Bundled Payments – Success Factors

Bundled payments are an effective starting point for going down the path of value-based reimbursement models.  The most important advantage in beginning with bundled payments is control – you can identify the episode of care and negotiate the payment agreement based on areas of strength in which your institution is most likely to be successful.

Success Factors

If you are considering a transition to value-based payment models, you will need at least the following in place:

  • Cost and reimbursement (medical spending) data for all services incurred during the defined episode of care.
  • Utilization data for services encompassing the episode of care, including all acute and non-acute providers involved.  Timely access to claims data is an important factor in bundled payment models, which may require new agreements with payors and/or the development of third-party administrator capabilities within your institution.
  • Risk stratification of the patient population as a way of projecting future comorbidities and complexities that need to be addressed.
  • Episodes of care in which you are either already competitive (as measured by medical spending and performance on a defined set of outcomes), or have reason to believe that you will be, to work to your advantage in bundled payment arrangements.

Examples of bundled payment models include:

  • CMMI Bundled Payment Initiative – This Medicare program includes four models; Models 2 to 4 require a 3-year commitment and had an initial application submission deadline of April 30, 2012, which was extended to June 28, 2012.
  • ProvenCare – A Geisinger Health System solution based on a set of episodes of care, this program started with elective CABG procedures and has yielded savings.  New bundled payment episodes continue to expand and demonstrate savings among their respective programs.
  • PROMETHEUS Payment Model – Started as a grant from the Robert Wood Johnson Foundation, in partnership with AHRQ, this model incorporates complex risk-adjustment criteria in the bundled payment methodology.  This initiative was recently expanded.  One of the challenges has been related to data complexity – both gathering and analyzing data in a meaningful way.
  • BCBSMA Alternative Quality Contract – This program uses a global budget payment methodology for all medical spending and includes numerous quality and other performance measures.  Twenty percent of BCBSMA providers committed to this initiative in 2009, and it has seen significant growth in provider participation since then.

Action Items

If you are starting to explore bundled payment models, you may want to consider the following action items:

  • Define an Episode of Care – The episode should include an area in which you believe you can both achieve cost savings and meet quality and outcomes measures.
  • Gather Cost, Reimbursement, and Utilization Data – The effort required to obtain this data is almost as important as the data itself.  If gathering this information is particularly challenging, you may need to examine your infrastructure and analytic resources so that monitoring this data can be frequent and easy going forward.
  • Gather Quality and Outcomes Data – Similar to the cost, reimbursement, and utilization data, the effort required to assemble this information is just as important as the data itself.
  • Project Savings and Performance – This is an early reality test in understanding how your organization will achieve savings and at least meet quality performance measures.  Episodes of care that involve supply savings tend to be more successful than those that do not (e.g., total joint replacement and its associated rehabilitation services may be easier to achieve savings with implants than episodes of care involving primarily chronic conditions).
  • Test the Assumptions – The range of financial performance outcomes based on past performance and assumptions regarding future performance must be tested to understand the possible range and impact on your financial performance.  In conducting these tests, you will also want to understand the operational dependencies, if any, that the model implies.
  • Develop and Negotiate a Bundled Payment Model – The main steps for developing a payment model involve packaging a defined episode of care, working closely with physicians to define opportunities for care delivery transformation and protocol standardization, determining the projected savings and measures, identifying the period of time, and proposing the reimbursement agreement terms with a payor.

We can help you assess potential bundled payment episodes of care and models in which your organization is most likely to be successful.

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