Population Health and CMS Policies: A Race to the Bottom?

Recently, I heard the phrase “race to the bottom” used in conjunction with the Centers for Medicare & Medicaid Services (CMS) policies which seek to reduce costs through use of an organization’s historical performance as the benchmark for future shared savings.

The Cambridge English dictionary defines race to the bottom as “a situation in which companies compete with each other to reduce costs by paying the lowest wages or giving workers the worst condition.” When applied to population health payment models, I wonder if perhaps "race to the bottom line" would be a more accurate term.

In shared savings payment models, participants compete with their own historical benchmarks. Accountable care organizations (ACOs) with historically high spending (and higher benchmarks) achieved shared savings more often than ACOs that joined the program with leaner operations (and lower benchmarks.) High benchmark ACOs, being less efficient, had more low hanging fruit to pick to demonstrate improvements that would earn shared savings. Conversely, already efficient organizations had less success at further reducing their baseline expenditures.

Concerns about race to the bottom led Rothman Orthopedics, a large and successful orthopedics group based in Philadelphia, PA, to decide to no longer participate in the CMS Bundled Payment Program for major joint replacement, the Comprehensive Care for Joint Replacement (CJR) model.¹

CJR offers opportunities to earn shared savings for orthopedic groups and hospitals, working in collaboration to improve the quality and coordination of care for the total episode of care—from initial hospitalization through recovery (90 days post-op). The model tests bundled payment and quality measurement for episodes of care associated with hip and knee replacements. Launched in 2016, the CJR model is offered in 67 Medical Service Areas across the country. Initially scheduled to end in 2021, the program was recently extended through December 31, 2024.

The model has been successful since inception at reducing costs and generating shared savings for hospitals and orthopedic groups while maintaining quality of care. Much of the savings were generated through reductions in the use of post-acute care facilities after surgery. Uncomplicated recovery for knee or hip replacement was achieved by preparing patients to receive home-based rehabilitation services.

Rothman Orthopedics participated in bundled payments for 10 years and thrived under shared savings agreements with an insurance company and hospital. However, bundled payments are no longer beneficial for the practice.

"What happens is the growth changes every year; the better you get the more difficult it is to save money, so we're now bottomed out," said Alexander Vaccaro, MD, president of Rothman Orthopedics, in an interview with Becker’s ASC Review.² Rothman dropped out of multiple value-based care agreements because the group was unable to become more efficient. "We looked at everything that we could to sort of squeeze out any inefficiencies."

Race to the bottom concerns can be applied to other shared savings models based upon historical benchmarks, which become harder to achieve as an organization succeeds in shared savings. These include Medicare Shared Savings Program ACOs and other bundled payment models such as Bundled Payment for Care Improvement- Advanced (BPCI-A).³

As newer CMS models—for example, Direct Contracting—push providers to take on increasing levels of risk, shared savings based simply on historical benchmarks may discourage organizations from participating. Adjustments to regional benchmarks and mixing shared savings with capitated payments and/or fee-for-service revenues are options that could be considered. A white paper⁴ published by Milliman in 2020 discusses this strategy in more detail. The total cost of care will need to be considered in any future value-based payment model.

Policy makers have always voiced concerns about the growing percent of GDP, now nearing 18%, devoted to health care. CMS continues to support curbing the growth in national health care investment through alternative payment programs as a means to reduce costs, improve quality, and encourage providers to shoulder some of the associated risk. If National investment priorities change to address infrastructure, public health, climate change, and/or socioeconomic disparities, providers working in value-based models will be best prepared for any attendant change to the bottom line for health care costs.

References:

1. Centers for Medicare & Medicaid Services. Comprehensive Care for Joint Replacement Model. https://innovation.cms.gov/innovation-models/cjr Accessed July 4, 2021.
2. Dyrda, L. Bundled Payments in ASCs: good business or a race to the bottom? Becker’s ASC Review. Published March 16, 2021. Accessed July 4, 2021. https://www.beckersasc.com/asc-coding-billing-and-collections/bundled-payments-in-ascs-good-business-or-a-race-to-the-bottom.html  
3. Centers for Medicare & Medicaid Services. Center for Medicare & Medicaid Innovation. Comprehensive Bundled Payment for Care Improvement Advanced Target Price Specifications. November 2020. Accessed July 9, 2021. https://innovation.cms.gov/files/x/bpciadvanced-targetprice-my3.pdf.
4. Kramer MJ, Reijula E, Shellabarger S. Medicare fee-for-service direct contracting: financial benchmark observations. Published January 4, 2021. Accessed July 4, 2021. https://www.milliman.com/-/media/milliman/pdfs/articles/direct-contracting-financial-benchmark.ashx