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Pay-for-Performance Across the Continuum of Care: Achieving Quality Improvement and Cost Savings through Hospital/Physician Alignment

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Pay-for-Performance Across the Continuum of Care: Achieving Quality Improvement and Cost Savings through Hospital/Physician Alignment

Published: 03/20/2018Stethoscope-by-Laptop-Computer-1

As payment models shift to focus on value targets, hospitals and physicians are increasingly being challenged to work together to redesign care delivery processes that extend beyond the acute care setting to include post-acute services.  For example, under CMS’s Comprehensive Care for Joint Replacement (CJR) bundled payment model, a patient episode is defined as beginning with admission to the hospital and ending 90 days post discharge.  Under the CJR model, a reconciliation occurs at the end of the model performance year and is based on achievement of Medicare cost and quality measures in the episodes of care.  Similarly, within the framework of CMS’ Oncology Care Model (“OCM”), participating physician group practices are accountable for both financial and quality performance during episodes of care involving chemotherapy administration to Medicare cancer patients.  An episode within the OCM program is a period of six-months.1  Both the OCM and CJR bundled care programs are predicated on the belief that when payment is based on performance across a continuum (including both quality and cost), participating providers are encouraged and motivated to improve care and lower the total cost of care across that continuum.

The prevailing thought is that the achievement of quality and cost targets for acute/post-acute care requires substantial commitment and collaboration among care providers, including hospitals, physicians and post-acute services.  This new paradigm, which ‘bundles’ a patient’s care into an episode extending beyond the traditional acute care setting, offers many advantages to patients and payors while challenging hospitals and physicians to take a broader perspective of patient care.  The shift in payment models, which requires collaboration among many types of providers, can be facilitated by implementing a series of focused performance/quality improvement and outcome measures that provide incremental steps to the achievement of the broader goals of the bundled care programs.  For example, an overall reduction in clinical variance across the care continuum, as evidenced by standardization of implants, protocols, order sets, medications and surgical supplies as well as operational improvements focusing on transitions of care, post-acute follow-up, appropriate documentation and navigator programs may have a very immediate and direct impact on service delivery cost, patient satisfaction and readmissions rates. 

In response, the service line co-management arrangement has evolved to include a broader continuum of care, including the opportunity to consider post-acute care services.  Historical service line co-management arrangements are pay-for-performance programs whereby hospitals engage physicians to participate in the management of one or more of a hospital’s service lines (e.g., orthopedics, oncology, cardiovascular, surgical services, etc.), and through that participation, drive achievement of identified performance improvement measures and/or target outcomes.  The performance improvement measures and target outcomes may now include measures that extend beyond the acute hospital stay.  When appropriately conceived and implemented, a service line co-management model is potentially a roadmap to the achievement of hospital, physician and payor goals and objectives.

FMV Pitfall

Evolving practices in the marketplace have resulted in new iterations of the co-management arrangement, as well as in new and evolving considerations in determining what constitutes a fair market value and commercially reasonable payment in such arrangements. As the scope, nature and performance measures in co-management arrangements change, the factors affecting value and reasonableness - and the pitfalls of properly identifying them-- are also changing and should be considered carefully. As examples, one should carefully consider:

(a) Overlap between the quality/performance improvement incentives included in a co-management arrangement and quality/cost-savings incentives payable via any other arrangement (g., CMS bundled payment programs). The potential for inappropriately duplicative payments may be avoided by (i) appropriately structuring the quality/performance improvement incentives in the co-management arrangement; and/or (ii) ensuring their appropriate consideration in fair market value analysis.

(b) Whether the incentives demonstrate improvement over baseline performance, particularly if incentives included in the co-management arrangement must be commercially reasonable to meet regulatory requirements.

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