The argument against mandatory bundled payments: does it hold up?

June 21, 2017


Voluntary vs. Mandatory? What will happen in the near future?

Oh, bundled payments. In a fee-for-service model, a hospital is paid for the number of services it provides to a patient – this includes the cost of equipment, devices used, nursing and so on. In this system, no single provider is responsible for the experience as a whole.

But with bundled payment models, the entire episode of care is taken care of all at once, in one payment. No matter how many services the patient receives over the course of a single episode of care (90 days), the provider is reimbursed a set target price.

Despite recent delays to CMS’ mandatory bundled payment systems, the general consensus is that value-based healthcare isn’t going anywhere. In fact, CODE published a blog that said taking more time to make sure bundled payment systems get it right is ok. Allowing adequate time to work all the kinks out is just part of the process, and it allows some breathing room to those participating.

CMS comment period

Since delays were announced back in March, CMS opened up the floor for a comment period for many to voice their opinions and experiences with bundled payments. Since the period ended on April 19, it turns out that not everyone is on board with mandatory bundled payments.

Out of the 47 comments received, it’s clear that most are in favor of a later start date: January 1, 2018 (but no further) to allow adequate preparation time. However, on the opposite side of the spectrum, a few have called for an end to mandatory bundled payments in favor of a voluntary system.

Other comments express concern over ambiguity – the only thing for certain is that everything is uncertain. Constant changes could lead to years of wasted time preparing for changes that will never come if canceled outright.

The Argument Against

The calls to end mandatory bundled payments all have a common theme: Not enough money and too many rules. The argument is that the money isn’t there to invest in the resources needed for these programs. The additional financial risk is too great for some organizations to take on.

For example, according to the Greater New York Hospital Association, the mandatory initiatives pose a serious threat to safety net hospitals that provide care to low-income and uninsured patient populations. “Medicare and Medicaid rates no longer cover an adequate level of operating and capital costs, and the resulting lack of margins for safety net hospitals does not allow for capital investment,” it said in its comments to CMS.


Here are some of the highlights:

National Association of ACOs

“While we support voluntary bundled payment models, we strongly oppose CMMI’s use of mandatory bundled and episode-based payment models. The scope of these programs is vast, and the current policies related to the intersection of bundles and ACOs hampers ACOs’ ability to succeed.”

“The policies CMS has created regarding this overlap are slowly eroding the healthcare industry’s greatest opportunity for creating true health care delivery system redesign; population health-focused models such as ACOs.”

Healthcare Financial Management Association

“HFMA’s members are deeply concerned with the rapidly increasing number of regulatory requirements that hospitals, physicians, and health systems must comply with. … Given that the only constant in the current environment is that these programs will change (and likely significantly), it makes it difficult for organizations to efficiently invest in the capabilities necessary to improve care delivery and reduce cost.”

“Due to the relatively short implementation times, many organizations are responding by adding significant administrative cost to manage this torrent of change. The volume and velocity of change make it extremely difficult to engage, educate, and provide front-line caregivers with the tools they need to focus on the most significant opportunities to improve individual delivery systems’ performances.”

The American Hospital Association

“We also support the agency’s proposed further delay of these programs until Jan. 1, 2018. …. However, we caution CMS against any further delays … To do so would effectively turn the start date for these programs into a moving target – hospitals and health systems would continue to expend resources to prepare for something that we fear would never come to fruition. This would clearly waste valuable resources, as well as create large amounts of frustration.”

The Arguments for

With all the criticisms in mind, if you get rid of mandatory bundled payment initiatives, experts from the Brookings Institution have counterpoints to each concern, outlined in this blog post for


Here are a few of the highlights:

“Our view: It is important to try mandatory models for bundles as well as other payment initiatives.”

“Selective participation also limits the generalizability of the results of a model test. Even where the other statistical challenges posed by selective participation can be overcome, a voluntary demonstration can typically only provide reliable evidence on how a model affects the types of providers who elect to participate. If bundled payments are ever to reach national scale in Medicare or elsewhere, we will need evidence that they work for all providers, not just “early adopters.”

“Mandatory approaches also facilitate the use of model designs that have potential to drive larger improvements in the efficiency of care. In particular, there is a strong rationale for setting common spending benchmarks for all providers in a geographic area based on the area’s average costs historically. Setting common benchmarks creates a level playing field across providers and allows market forces to drive market share to the most efficient providers, a potential source of major cost savings. “

“In our view, however, the Department does not have a good alternative to the mandatory structure used for CJR and EPM that could preserve the integrity of the model tests and the scope of their potential impact. Making these models optional would be a severe blow to efforts to use bundled payments to improve care delivery in orthopedics and cardiac care, and to the chances for bringing bundled payments to scale nationally in the coming years.”

The blog also noted that getting rid of mandatory bundled payments “would send a damaging signal to the healthcare industry about CMS’ ability to carry out mandatory demonstrations.”

Now for the question of the hour – what do you think? I want to hear from you. Both sides have been presented and I want to know where you stand. Are you for or against mandatory bundled payment models? Email me with any comments!

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