What Are Bundled Payments and Are They Here to Stay?

Key Takeaways

  • Current vendor solutions are limited and generally require additional advisory services.
  • Few available solutions offer workflow integration, especially across post-acute care settings, to assist in the execution of bundled episodes.
  • Larger HCOs will weather the shift to bundled payments more easily than their smaller counterparts, especially as bundled payments begin to scale across multiple service lines.

Bundled payments have been looming on the horizon for healthcare organizations (HCOs) at varying degrees of intensity for at least the last thirty years. As healthcare costs have continued to rise, payers and providers are increasingly viewing bundled payments as a viable alternative to fee for service (FFS) payment structures.

Recognizing that this trend is here to stay, we authored the upcoming report, Bundled Payments: Current Tools and Strategies, to help HCOs understand the impetus behind bundled payments as well as provide a detailed perspective on how healthcare information technology (HIT) vendors are prepared to support this payment modality transition.

The Drive for Bundled Payments

Bundled payments are positioned to serve as a transition between FFS and capitation. By definition, a bundled payment links multiple provider payments into one care management and payment system during a specific episode of patient care during a defined period of time. There are two types of bundles: prospective and retrospective.

A retrospective bundle incorporates a reconciled budget with the payer or “convener” as a financial integrator of the fees paid out instead of putting the responsibility upon one provider. This arrangement is built upon a FFS system and is retrospective because providers first receive their usual FFS payments, and then they receive an additional payment after their total costs are assessed and if cost savings were generated. However, cost assessments can take a year or more to complete after services are initially provided.

A prospective bundle pays a fixed price for a set of services covered in the bundle before all of the services are rendered. An average cost per episode of care is determined based on historical data and/or regional costs and payment is delivered to providers when an episode is initiated, rather than waiting until the entire episode has been completed. Adjustments to payments are made after the fact to account for outliers, excluded episodes, and other factors.

Retrospective payment bundles are the most widespread bundled payment system primarily due to the abundance of participation in the Bundled Payments for Care Improvement (BCPI) Initiative and the Comprehensive Care for Joint Replacement (CJR) model. Retrospective payments for bundles are also easier to understand, administer, and execute, which is why they comprise the majority of bundled payment financing arrangements to date.

A CMS-led Initiative

CMS is still navigating how to implement this payment structure while not alienating providers, and BPCI was an attempt to find a middle ground that is palatable to providers while capitalizing on the cost savings bundled payments offer payers.

Unfortunately, determining this middle ground has led to CMS sending conflicting messages to the industry. In late 2017, CMS rescinded rule changes that required mandatory bundled payments for providers to test the effect bundled payments would have on cardiac and orthopedic care. CMS noted that responses from providers to the mandatory bundled payments cited concerns over both the process by which costs for episodes were determined as well as the ability for smaller HCOs to comply with the process.

Despite these setbacks, CMS is not withdrawing support from bundled payments as a whole and has instead created the BPCI-Advanced, a voluntary iteration of BPCI with the same goal of aligning incentives among health care providers. Early adoption of the BCPI-Advanced program has been robust although it remains to be seen how many of these providers might exit early next year. Additionally, HHS Secretary Azar indicated last month that mandatory bundles are coming in the near future for radiation oncology and possibly other providers as alternative payment models.

Commercial payers have shown interest in bundled payments, but have been slow to introduce the practice. Although we have seen increased adoption from some payers, the general consensus is that these organizations will wait until the concept is proven before devoting resources to the change. We might have to wait until bundled payments are once again mandated by CMS before commercial payers adopt the model.

Provider Reservations

While the attitude of providers towards bundled payments could be best described as “wary,” there is still opportunity for healthcare providers to lower their costs while improving the standard of care. Yet, success with bundled payments requires close coordination between multiple providers over a varying timespan, something that many providers struggle with.

In order for bundled payments to work for both patient and provider, an HCO needs to have the ability to identify who is eligible for bundled payments early in the treatment cycle through monitoring and tracking. They also need to have a network and processes in place to engage affiliated and community providers that are necessary to the bundled payment process. Not surprisingly, many HCOs are hesitant to invest the organizational resources necessary to establish this level of collaboration.

Specialty physician groups that are only focused on engaging in one or two retrospective bundles will be able to change more rapidly but over the longer term, it will be harder for smaller HCOs to effectively scale bundled payments across multiple services lines within their organization. Another advantage larger systems have is systems and processes for dealing with post-acute care needs that are critical for succeeding in bundled payments.

In general, large HCOs with wide networks and established reporting and monitoring processes are better equipped to handle the transition to bundled payments and effectively scale these program although several specific factors (e.g., episode type, target price, exclusion criteria, risk adjustment) will affect how a provider performs.

The Tools for Bundled Payments

Our report focuses primarily on identifying the IT environment that supports, and will support, bundled payment plans. We were able to identify a number of key issues that software solutions must address, including patient tracking, care process redesign, and physician engagement. As of the writing of this report, no vendor offers a comprehensive solution to the myriad reporting and management challenges that bundled payments present.

We did identify commercially available solutions to deal with cost and quality reporting requirements inherent in the bundled payment process. Unfortunately, HCOs are going to have to develop piecemeal processes that incorporate multiple systems until vendors are able to provide a robust comprehensive solution. We expect that as bundled payments garner more support and interest, HIT vendors will recognize the market opportunity and develop systems to specifically address these issues.

Conclusion

The question is not whether bundled payments are going to see greater utilization, but rather to what extent will bundled payments affect healthcare payers and providers? Providers especially will need to have a plan and processes in place to reduce risk to their revenue streams as bundled payments become more ubiquitous.

Our report, Bundled Payments: Current Tools and Strategies, outlines how providers can navigate these changes and identifies IT solutions that may assist them. It provides detailed insight into what bundled payments are, how to execute them, and the challenges associated with their orchestration. Furthermore, it contains comprehensive vendor profiles and evaluations of the solutions they offer, which we hope will assist providers as they prepare for this transition.

Sign up today for updates about when the report is available for purchase, as well as admittance to a webinar that will supplement our findings.

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HIMSS18: Care Management and Engagement

HIMSS18 Review 2 of 4

By Matt Guldin and Brian Eastwood

Having returned and (mostly) recovered from HIMSS18 in Las Vegas, the Chilmark Research team wanted to share our thoughts on what we saw in presentations and heard in conversations. This post includes our analysis and insights on Care Management and Engagement; additional posts will consider Analytics/AI and Interoperability as well as Population Health Management and Convergence.

Overall, we were pleased to see progress on telehealth, as well as a broader understanding that healthcare organizations (HCOs) will get patient engagement right only when they assemble a comprehensive collaborative health record (CHR). On the other hand, we were disappointed in slow progress toward addressing two prominent public health issues — the opioid crisis and behavioral health — as we didn’t see many large-scale use cases for engagement in general or episodic payments in particular.

There certainly was an increased awareness and discussion of integrating behavioral health into primary care and care coordination at HIMSS18. However, this shift is still in its very early stages.

Care Management Themes

Lack of focus on the opioid crisis: Last week, the CDC released a Vital Signs report that showed a 30% increase in emergency department visits due to suspected opioid overdoses from July 2016 to September 2017. Despite this continued public health crisis, there was a general lack of targeted solutions or marketing focused on this topic at HIMSS18.

Instead of vendors helping providers to help address this problem at the point of care or service, though, there is a “top-down” approach at the state level emphasizing tighter prescription regulations, inventory control, and tracking. There were some specific examples we did find though. One vendor, Venebio, has created a predictive analytics solution to identify and predict the specific overdose risk over the next 12 months for a particular patient; Venebio is selling to state Medicaid agencies, payers, and providers. Collective Medical, through their EDIE report, is helping to provide a list of current medications for ER patients which facilitates identifying drug-seeking patients.

Integrating behavioral health is in its early stages. There certainly was an increased awareness and discussion of integrating behavioral health into primary care and care coordination, including several educational sessions on the topic. However, this shift is still in its very early stages. To be determined: What types of models by the work best in varied primary care settings; how IT solutions such as telemedicine and digital health might help to address various challenges, including a lack of sufficient behavioral health providers and lengthy behavioral health service queues; and the role of self-support tools, which have high levels of engagement and effectiveness.

Scaling episodic payments remains a huge challenge. While a number of HCOs have already engaged in an episodic payment for a particular procedure or two in a service line (such as cardiology or orthopedics), scaling these efforts across several service lines for an HCO remains a challenge as solutions remain immature and most HCOs are in the early stages of forming post-acute networks. Some of the biggest challenges include the timely notification of when a patient enters into an episode, an inability to track patients across and outside the HCO, and an effective patient engagement strategy that is customizable to meets the needs of a patient in a particular episode.

Engagement Themes

Data matters. If there was a unifying theme to the preconference Patient Engagement & Experience Summit, it was the need to begin patient engagement efforts with a CHR – one combining clinical, claims, consumer, financial, and patient-generated health data to provide a comprehensive view of a patient’s diagnoses, social determinants of health (SDoH), and barriers to receiving care. Record in hand, healthcare organizations (HCOs) can shift away from generic patient outreach – think portal message, email, or even snail mail flier – toward outreach that better meets patients’ individualized needs.

Use cases remain simple. The operative word above is can, as HCOs aren’t yet meeting individualized needs. Many use cases at the preconference summit highlighted a single condition: Asthma, colon cancer, sepsis, substance abuse, outpatient physical therapy, etc. Two factors seem to cause this. The first reflects the adage that you can’t manage or improve what you cannot measure. Since HCOs are measuring readmission rates, HCAPHS scores, and joint replacement bundled payment performance as if their financial lives depended on it (and they do), patient engagement and experience efforts are frequently tied to these metrics.

Behavior change is hard. The second factor is the challenge of personalization. It’s fairly easy to use a CHR to identify what makes a patient unique (thanks to advances in AI and machine learning that colleagues Ken Kleinberg, Brian Edwards, and Brian Murphy covered in a separate HIMSS recap). It’s much harder to align those unique characteristics to specific actions that will improve clinical outcomes. As noted by Dr. Heather Cole-Lewis, Johnson & Johnson’s Director of Behavior Science, such alignment requires context, and today’s engagement solutions have not been designed to handle the complexity that comes with that context. For example, to accomplish a care plan goal of lowering blood pressure to 140/90, Cole-Lewis said, a patient may need to do one (or more) of at least seven things:

  • Start doing something.
  • Stop doing something.
  • Keep doing something.
  • Learn about doing something.
  • Do something once.
  • Do something for a year.
  • Do something forever.

Telehealth is maturing. If there was a bright spot for the engagement domain at HIMSS, it was the level of activity in the telehealth market. (Full disclosure: I wrote my first “telehealth is ready to take off” article in 2013.) Nathaniel Lacktman, chair of the law firm Foley & Lardner’s telehealth industry team, pointed out that the recently passed federal budget includes several extensions of telehealth reimbursement under Medicare, particularly for kidney dialysis, telestroke, and the patient-centered medical home. This should provide HCOs with the impetus to initiate or expand telehealth efforts that have otherwise stalled.

Plus, as John Moore pointed out in his HIMSS18 recap, telehealth vendors are pushing to cover the vast area between low-acuity DTC services and inpatient services through a variety of strategies. These include offering chronic condition management, supporting outpatient care settings, or unifying their inpatient and at-home UX. Stay tuned for Chilmark’s forthcoming report, Telehealth Beyond the Hospital, which will examine these strategies in much greater detail and identify which vendors are best positioned to execute in this market.

Major Medical Decisions Still Require a Leap of Faith

Last weekend during dinner with my family, the topic of total knee replacements came up. My aunt, who is 70, is having her first procedure done and wants to know what information is available to help her make a better decision. She hoped that I might have some insights, since she knows I am researching bundled payments for total knee replacements.

I asked what she already knew. She stated she had plenty of anecdotal advice and recommendations from my uncle, her primary care physician, friends, and even professional colleagues. It varies a bit but basically consists of “I had my procedure done at this particular facility by this orthopedist and it was great.” This was helpful but did not really help her to know where to begin. She explained that she had gone to ‘Dr. Google’ and entered a particular recommended facility or provider, along with the keyword “total knee replacement.” This returned a large number of results. She clicked on a few links but quickly grew disheartened and frustrated by not readily finding the information she was looking for or learning the differences in the types of ratings data that was available. After printing out a dozen pages over 30 minutes, she gave up.

What’s most important to my aunt is her likely functional status a year or five years from now. How quickly she will be able to resume normal daily activities of living, such as walking and bathing, as well as her varied daily routine? Potential complications and pain associated with the procedure itself are a secondary concern given her health status.

Unfortunately, I told her that information is just not readily available. Several organizations, including CMS, provide limited outcomes-based information at a facility level on total knee replacements. Additionally, a tool made available by ProPublica last year provides limited outcomes-based information on how particular orthopedists have performed. She was unaware of a few of these resources and appreciated that I provided her with the details.

I tried to explain that a registry has been gradually adding facilities and collecting outcomes-based data on total knee replacements – but the data has not been made publicly available though and still only represents less than 20% of all total knee replacements done annually in the United States. Additionally, I mentioned several rating systems that evaluate the outcomes of total knee replacements – but these are not used or collected in any systematic fashion.

After explaining all of this, my aunt was more perplexed than ever. I told her to use some of the information sources I had provided but recommended that, in the end, she would have to make more of a “gut” decision on what facility and provider to choose. I did tell her to focus on a few other things she had overlooked:

• Did the orthopedist talk to her about her particular goals and preferences?
• Did the initial consultation with the orthopedist address particulars about what my aunt should expect, including detailed and patient-specific information on pre- and post-surgery concerns?
• What device does the orthopedist recommend, how long has he/she been using it, how many times he/she has implanted it, and what is the device’s track record been?

At end of this lengthy conversation, my aunt felt better, but she still didn’t know with what orthopedist she should schedule an initial consult. She was going to use some of the limited publicly available information and take a “leap of faith” after meeting with the orthopedist and obtaining additional information.

As I conduct further research on this topic and talk to various health IT vendors and medical device manufacturers, I am curious to see what types of solutions they offer to help providers (or payers) address this glaring need for outcomes data, as well as the administration and clinical management of bundled payments. Based on the dinner conversation with my aunt, I see several clear needs in this market:

Increased outcomes information meaningful to patients – There is a need for patient-reported outcomes using a standardized, clinically-validated rating system for total knee replacement collected at a facility-level
Risk-adjusted information on device performance – This is always going to be a challenging issue to address but information today is either limited to marketing collateral from device manufacturers or an orthopedist’s recommendations
Customized care plans – Care pathways are increasingly being mentioned but patients need more transparency into what this means including how this is being translated into individualized care plans
Patient-decision aid tools – Patients need tools to enable better shared decision-making and help to customize the options available to them
Guarantees from the facility and/or device manufacturer – Some providers organizations and device manufacturers have become to offer this since 2014 but it still rare overall
Price transparency – While this is not as much of a concern for Medicare patients especially those with Medigap coverage, it is for patients in traditional commercial coverage especially as deductibles and out-of-pocket limits continue to steadily increase

Surgical procedures, especially invasive procedure like total knee replacements, will always have a degree of risk and inevitable complications. If more responsibility, especially cost, is going to be thrust on to patients like my aunt, they need much more substantial information and tools to help them make this decision including where this procedure should be done, who should perform it, what device should be used, and what outcomes they can realistically expect to achieve.

For more information and analysis of the care management market, the 2017 Care Management Market Trends Report will be available shortly for purchase.

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