Physician practices earned large financial bonuses under BPCI-A

Physician practices fared just as well as their hospital counterparts in CMS’ flagship bundled payments program, the Bundled Payments for Care Improvement Advanced (BPCI-A) Model.

A new study in Health Affairs analyzed program data to determine physician group practice participation and performance in the BPCI-A, which has been lucrative for most hospital participants.

The data showed that physician practices participating in BPCI-A accrued over $421 million in incentive payments during the first four performance periods (2018-2020). During that period, participation peaked at 495 physician group practices in the first performance period but steadily decreased to 388 in performance period four, which coincided with the COVID-19 pandemic. Notably, CMS had given participants the option to suspend BPCI-A participation during the pandemic.

However, participation in the bundled payments program has continued to decline. Researchers reported that 317 physician group practices participated beyond the study’s period in performance period five. That number further fell to 245 in performance period seven.

Researchers attributed declining participation to the voluntary nature of BPCI-A, as well as changes to the program in 2021. At that time, CMS adjusted its target price calculation methodology by incorporating a retrospective adjustment. Participants must also select a whole service line of clinically relevant bundles versus picking ones with the most enticing target prices.

BPCI-A participants receive individualized target prices for spending on care episodes, which begin with a specific patient encounter like a joint replacement surgery and end 90 days after discharge. If participants spend below the target price, they receive a financial bonus. If episode spending goes over, they are penalized.

During the study period, CMS set the target prices prospectively. However, researchers found that target prices were miscalibrated, as evidenced by physician group practice performance for the first four performance periods.

Practices preassigned higher target prices tended to earn larger financial bonuses versus practices with lower preassigned target prices, they reported. For example, practices in the lowest decile of target prices received a mean reconciliation payment of $139 per episode during the study period, while practices in the highest decile received $2,775.

Researchers also identified a similar pattern across individual bundles chosen for participation, with several of the most frequently selected bundles associated with a bonus of several thousand dollars per patient care episode.

Physician practices participated in a mean of 4.4 bundles at first, with the most frequently selected being major joint replacement of the lower extremity, hip and femur procedures and major joint replacement of the upper extremity. By the pandemic, practices participated in a mean of 3.9 bundles, with major joint replacement of the lower extremity, sepsis and congestive heart failure being the most popular.

Practices that stayed in BPCI-A during the pandemic also earned larger financial bonuses for each care episode and larger bonuses overall compared to the prepandemic cohort, researchers reported.

Researchers said that, together, the findings suggest an issue with target price calculations, with a “nearly deterministic effect of target prices on financial rewards and penalties both in BPCI-A and in episode-based payment models more generally.”

“High-spending participants in BPCI-A were assigned higher target prices, and thus they disproportionately received bonuses,” they wrote in the study. “In other payment models where spending benchmarks are based on regional spending trends and not on each participant’s own historical spending, high-spending participants disproportionately fail to meet the regional benchmark and are penalized.”

Recent BPCI-A changes may correct the miscalibration of target prices, but they may not strike the right balance between enticing participants in a voluntary model and being strict enough to generate savings.

“As long as providers are able to cease participation when target prices or participation conditions become too unfavorable, CMS will likely continue to struggle to set appropriate spending benchmarks in future episode-based payment models, BPCI-A or otherwise,” researchers said.