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July 26, 2016

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CMS's New Bundled Payments Plan Could Be a Boon for Medtech

The agency's proposal for streamlining high-volume, high-expense episodes of care, including heart attacks, could present opportunities for medical device companies to help hospitals better manage patients.

Nancy Crotti

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The Obama administration has released a proposal to bundle Medicare payments to hospitals for heart attacks, coronary artery bypass graft procedures, and surgical treatments for broken hips and femurs, excluding joint replacements.

The proposal is part of CMS's ongoing quest to save money by encouraging hospitals to streamline procedures for "high-expenditure, high-volume episodes-of-care experienced by Medicare beneficiaries." CMS estimated that it spent a total of $4.1 billion per year heart attacks, $2.3 billion on coronary bypass surgeries, and $4.7 billion on operations for broken hips and femurs from 2012 through 2014. That was for an annual average of 168,000 heart attacks, 48,000 bypass surgeries, and 109,000 hip or femur fracture operations.

The agency wants to run this latest bundled payment program for five years, beginning July 1, 2017. The pilot would include 98 randomly selected metropolitan hospitals, which have not been identified. CMS would pay participating hospitals "target prices" based on their spending in these three areas during the first year of the program. If they exceed the target prices, the hospitals would have to reimburse CMS.

The agency would also give these hospitals access to data and educational resources to better understand care patterns during the inpatient hospitalization and post-acute periods, as well as associated spending.

This proposed rule also includes several possible modifications to the five-year Comprehensive Care for Joint Replacement program, which began April 1. CMS required certain hospitals to participate in that program to bundle payments for hip and knee replacements. The agency is also proposing making incentive payments to hospitals whose heart attack patients take part in cardiac rehabilitation programs in the 90 days following discharge. CMS will accept comments on the proposal for 60 days after publication in the Federal Register.

The impact on medtech could be positive, according to some experts.

"Heart attack is a medical treatment while (coronary artery bypass graft) is surgical. Neither are as directly reliant on medical devices for treatment as with hips and knees," said Ken Graves, a managing director of LEK Consulting. "As such, devices aren't positioned as strongly as a cost center to manage by hospitals. This may create more of an opportunity for medtech to be considered an enabler for better managing patients across the continuum and capture the appropriate data, like with remote monitoring."

Jonas Funk, also an LEK managing director, agreed.

"I think it is a continuation of CMS to push more accountability to hospitals, which will in turn lead hospitals to seek medtech partners that can help them more holistically manage patient outcomes across the care continuum," Funk said. "Specifically for the expansion to heart attack, this will likely increase the incentives for providers to more actively monitor and manage patients post-discharge, which could increase demand for technologies from medtech and healthcare IT companies to provide those types of solutions."

It's good but also kind of disappointing, added Michael Abrams, cofounder and managing partner of Numerof & Associates.

"It's a step in the right direction by CMS in reshaping healthcare delivery to be more transparent, accountable for cost and outcomes, evidence-based, and cost-effective," Abrams said."Hospitals won't change their approach to care delivery on their own. That's why CMS, as the largest payer in the US, plays a critical role in reshaping healthcare delivery."

The program does not use the market-based approach that Numerof & Associates had hoped would produce a more patient-oriented delivery system, Abrams added.

"It's still top down and relies on regulation rather than market mechanisms. But it is a step in the right direction," he said. "It should be a wake-up call for healthcare delivery organizations across the country to step up their efforts at reinventing their business model."

Nancy Crotti is a contributor to Qmed.

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