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BPCI Advanced Model Year 4: Should I Stay or Should I Go?

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There was a lot to unpack in the recent announcement that the Centers for Medicare & Medicaid Services (CMS) sent to Bundled Payments for Care Improvement (BPCI) Advanced participants regarding Model Year 4. While some of the policy and methodology changes for Model Year 4 had been alluded to in earlier communications from CMMI, others were unexpected.

One of the key unknowns now facing providers in the program is the financial impact of the Model Year 4 changes.

In a year filled with uncertainty, this has left some wondering, "Should we stay in BPCI Advanced? Or should we exit the program now?"

Since 2012, when Premier first began working with our members on the original BPCI initiative, we have counseled members that the day would soon come when CMS would move to mandatory bundles. It is clear that COVID-19 has shortened the on-ramp to mandatory bundles.

As a rule, Premier recommends that healthcare providers gain early experience in voluntary programs, especially given that mandatory models are forthcoming – and despite the changes CMS just unveiled, BPCI Advanced is no exception.

CMS’s actions indicate that the agency is doubling down on a future that includes episode payment models.

On Sept. 10, in an email to BPCI Advanced participants, CMMI leadership stated that changes to the BPCI Advanced methodology for Model Year 4 were necessary to stem the rising tide of future payments from CMS over the lifetime of the program. CMMI indicated that this outflow of dollars – estimated to be $2 billion – is not sustainable, and changes to the program are necessary, if not critical, to the survival of the program.

On the same day, in an email from Brad Smith, Deputy Administrator and Director, Centers for Medicare and Medicaid Innovation, CMS reiterated its commitment to bundled payment models.

"The Innovation Center remains strongly committed to moving forward with testing bundled payments. As a next step, we plan to accelerate our work on a new bundled payment model that we anticipate launching as a mandatory model after BPCI Advanced. By being mandatory, we are optimistic this future model will mitigate many of the selection effects we have seen in BPCI and BPCI Advanced."

What's the hurry in rolling out a mandatory bundled payment model? The Congressional Budget Office now expects the Hospital Insurance Trust Fund, which finances Medicare Part A, to become insolvent by 2024, two years earlier than previously expected, as a result of COVID-19. If we expect Medicare to be operational for future generations, spending must decrease.

What exactly are the program changes to BPCI Advanced?

The Model Year 4 program changes can be summarized as follows:

  • CMS will apply a realized trend adjustment at reconciliation (capped at 10 percent). It's important to understand that the 10 percent cap, while it will have an impact on the target price, does not inflate or deflate the target price by a full 10 percent.
  • The physician group practice (PGP) offset, a variable used in Model Years 1, 2 and 3, has been eliminated. CMS indicates it is discontinuing this factor to simplify the target price methodology for physician group practices.
  • Individual episodes can no longer be selected; instead, clinical episode service line groups (CESLGs) – of which eight groups are arranged by service line, containing a subset of individual episodes – must be chosen in their entirety.
  • New procedure flags will be applied to improve risk-adjustment precision and the target prices for major joint replacement of the lower extremity (MJRLE). CMS discovered it was underestimating the spending on hips while overestimating the spending on knees.
  • Finally, changes to the clinical episode overlap methodology will standardize episode attribution in the baseline and performance periods. Previously CMS applied attribution one way during the baseline period (which resulted in more acute care hospitals qualifying for participation) and another way during the performance period. It will not be standardized.

Think that now is the time to exit BPCI Advanced? Not so fast.

The programmatic changes may be less dramatic than they seem on the surface. Here’s why:

  1. The collective changes in Model Year 4 may decrease some target prices while increasing others. The introduction of the realized trend adjustment will essentially create a retrospective adjustment to the target price that was not included in Model Years 1, 2 or 3. This will be done by capping the difference between the preliminary peer group trend factor and the realized peer group trend factor at 10 percent. The comparison of your performance to your peer group may result in higher or lower target prices.
  2. On the surface, it appears that no one group will be more advantaged (or disadvantaged) by the changes than any other group (i.e., conveners vs. episode initiators). It has generally been felt that past program allowances, whether intentional or accidental, have advantaged the convener participant. For example, some conveners have gone as far as to establish a new Tax Identification Number wherein they then select (or cherry-pick) only the top-performing providers as their participants.
  3. The creation of CESLGs, while unexpected, will require full-service line participation. Not a bad thing; this has been coming. In fact, this arrangement will shine a bright light on the participants and the non-participants. It is classic change management: the laggards can no longer hide behind the early adopters; buy-in will no longer be optional.
  4. The MJRLE risk adjustment is an adjustment that should have been done at the outset. CMS has realized this and made the appropriate change by introducing new risk flags.

With a confirmed mandatory bundled payment model in our line of sight, now is not the time to step back from bundles; instead, it is the time to lean in to them.

In the past, participants would exit BPCI Advanced, thinking, "now isn't a good time," or, “we'll learn "later." As of today, though, "later" is no longer some indeterminate point in time. CMS has now provided unequivocal confirmation of the following:

  • The trust fund will be insolvent by 2024;
  • Medicare spending must be reduced to sustain care for future generations; and
  • Mandatory episodes will happen in 2023.

The days of volunteering to participate in alternative payment models are quickly becoming a part of our past. One of the Premier members participating in our bundled payment collaborative said it best recently: "Participating in voluntary bundles is the tuition we pay now to learn now how to manage an episode of care."


Now is not the time to exit – now is the time to learn and prepare.

Our experts are helping healthcare providers successfully transition to value-based care models. Premier’s collaborative members have performed up to twice as well as providers in other bundled payment programs.

Learn more about how our bundled payment collaborative is reducing costs, increasing savings and improving outcomes for our members.


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