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Knowing Your Data is Key to Bundled Payments Success

Posted by Robin Corderman on Oct 3, 2016 10:00:00 AM

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Along with accountable care organizations, risk-sharing arrangements, and medical homes, bundled payment innovations are yet another tool in CMS’ toolbox for moving closer to value-based care.  Bundled payments are designed to test whether costs can be lowered and health outcomes improved if providers work closely together to coordinate care. 

How much do you know about bundled payments? Let's take a moment to review some overall information. 

What are Bundled Payments? 
At the most basic level, a bundled payment is a defined reimbursement or set of reimbursements for an “episode of care” or specific time period.  Unlike traditional fee-for-service reimbursement, where an episode of care involves separate reimbursements for every organization and provider that delivers care, bundled payments are given to one entity (the “episode initiator”), which then distributes payments to other providers or facilities through a pre-determined formula or figure.  (Alternatively, payments may be made directly to all providers, but the payment amount has been set beforehand to make sure that the sum total of payments does not exceed the cost of care.) 

What’s in a bundle?
 Depending on the specific program, CMS has dozens of clinical episodes listed in their pilot initiatives., The existing Comprehensive Care for Joint Replacement program, which originally focused on hip replacements, has been extended to include other hip surgeries, and CMS recently proposed a new model focused on heart attacks and bypass surgeries.  Any service that can lend itself to being “packaged” into a bundle could end up in a bundled payment program. 

How do Bundled Payments Save Money?
Bundled payments attempt to “align incentives” (in the language of economics) by encouraging the episode initiator – hospital, ACO, or payer – to closely coordinate care, reduce unnecessary care - including hospitalizations -, and optimize workflows that emphasize communication among stakeholders.  The best case scenario for bundled payments is that the cost of care for the episode is less than the amount allocated, and providers share in the savings.  The worst case scenario is that the bundled amount distributed is less than the cost of care, and money is lost. 

Read "5 Steps for Financial Success in a Value-Based Payment Environment" to learn how healthcare payment structures don't have to mean negative financial impacts. 

Do bundled payments achieve good outcomes in cost and quality?
Evaluations of various bundled payment initiatives have shown mixed results.  The Lewin Group recently released the second annual evaluation of the CMS Bundled Payments for Care Improvement Initiative.  Some episode groups, such as orthopedic surgery, reduced costs and increased quality per episode, while others showed no significant changes to quality or cost.  CMS emphasizes that results are “encouraging”, but there is still much to be determined.

What Should a Provider Consider When Weighing Bundled Payments
Bundled payments may be one way for providers to experiment with bearing risk and understanding capitated (also known as “global”) payments without having to jump into the deep end of the pool and assume risk for every patient and every episode of care.  Succeeding at bundled payments can be a test of how well an organization understands its patients and its data. 

All health care reform initiatives highlight the importance of obtaining, assessing, and integrating data from disparate sources. This is particularly true for bundled payments. Entities considering initiating or participating in a bundled payment program must have a deep understanding of the following:

  • what it costs to deliver their portion of care; (Though this sounds simple, many provider systems are not set up to easily determine these numbers.)
  • how the bundled payment is calculated and distributed;
  • how the episode of care is defined and;
  • how risk adjustment is calculated, which attempts to analyze how patient health status will affect costs.

Partner organizations (e.g. post-acute facilities) who want to be included in bundled payments should be able to approach the episode initiator with data displaying their ability to provide high-quality, low-cost care consistently. 

Providers should also consider the fact that CMS has proposed that physicians who participate in bundled payment program qualify for payment incentives under the Quality Payment Program.

These considerations are only a few of the many decisions that must be made around the complex issue of bundled payments, an innovation where there is still much to be learned and explored.

Contact us at engage@primaris.org to discuss how we can guide you in your quest of the triple aim of improving experience of care, improving population health and reducing total costs of care.

You can also visit CMS's site for more information regarding bundled payments.  

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Topics: value-based care, value-based payments

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