, Gaines still stresses that the initial results of these initiatives have been so striking that radiology practices should expect them to proliferate in the future. “One hospital in San Antonio, Texas, has been posting its ACE Demonstration results online, and as of January 2012, it had achieved savings of over $1,000 per Medicare Severity DRG on episodes of care for coronary-artery bypass graft,” Gaines says. “That quickly adds up to millions of dollars, and the hospital has done it without any negative impact on outcomes.” Thus, the message from Gaines and Lovell to the radiology community is simple: Take every available opportunity to learn the ropes of participating in bundled-payment initiatives—before it is too late. “Again, the message is that you are at the table or on the table,” Gaines says. “The forward-thinking groups that want to be where health reform is taking them will view these initiatives as interim steps on the way to becoming more integrated.” Cat Vasko is editor of ImagingBiz.com and associate editor of Radiology Business Journal.