Bill FeraBundled payments—are they good for the business of health care? In a word, yes. They offer payers the potential to cut costs through a simpler payment cycle and to protect against paying for medical errors. They can help providers remove waste and improve profitability by delivering high-quality care more efficiently. Yet transitioning to bundled payment models may require healthcare organizations—both payers and providers—to substantially modify their business operations.

Payer Considerations

Payers will need to change their infrastructure and network management to handle bundled claims, and they will need to develop methods for Andrew Adamssharing clinical and financial information with stakeholders. Following are some key focus areas and action steps.

Payment parameters. In agreement with targeted providers, payers will need to determine which conditions and episodes of care will be reimbursed through bundled payments, and they will need to define the measurements that will be used to assess provider performance.

Payment timing. Payers will need to determine whether it is better to pay providers in advance of treatment, with a target price for the bundle, or after the episode of care has occurred.

Infrastructure. Payers will require technology to adjudicate and review claims for appropriately bundled services. Adapting or acquiring this technology will involve two key steps: implementing transaction systems to consolidate billing, payment management, reporting and analytics, and provider communications, and building tools to measure operational and financial performance and to gauge, and offer feedback on, provider performance.

Provider Considerations

Providers will have to modify their systems to accommodate new ways to bill and be paid for services and to manage patient care—new ways that involving taking on more risk. Key focus areas and action steps include the following.

Revenue cycle readiness. Providers should seek to identify episodes of care that can be best improved upon, and inefficiencies that can be corrected, with a bundled payment approach. They must assess how they will identify participating patients and track all episodes of care. It also will be necessary for them to determine needed changes in documentation, coding, claims submission, and billing and payment operations, and to set procedures for distributing payments to owned and contracted providers.

Technology. Consideration should be give to the extent that current technology can accommodate revised processes, decision support needs, and episode payment rules, and whether new systems are required. Providers should look for integrated systems that enable controlled access to clinical and financial data so all participants in an episode of care can share data for informed decision making.

Patient protocols. Providers should make sure their patients understand the bundled arrangement and what to expect from it. They should leverage the opportunity to improve patients’ care experiences through transparent pricing and simple explanations of their financial responsibility.

Extra controls. Adapting to bundled payments will require providers to refine their rejections and appeals process. Depending on contractual agreements, a provider may pay other providers connected to an episode of care before the provider itself is paid. Delayed or denied payments can present serious cash flow issues.

As the industry strives for lower costs and improved patient outcomes, new approaches to payment and delivery will continue to flourish. Bundled payments present a prime opportunity for payers and providers to collaborate in reaching a shared goal: a less-costly, more-efficient payment system that supports value-based care.


Bill Fera, MD, is a principal in Ernst & Young LLP’s Advisory Health Care practice and is based in Pittsburgh, PA. Follow Bill on Twitter: @BillFeraEY

Andy Adams is a senior manager in Ernst & Young LLP’s Advisory Health Care practice and is based in New York, NY.

The views expressed herein are those of the authors and do not necessarily reflect the views of Ernst & Young LLP.


Publication Date: Tuesday, July 01, 2014