Ask the Experts: Bundled Payment Start Date and Allocation
We are implementing a new bundled payment program. From an accounting standpoint, what parameters have other hospitals used to set a start date for moving to a bundled payment versus fee-for-service? Or are these payment models typically started on a per patient basis? Have you experienced any problems with patients receiving similar treatment being on different payment plans (i.e., fee-for-service versus bundled payment)?
Answer 1: In the ideal world, a bundled payment should have no effect on charge capture or billing. You simply accrue the contractual per the contract for open accounts of bundled-pay patients in the monthly financials. After posting the payment, you adjust off (contractualize) the difference.
If you can set up a separate insurance company (insurance plan) series for the bundles, there is no accounting reason to pick a particular start date. If you are not able to do so, then a start-of-year beginning makes more sense. That’s because you’ll have to tweak the contractual calculation to accommodate the discount inherent in the bundle. However, this is not recommended as it’s very imprecise.
Yes, these payment models typically start on a per-patient basis. As a CFO in five different health systems, our organizations created custom bundles beginning in the 1990s, mostly on the fly. I believe you’ll find that hospitals have been bundling custom packages for self-pay for years for plastic surgeries, obstetric deliveries, eye surgeries, and other procedures. For these cases, there was no clinical protocol associated with the bundle—the surgeon or main doctor on the case drove utilization—other than to say, for example for a delivery, “We will do it for $3,500 and if you go over 48 hours we will charge $500 per day.”
As you move to more complex cases, such as hip replacements or heart valves, you will not want to do a bundle unless you can change clinical practice from your “average” to add value. You’ll need to do this either by reducing variation or reducing total cost. If you just do a bundle for the sake of a bundle without an underlying plan to change the clinical care process, you’ll lose your shirt at some point.
That said, once you develop the “perfect care protocol,” it’s easier operationally to apply the bundled-care protocols to the entire population, not just the bundled patients. That way, you’ll have different payers and payment rates all receiving the same bundle of services. This is not a problem. You’ll just apply the contractual as appropriate to each payer as you do now.
In reality, you probably already are bundling (i.e., most hospitals have a standard “package” of services for birthing programs). For these bundled services, you already handle patients who have different types of coverage (i.e., Medicaid, commercial plans, and self-pay).
Related to your question about problems with patients receiving similar treatment being on different payment plans (i.e., fee-for-service versus bundled payment), you want to give all patients the same care that is driven by evidence-based research and considering that patient’s unique circumstances. You don’t want to offer different care plans for different payers. Of course, you’ll have some variability based on unique patient conditions. However, how much you allow without exiting the bundle is up to you.
I think the bigger and more complex issue in bundles is how to incorporate professional fees. Unless the CPT code is a bundled code—like sleep labs—where you can bill it with or without the professional fee, most insurance companies cannot split a payment between hospitals and other providers in a manner that is acceptable to both parties. So, you may need to set up your own accounting process to reallocate payments based on bundle criteria ‒ not health plan benefit criteria.
The most extensive bundling I ever did was with employed physicians for cash-paying patients. We developed a separate health plan code for this. The physicians’ offices would get a patient sheet with the plan code, triggering them to know they are not to bill the patient but to expect a payment from the hospital. The hospital collected the global fee and allocated it per contract terms.
This question was answered by: Paul Selivanoff, principal, Simply Better Outcomes, Adams, Nebraska.
Answer 2: We have not yet started a bundled payment program although we have been working with health plans in this area. The assumption is that it would be started on a per patient basis. New patients who fit certain parameters would be paid via the bundle, so therefore it would be possible for patients receiving similar treatment to be on different payment plans.
This question was answered by: Ruth Landé, vice president, patient revenues, Memorial Sloan-Kettering Cancer Center.
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