Are You Ready for Bundled Payments?
The implementation of the Affordable Care Act has put emphasis on population health while improving outcomes at lower costs. “Bundled payments” represent one strategy for addressing the delivery and performance side of the healthcare equation. A bundled payment is a single remittance to providers and/or healthcare facilities for all services to treat a given condition or population. In theory, when constrained to a fixed amount for all such services:
- Providers and healthcare facilities have a strong incentive to improve coordination of care and drive out inefficiency.
- Providers and healthcare facilities assume the risk for cost overruns as well as those associated with preventable complications.
- The costs for medical care should go down.
- Patient outcomes should improve.
The Centers for Medicare and Medicaid Services (CMS) Bundled Payments for Care Improvement (BPCI) Initiative will test the theory via carefully constructed pilot programs using four broadly defined models of care over the next three years. Participants include acute care hospitals, skilled nursing facilities, physician group practices, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals. CMS stated targets for alternative payment models includes 30 percent of all Medicare fee-for-service payments by 2016, and 50 percent by 2018.
Medicare’s first major bundled payment legislation covers Care for Joint Replacement (CJR) for the lower extremities across a 90-day “episode of care.” With nearly 800 hospitals covered by the 67 Metropolitan Statistical Areas (MSAs) in scope, CMS expects to cover 23 percent of its procedures and save $343 million over the five-year performance measurement period.
While alternative payment models may energize economists and politicians, they’re a clear source of anxiety within the industry. Vertically integrated providers may be equipped to manage a full episode of care profitably by instituting end-to-end quality improvement initiatives and optimizing internal lines of communication. When a single payment is shared among multiple providers, people, processes, and technology, issues can get in the way of resource sharing, communication, end-to-end performance management, and compensation. And, of course, chronic care presents far more challenges to implementation than acute episodes.
Despite the challenges that lay ahead, bundled payments will play a substantive role in future payment models. As the industry works to create a clear, complete definition of each episode of care (including services and supplies) covered by a bundled payment, the following key components help ensure success:
All parties to the design, administration, and evaluation of a bundled payment need access to standardized data that characterizes the costs and outcomes associated with each episode of care accurately. Shared data enables physicians to identify and act on variations in patient populations. It gives them the means to assess the efficacy of different approaches to treatment and monitor performance. Shared data also enables providers to evaluate risk and develop strategies to mitigate it.
A Physician Champion
As subject matter experts and primary front-line caregivers, physicians are critical resources for designing structures that align key resources to deliver value for their patients. Without their support, a physician-driven organization will face a difficult transition to alternative payment models. Therefore, each organization needs a physician champion who enjoys the respect of his or her peers and stands ready to take on the mantle of delivering care in a new way. This individual must also have the capacity to work effectively with other stakeholders.
Analytics is a core competency for setting up and monitoring any bundled payment program. It provides the means through which an organization understands the economics of service delivery and evaluates outcomes using varying models of care. It identifies outliers in terms of cost, outcomes, or gaps in care and support assessment of root causes. Data analysis builds the case for equitable compensation for the organization and the system as a whole. And it creates the tools to institute quality measures that help the organization celebrate victories and correct problems.
Real-Time Financial and Quality Dashboards
Dashboards provide essential information to help management monitor trends in payment bundles over time (e.g., occurrences, average payment, average cost) as well as prioritize continuous improvement initiatives. The financial and quality dashboards will give up-to-date financial information that helps administrators see the financial health of the practice. Since bundled payments are a new form of billing and collecting revenue for the practice these dashboards will be vital to staying on top of how the practice is adjusting to the new payment models and allow administrators the ability to stay ahead of any issues that this will cause the practice financially and adjust accordantly.
Physician Control and Rewards
If we expect physicians’ best efforts to streamline care delivery while keeping patients healthy, appropriate incentives and rewards must be in place. A key motivator is simply giving physicians the freedom to design plans of care that have the greatest chance of generating favorable outcomes. This freedom includes an appropriate provision of time to lead care coordination. And when such efforts realize substantive benefit for the healthcare system, physicians should share meaningfully in the bounty.
While bundled payment strategies have the potential to improve the quality and cost of healthcare delivery, they will be challenging to develop, implement, and maintain. Aldrich can help your organization develop the data systems, analytical frameworks, workflows, and business processes to meet the challenge.