The IPPS rule could easily be retitled “Get Ready for Bundled Payments,” says Susan Nedza, MD, MBA, senior vice president of clinical outcomes management with MPA Healthcare Solutions, a healthcare analytics consultancy in Chicago. An emergency medicine physician, Nedza previously was a regional chief medical officer at CMS and a senior executive at the American Medical Association. She says the final rule is similar to the Medicare Access and CHIP Reauthorization Act (MACRA), but with a great deal more complexity.

“For the folks in the quality area, the link between the hidden quality metrics and the financial bottom line of the institution is where you need to focus,” Nedza says. “It’s clear that if you miss certain targets, a health system can be at risk for 1% of its Market Basket Update, which can be significant dollars, based on the Medicare volume and the patient population they serve.”

Several metrics can play into that risk, including targets for hospital-acquired conditions, value-based purchasing, and avoiding hospital readmissions. The more direct ties to financial outcomes will generate more interest from finance leaders at the hospital than quality professionals have ever seen, Nedza says. She says that could be a challenge for many hospitals.

“It’s a challenge because it’s not an area where there are a lot of linkages at this point. Most of the quality metrics have been more compliance-based, where you had a minimum to submit and there was either an upside or no penalty,” she says. “But now we’re talking about these metrics being tied more directly to finances, with a real possibility of a negative effect.”

That increased scrutiny from financial executives ties into the move toward bundled payments, Nedza explains. She sees substantial alignment in the final rule with what CMS is doing in its bundled payments program, including more administrative- and claims-based quality metrics. With acute myocardial infarction, for instance, Nedza notes that the IPPS final rule includes metrics that are also being proposed in the bundled payments program.

“What that means is that this becomes almost a transition point, where to meet the stated goal of transferring risk the metrics are going to be more administrative-based and usable in a bundled structure,” Nedza says. “That’s different from what most of who grew up in the quality world are used to. We’re more used to process measures. The linkage is going to continue to increase.”

One of the most talked-about changes is a welcome change to the Two-Midnight rule, imposed in 2014 in response to patients staying in observation status for three or four days when they should have been inpatient. The rule was supposed to prompt a decline in the number of long observation stays and an increase in the number of inpatient admissions, and CMS tried to offset the cost through a 0.2% reduction in inpatient payments. That reduction was strongly opposed by hospitals, including some that sued CMS. As a result, CMS gave in and removed this adjustment for 2017 and also retroactively eliminated the reductions back to 2014.

Nedza says compliance with the Two-Midnight rule was difficult from a practical standpoint and unfairly threatened a hospital’s finances.

“It became increasingly more complicated to try to fix this, and we almost lost sight of what the original intent was,” Nedza says. “In a bundled payment model, none of this matters because the hospital and physician will be held responsible for the costs. You can put them in inpatient or you can put them in observation status, but what really matters is the aggregate costs for that patient.”

There are similar points regarding the quality metrics. The 30-day readmission metrics are going to be extended to 90 days in the bundles, so the risk will be transferred to the providers, Nedza says. That puts more emphasis on quality and less on the data gathering and reporting metrics, she says.

“This is an example of moving from a regulatory requirement to a real quality improvement model,” Nedza says. “For quality professionals, this means expanding the scope to partners outside the hospital. You’re going to have financial risk associated with what happens to patients after discharge, and a significant portion of the potential for improvement is going to be in that post-acute care space.”

Nedza advises quality professionals to start considering how current metrics can be used in a bundled context and measuring a 90-day period. That can show the infrastructure you will need and the stakeholders you need to convene, she says.

She also suggests developing closer ties with the finance department, particularly with the goal of understanding the financial effect of the patients who failed to meet quality measures in the past. Who were the patients that caused the 30-day readmission measure to be suboptimal or optimal?

“We’ve seen over the years that a lot of quality improvement programs increased perceived quality on performance measures, but also resulted in reduced costs,” Nedza says. “You need to do an inventory with physician leadership and hospital leadership of what they are currently collecting and try to identify the things that are actually allowing them to save money while not compromising quality. It’s a paradigm shift.”