Bundled Payment

Bundled Payments: Value-Based Guidance

February 1, 2017 12:01 pm

With a new administration in the White House, the healthcare landscape is rife with uncertainty. Providers, payers, and pundits alike have been left contemplating the future of healthcare policy in the United States.

The Center for Medicare & Medicaid Innovation (CMMI), Medicare’s platform for developing and testing value-based payment models, is an oft-mentioned target of the Trump administration. Many Republicans believe CMMI has unfairly served as a vehicle to push value-based models—some mandatory—without allowing for appropriate legislative review. On the other hand, the decision could be made to simply shift power to the new administration as a means of revamping existing reforms and developing new ones.

Although some value-based models face an uphill battle, the value-based concept has a long history of bipartisan support. The George W. Bush administration first tested the approach, and such models as bundled payments—single, fixed payments for services by two or more providers during an episode of care—have backing from both sides of the Congressional aisle, making their fate less directly tied to that of CMMI and the Affordable Care Act (ACA).

Momentum has been growing for bundling as a mechanism to enhance care delivery across the continuum. The Centers for Medicare & Medicaid Services (CMS) has tested the concept with Medicare through a pair of voluntary demonstrations focused on orthopedic and cardiac procedures: 2009’s Acute Care Episode (ACE) and 2013’s Bundled Payment for Care Improvement (BPCI).

In April 2016, Medicare launched Comprehensive Care for Joint Replacement (CJR), its first mandatory bundling program based on BPCI. Through CJR, approximately 800 hospitals were placed into bundled payments for hospital, physician, and post-acute care services for 90 days. Medicare also finalized a mandatory cardiac care bundling program set to begin in July 2017, but it is unclear whether that program will go through under the current administration.

Commercial payers have embraced bundling as well, including the nation’s largest private payer, UnitedHealth Group, which is expanding bundling initiatives that have helped save employers more than $10,000 per orthopedic procedure.

Replicable Bundling Strategies and Results

There’s also a growing body of evidence pointing to the value of bundled payment. An article published in JAMA Internal Medicine outlines how Baptist Health System (BHS) achieved replicable hospital and post-acute care savings on joint replacement procedures while reducing Medicare payments, without compromising quality. According to the research, from 2008 to 2015, the San Antonio-based health system, an ACE and BPCI participant:

  • Reduced Medicare payments by 20.8 percent during a period in which such payments increased 5 percent nationally
  • Achieved a 67 percent reduction in prolonged length of stay (LOS)—a validated measure of surgical complications—while patient severity remained unchanged
  • Saved more than $11 million, including a 54 percent decrease in post-acute care during BPCI

Following are strategies deployed by BHS that can be implemented immediately, even by health systems without bundling experience.  

Leverage evidence-based data to reduce variation in implantable device use and associated costs. BHS leadership used clinical data to engage surgeons in a data-driven process for selection of implants proven to produce clinically equivalent outcomes at a lower cost. With this information, leadership arrived at lower target implant prices and contracted with complying manufacturers, including through an anonymous online bidding process. The result was a 29 percent price decrease for implantable devices, double the national trend.

Stress tactical over technical to help drive health system-physician collaboration. BHS formed a physician leadership council, which collaborates directly with system leadership to set program priorities and direction. To keep physicians engaged, BHS stressed the importance of starting and ending meetings on time and limiting them to an hour. Physicians welcomed this attention to the time commitment, with the result that universal participation by physicians in the meetings became the norm.

The authors reached several relevant conclusions regarding efforts such as those undertaken by BHS, including the following.

Cost savings do not come at the peril of quality or patient selection. Prolonged LOS dropped significantly with patient risk scores unchanged, and readmission and emergency department visit rates were stable to improved and consistent with national trends.

Improvements are sustainable over time. Savings and quality improvements outpaced national trends across multiple bundling programs over six years, mitigating the chance of other factors driving the results.

Medicare savings on post-acute savings can be achieved once post-acute providers have “skin in the game” through BPCI. This result suggests physicians and hospitals are likely to redesign care when they have appropriate financial incentives, and it reinforces the importance of careful bundle design.

Although the future of healthcare policy is uncertain, we know that healthcare costs are rising, and people are living longer with more chronic conditions. Hospitals and health systems will continue to face increasing financial and quality pressures. Value-based models such as bundled payments have been proven to enhance care delivery across the continuum. Best practices of participants in bundled-payment initiatives, such as BHS, offer direction for providers, payers, and a new administration contemplating major care delivery changes.

Amol Navathe, MD, PhD, is assistant professor of health policy and medicine, University of Pennsylvania, Philadelphia, and co-editor-in-chief of Healthcare: The Journal of Delivery Science and Innovation.

Gary L. Whittington, CPA, is CFO, Baptist Health System, San Antonio.

Rulon F. Stacey, PhD, FACHE, is managing director, Navigant, Minneapolis; chair, Malcolm Baldrige National Quality Award Board of Overseers; and chair, International Hospital Federation CEO Circle.

Richard Bajner is managing director, Navigant, Chicago.



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