Implications of Trump’s Executive Order on Bundled Payments

Implications of Trump's Executive Order on Bundled Payments

On Inauguration Day, Donald Trump followed through on his campaign promise to “roll back” Obamacare by signing an executive order to minimize the economic burden of the Affordable Care Act (ACA) “pending repeal.” Within the order, federal officials are directed to “waive, defer, grant exemptions from, or delay” implementation of the ACA “to the maximum extent permitted by law.”

While this move wasn’t surprising given the new president’s vocal opposition to the law, the executive order alone merely slows the law down; the law itself can’t be weakened or changed without congressional support. Given the divisiveness among our current political leaders, a repeal and/or replacement could take a while to secure. This leads a number of healthcare administrators between strategies with one foot unsteady on the fee-for-service dock; the other, unsure of when to fully jump in to the value-based care boat.

Under a bundled payment program, a single comprehensive payment is made for a group of related services, based on the expected costs for a clinically-defined “episode of care” like a total joint replacement. The payment covers all healthcare expenses (i.e. hospital or surgery center fees, physicians fees, implants and supplies, pain management, rehabilitation) from the time of the initial surgery through 90 post-discharge. If the providers involved work together to achieve specific savings and quality targets, they are eligible to share a “reconciliation payment”; those that don’t can lose out on these shared savings and/face “repayments.” If you’d like to better understand bundled payments and its effect on hospitals, watch our free recorded webinar.

In my personal inference, Donald Trump’s recent executive order does little more than potentially slow down the role out of the cardiac and hip fracture bundles introduced last August. I believe the fate of bundled payments is more tied to the confirmation of Dr. Tom Price – an orthopedic surgeon recently nominated by the president for Director of Health and Human Services. As an outspoken critic of mandatory bundled payments in the orthopedic setting, Dr. Price is in a position to modify or eliminate this program. Many I have spoken with feel that between his public stance on the program and the savings realized thus far, he is most likely to roll back the mandatory participation, making the program voluntary.

While that is one option, I don’t believe CMS will be able to achieve the desired effect of getting costs under control and creating a more sustainable program if organizations are allowed to opt in or out. And, realistically, how much longer can less efficient hospitals really afford to continue operating under today’s conditions?

Over the last decade, we have seen a few key trends shaping the financial health of our clients. Changes in technology have added direct costs while shifting cases from the inpatient to outpatient setting which can limit reimbursement. Increased payor scrutiny has curbed utilization. Even within those service lines experiencing volume increases, the majority of growth is reportedly coming from a rise in patients covered by government-driven payers including baby boomers enrolling in Medicare, the expansion of Medicaid across a number of states and less lucrative third-party products offered under the Affordable Care Act.

These are trends that will outlast Obamacare or its successor. Hospitals that fail to control costs will face diminishing margins as reimbursements continue to shrink. This is even before they face any additional penalties for not successfully transitioning to a bundled payment environment. Programs that are thriving under the bundled payment models have developed the structures, processes and aligned incentives needed to break down the traditional silos that sometimes characterize healthcare. While many may disagree on the merits of the Affordable Care Act, or fear the shift to bundled payments, it is hard to argue against a program that engaged providers in a shared commitment to evidence-based care standards.

For the full article, written by Becker’s ASC Review, click here.