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:
