Preparing for Alternative Payment Models, Part 1

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By Michael Mayer, CIO, The Americare Companies and Michael Zucker, VP Patient Accounts, The Americare Companies
Tough Decisions in Alternative Payment Models

A huge number of alternative payment models are being discussed by healthcare executives, government entities and pundits. In this post, we’ll outline five models currently being tested.

But first, we’d like to stress the importance of not getting bogged down in detail. The truth is, these models haven’t been around long, and none are likely to become the government’s or private payers’ “chosen” method without undergoing substantial changes.

So, understand what’s being vetted and what home health organizations may be seeing more of in the next few years, but remember that flexibility in implementing new payment models will be the real key to success for your business.

The High Five

  1. Bundled Payments for Care Initiative (BPCI)
  2. Comprehensive Joint Replacement
  3. Home Health Value-Based Purchasing
  4. Medicare Care Choices Models
  5. Medicare Shared Savings Program

BPCI Model 2

This model is a voluntary program in which each episode of care includes inpatient stay, post-acute care and all related services. The episode ends either 30, 60 or 90 days after hospital discharge. Medicare makes payments under a fee-for-service model and later compares the final cost of the bundle with what the Centers for Medicare & Medicaid Services (CMS) has set for a cost. The agency either receives a bonus or is required to pay back a portion of the money already paid. BCPI Model 3 has 592 current participants.

BPCI Model 3

In this model, the episode of care begins at the initiation of post-acute care services and must begin within 30 days of discharge from the inpatient stay. It ends 30, 60 or 90 days after the initiation of the episode, with a cost comparison occurring as above. BCPI Model 3 has 803 current participants.

Comprehensive Joint Replacement

This program relates to DRG codes 469 and 470, at nearly 800 participating hospitals. Actual spending on all services (except those specifically excluded or unrelated to the episode) are compared to the price set by the hospital where the initial procedure took place. The hospital receives additional money or must pay back money received, resulting in a significant change in the way hospitals view the agencies they refer to for post-acute care.

Under this model, hospitals use Home Health Compare and other resources to review an agency’s survey compliance, quality and staffing metrics, ability to manage daily activities, skill at managing pain and patient survey results. In particular, hospitals look for signs of inefficiencies, such as high rehab utilization rates.

Home Health Value-Based Purchasing

This program is a requirement in Massachusetts, Maryland, Florida, North Carolina, Washington, Arizona, Iowa, Tennessee and Nebraska. It’s currently only required for Medicare patients, but private payers are expressing interest.

Payments are adjusted based on outcome reporting. The program started in 2015, and payment adjustments begin with 3% up or down from 2016 to 2018, rising to 8% by 2020.

Medicare Care Choices Model, Hospice Only

This voluntary program is designed to help CMS evaluate whether providing certain supportive services can improve the quality of life and care received by Medicare beneficiaries, increase patient satisfaction and reduce Medicare expenditures. Each of the nearly 150 participating hospices receives either $200 for patients 15 days on the service or $400 for 15-plus days on the service, billed monthly.

Medicare Shared Savings Program

This voluntary program for 433 accountable care organizations (ACOs) is designed to fulfill the intent of the Affordable Care Act by providing better care for individuals and better health for populations while lowering expenditure growth. It’s based on the idea that a community of providers with access to a patient’s full history can provide better care for that patient. Preventative care, integrated care, and highly experienced caregivers (including home health) are key to the program.


There’s a wealth of information to be gleaned from these pilot programs about what’s coming to home health in the next few years.

Data. None of these programs work without data, and as data becomes the basis for everything, agencies will need to adjust in small ways (no more blank fields in OASIS, conforming to standard formats for answers) and large (data analysts with a deep understanding of healthcare will be needed to create and run the reports agencies will base their businesses on).

Operations. Agencies will be paid for quality, so at the very least, they will need to know their per-episode costs, per-visit costs and their quality metrics. That means more accurate and more timely documentation across the board. It also means looking at how you provide care and who needs to be involved in making changes to gain efficiency.

In the next part of this post, we’ll outline specific steps home health organizations can take to prepare for new payment models on the horizon.

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