Bundled Payment

Bundled Payments for Hospitals: Lessons in Collaboration

May 25, 2017 10:05 am

Bundled payments often are depicted as the next big thing in health care, but they have been around in some form for more than 30 years. In bundled payments, physician professional costs and post-discharge costs (for up to 90 days) related to the inpatient episode are rolled up into thea single payment. And just as they were when DRGs were rolled out in the early 1980s, hospital leaders are concerned about financial accountability and responsibility, particularly for post-discharge costs. But finding ways to work together can present an opportunity for hospitals, clinicians, and health plans to enjoy a measure of prosperity.


As a first step, hospitals, clinicians, and health plans must find ways to work together for their mutual benefit. An effective bundled payment program can help hospitals lower costs and adverse outcomes of care, resulting in better margins. Physicians need to be informed of the costs of services and supplies, and those high-volume expenditures that may be amenable to lower levels of utilization.  Furthermore, physicians and nurses need to have opportunities to voice potential solutions.  Shared savings programs with participating physicians provides an incentive to eliminate unnecessary services, and a stimulus for better outcomes across the continuum of care. Health plans will know what their costs will be prospectively, and the bureaucracy of managing endless claims will be reduced.

Tracking Results

Second, hospitals and physicians must know their results of care. A recently published analysis of surgical outcomes in the Medicare population for hospitals that provided the largest volumes of charity care in the United States found that, among facilities with suboptimal performance assessment, hospital and health system leaders are well aware of inpatient outcomes, but they do not adequately track readmissions. Other recent research has shown that 20 to 40 percent of surgical patients who are readmitted do not go to the same hospital where the procedure was performed. Agreements among facilities within a geographical location to notify the original hospital of a readmission or an emergency department visit will be essential for tracking patient outcomes. Patients must be informed that best outcomes can only be achieved when post-discharge care is provided by those who know the full scope and details their hospitalization and directed to contact their primary care physician before going to an emergency department—or at least notify them afterward. In bundled payment arrangements, better communications among providers, patients, and health plans will be necessary to prevent emergency department visits and readmissions.

Eliminating Unnecessary Services

Hospitals and physicians must work together to identify services that do not deliver an ROI in improved patient outcomes. For example, based upon current evidence, pressure irrigation devices could be eliminated, saving millions of dollars annually without any impact on outcomes. The duration of antibiotic therapy also can be reduced for many infections. Similarly, itemizing the high-cost services for inpatient and post-discharge care permits a systemic approach to eliminating or reducing practices with little or no impact upon outcomes of care.  Supply chain decisions regarding medications, lab tests, prosthetic devices, and imaging studies also should be made jointly to reduce overall procurement costs. Comparing practices of clinicians with the best and suboptimal outcomes can identify those service costs that can be modified or eliminated without adversely affecting outcomes.

Focusing on Improvement

Finally, hospitals and physicians require a coordinated focus on improvement in the outcomes of inpatient care. Major inpatient complications are predictors of readmissions. Coordinated analysis of suboptimal outcomes, with specific care redesign strategies can yield improved outcomes. Results should be visible to both clinical and financial stakeholders: When clinicians see their performance measured against that of others in the facility or in other facilities, they can see for themselves where they have opportunities for improvement, and are more likely to be responsive to changing their practices accordingly.

Only by aligning incentives, knowing the outcomes of care, and making a focused and coordinated effort to eliminate waste while improving performance can healthcare organizations turn alternative payment models into an opportunity for better margins. 

Donald E. Fry, MD, is executive vice president of clinical outcomes, MPA Healthcare Solutions, Chicago. 


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