Lower Clinical Spending Needed in BPCI-A Program to Avoid Losses

Hospitals and physician groups participating in the Bundled Payments for Care Improvement Advanced (BPCI-A) program would have had to reduce clinical spending by 3.7 percent to 8.2 percent during the first four performance periods for CMS to break even, a study published in JAMA found.

BPCI-A program participants select inpatient and outpatient groups of care episodes that last from the day of the encounter to 90 days after discharge. Participants receive a target price for episode spending for each bundle.

Participants receive positive reconciliation payments or bonuses if the episode spending falls below their target. If spending exceeds their target, participants owe negative reconciliation payments or penalties.

Reductions in clinical spending must equal or exceed the sum of reconciliation payments paid to participants for CMS to break even and avoid financial losses.

The study assessed the amount of reconciliation payments and clinical spending reduction needed for CMS to break even in the first four performance periods of the BPCI-A program. Period one began on October 1, 2018, and period four ended on December 31, 2020.

Hospital participation increases between the first and fourth participation periods, rising from 712 to 753 hospitals. Meanwhile, the number of physician group participants declined from 495 to 388.

During the first four performance periods, reconciliation payments totaled $1.15 billion.

In performance period one, total reconciliation payments were $313 million, with hospitals receiving $221.3 million and physician groups receiving $91.7 million. Total reconciliation payments were lower in performance period two at $284.8 million; hospitals received $179.9 million and physician groups received $104.8 million.

Reconciliation payments were $335.3 million in performance period three, with hospitals receiving $226.5 million and physician groups getting $108.8 million. The bonuses may have been exceptionally high in this performance period due to decreases in post-acute care utilization during the COVID-19 pandemic, researchers noted.

Finally, hospitals received $128.4 million and physician groups received $85.4 million in performance period four, for a total of $213.8 million.

Given these bonuses, BPCI-A participants would have had to reduce clinical spending by 3.8 percent in performance period one (4.5 percent for hospitals and 3.7 percent for physician groups) and 3.7 percent in performance period two (4.1 percent for hospitals and 3.3 percent for physician groups) to break even.

Participants would’ve had to achieve steeper spending reductions in performance periods three and four, the study found. Participants would’ve had to reduce clinical spending by 8.2 percent in performance period three (8.3 percent for hospitals and 7.9 percent for physician groups) and 4.1 percent in performance period four (3.8 percent for hospitals and 4.7 percent for physician groups.

This range of clinical spending reductions is significantly higher than the 0.53 percent reductions that occurred during the first two performance periods of the BPCI-A program, the study noted. The reductions needed were also generally higher than the 3.8 percent reductions observed in evaluations of bundled payments for joint replacement.

“Reconciliation payments were too high because target prices were miscalibrated and too easily achieved,” researchers wrote.

CMS has implemented changes to address the high target prices for Model Year 4, which started on January 1, 2021. The agency altered target price calculations using an adjusted retrospective element.

Since its launch, the BPCI-A program has led to mixed results for Medicare. A report prepared by The Lewin Group found that the model reduced average episode payments by $743 per episode, or a 2.7 percent decline from the baseline mean during Model Years 1 and 2, spanning from October 2018 to December 2019.

The reduction was higher for surgical episodes, which saw a 4.5 percent reduction from the baseline mean, translating to $1,353 per episode. Medical episode payments fell by 2.2 percent or $564 per episode.

However, Medicare experienced a net loss of $65.7 million after accounting for reconciliation payments, amounting to 0.4 percent of what Medicare payments would have been in the first two performance years without the payment model.

The BCPI-A program generated net savings of $204.4 million for surgical clinical episodes but resulted in a $275 million loss for medical episodes.