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Bundled payment models' downside risk sparks provider dropouts, GAO finds


Many hospitals that participate in the CMS’ voluntary bundled payment models drop out after they are forced to take on downside risk, according to a new U.S. Government Accountability Office report.

The report, which was released Tuesday, found that providers are motivated to join bundled payment models because of the potential for financial gain but they usually end their participation in the model when they have to enter downside risk, and financial gain isn’t guaranteed. Just 39% of hospitals that participated in the second model of Bundled Payments for Care Improvement continued in the model after they faced downside risk.

The report was assembled by the GAO in response to a request from Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee. The GAO interviewed CMS officials, its contractors and provider organizations to understand the types of providers that participate in bundled payments and compare the advantages and disadvantages of voluntary and mandatory bundled payment models.

The CMS said it is reviewing the GAO’s findings and “will keep them in mind as we oversee and evaluate the current bundled payment models and consider designing future ones.”

The report comes as the industry awaits a new mandatory oncology payment model from the CMS, which HHS Secretary Alex Azar mentioned in November 2018. The impending model indicates that the Trump administration is reversing course on its stance that payment models that put providers at risk of losing money if they don’t lower costs of care should be voluntary.

The GAO report reviewed the CMS’ six bundled payment models: four separate Bundle Payments for Care Improvement (BPCI) models, the Comprehensive Care for Joint Replacement Model and the Oncology Care Model.

Stakeholders — including CMS officials — told the GAO that it’s more beneficial for the CMS to implement mandatory models versus voluntary ones. The stakeholders said mandatory models allow the CMS to get a larger and more diverse pool of participants, which enables the CMS to evaluate the effects of the model on all types of organizations. Additionally, mandatory models allow the CMS to test models with greater financial risk because participants can’t pull out if the conditions are financially unfavorable.

Providers dropping out of voluntary models is common. For instance, the GAO found that nearly all of the safety-net hospitals left CMS’ Comprehensive Care for Joint Replacement model after it became voluntary in 2018 when a CMS final rule went into effect. Of the 136 hospitals that initially participated in the model because it was mandatory, 17% were safety-net hospitals. When the model became voluntary in some geographic areas after a CMS rule, only two of the 62 safety-net hospitals eligible for voluntary participation remained in the model.

“This suggests that smaller hospitals and safety-net hospitals, when given flexibility to determine whether they can meet the model’s requirements, will not voluntarily choose to participate or end participation if they are able to do so,” the report said.

Given the benefits of mandatory models, the GAO said CMS should consider using them after voluntary participation in the model shows potential for reducing cost and improving quality of care.

In general, providers participating in the bundled payment models were typically larger on average compared to the national average. For instance, physician group practices that participated in the Oncology Care Model had on average nearly four times as many cancer episodes per practice from 2014 through June 2015 compared to practices nationally.

Participants in the bundled models were also more likely to be located in urban areas, have a teaching status and spend more on targeted episodes.