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 Strategies and Tools, 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.

On January 30, 2019, we are hosting a webinar on this topic. To attend or just be on the list for the recording, please click here to register.

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Did You Know?

Making the Most of the CCM Code

Challenges of Billing

One of the most buzz worthy topics at the recent HIMSS conference was CMS’ new CPT code for chronic care management (CCM). The code will pay providers and care teams $43 PMPM for the non-face-to-face time they spend managing complex, chronically ill patients’ health. Scaled across patient panels and office practices, this represents no small amount of potential new revenue. Yet, the billing requirements accompanying the new payments are complex and comprehensive, with considerable implications for workflow, documentation, IT customization, patient engagement, and more. This month’s domain monitor provides a high level outline of the new CCM code, a breakdown of the major challenges practices face in billing for it, and some early signs of how the health IT industry is responding to the opportunity with new solution capabilities.

To read the full article, please submit your information below:

Payers Accelerating the Move Towards Value-Based Reimbursement

Chilmark Bight

Recently, HHS Secretary Sylvia Burwell announced plans to accelerate the transitions in Medicare reimbursement models that have already been under way since 2011. Following suit, the Health Care Transformation Task Force, a private-sector alliance, announced their intentions to accelerate the healthcare industry’s transformation to value-based reimbursement (VBR).

To read the full article, please submit your information below:

Care Coordination: A Dynamic, Rapidly Evolving Domain Deserving of Coverage

Coordination Concept

Effective and efficient care coordination across a community is quickly becoming a cornerstone in a healthcare organization’s (HCO’s) strategic efforts to manage the health of the population it serves. Moving beyond discharge summary distribution to reduce readmits, which is still far from perfect, HCOs are now setting their sights on care coordination for the ability to optimize care management, disease management and utilization management (CM, DM & UM). The solution landscape for care coordination is a highly diverse one that has, to our knowledge, seen very little in the way of formal analysis. Since one of Chilmark Research’s core tenets is to bring clarity to technologies that have the potential to be transformational to the delivery of care, we are launching a new Domain of coverage – Care Coordination. This Domain Monitor gives an early preview as to our current thoughts, informed in-part through discussions with CAS clients, on this important area that will guide our research in the coming months.

To read the full article, please submit your information below:

Referrals Management Changing with Care and Payment Reform

It Needs More

Referrals occupy a singular place in healthcare. Every HCO and provider wants more of them under FFS. Under VBR, HCOs will strive to reduce leakage with in-house consults but will still be referring patients to and receiving referrals from other providers. To become more efficient, referrals and consults will need to be accompanied by more clinical and administrative data, necessitating better integration with other clinical and administrative applications. What is clear is that a referral can no longer be seen as an isolated event and closed-loop referrals management applications can’t stand alone.

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Information Blocking Laws — Ready, Shoot, Aim

Interference

The most straightforward definition of interoperability we have heard so far is from David Kendrick, CEO of MyHealth Access Network in Oklahoma, “Every patient deserves to have their complete, longitudinal medical record available wherever and whenever decisions are made about their health.” By this measure, interoperability is still unusual in most sectors of the U.S. healthcare system. The ‘lack of interoperability’ between EHRs has become a clarion call for those dissatisfied with EHRs in general as well as with the fruits of EHR certification and the MU program.

More troubling, interoperability ills are now being cited as a reason to impose civil penalties for ‘information blocking.’ ONC’s report to Congress on information blocking in healthcare acknowledged that information blocking is widespread even though its exact scope remains a mystery. The report admits that the causes are more complicated than the simple competitive concerns of EHR vendors and HCOs. Vendor gaming of pricing and features is real. Providers resist sharing data with real or perceived competitors. To borrow a phrase from Exxon’s CEO and apply it to healthcare – most HCOs choose not to lose patients on purpose. The report’s key takeaway is that business practices, rather than technology, are a primary driver of data hoarding by different healthcare stakeholders.

To read the full article, please submit your information below:

The Waning Influence of ONC

Market Challenges

Many are beginning to question ONC’s role in the further promotion of EHR adoption and use. Healthcare organizations of all sizes are struggling with a rapidly shifting landscape that is increasingly pushing such initiatives as compliance to ONC’s meaningful use program further back on their list of priorities. Despite the efforts of new ONC director, Dr. Karen DeSalvo, to redirect ONC’s current programs, many factors are working against her office and ONC’s influence in the market will continue to wane.

To read the full article, please submit your information below:

Expanding the Clinical Network for Value-based Care

expansionThe provider world is dominated by organizations that believe in a slowly evolving status quo that will somehow carry them across the threshold of accountable care to a fully formed world in which VBR-compliant ways of delivering healthcare solve their sundry problems. These status-quo organizations remain wedded to fee-for-service (FFS) and have not begun to focus on the inevitable shift in risk from payers to providers under future value-base reimbursement (VBR) models.

There are a select number of forward-thinking HCOs that are actively preparing for VBR and the day when revenue depends on how well they deliver care to the individual patient and panels of patients as a whole over time – not just episodically. However, these forward thinkers represent an exceedingly small proportion (5-7%) of all HCOs in the U.S.

An area of weakness we find across HCOs, including a few forward thinking ones, is a lack of core competencies in a number of areas that have been the domain of payers and will be critical for success under VBR including: actuarial analysis, benefit design, utilization management, authorization management, disease management, consumer marketing, and similar functions. One could debate consumer outreach and marketing, but by and large, even here payers have done a better job than most HCOs

Providers of both the progressive and less progressive variety will find that their ability to thrive under VBR depends on how well they perform these functions. Some provider organizations see VBR as a way to disentangle themselves from payers without realizing that they will wake up one day and find that they have become the payer.

These new functions that providers will be required to adopt will ultimately have to be incorporated into clinical operations even though the current crop of clinical applications (e.g., EHRs and HIEs) is arguably not up to the task. HCOs preparing for VBR will find themselves at worst hamstrung or, at best, minimally supported by their clinical vendors.

The longtime focus of clinical application development has been on the physician and, to a lesser extent, the nurse. The point-of-care has been where the money is for EHR and HIE developers. No one can dispute that the physician-patient interaction is the central and most important element in a clinical visit. Every clinical intervention flows from that interaction. However, an office visit consists of multiple interactions between the patient and the HCO. Patients, in a single visit, interact with many people: front office staff, nurses, phlebotomists, radiology technicians, nutritionists, care managers and a host of others. The idea of team-based care requires that EHRs and HIEs do something they aren’t that great at: provide a point-of-care focus for the individual clinician as well as a point-of-encounter focus for the HCO.

When we look at introducing functions formerly performed by payers into clinical operations, the point-of-encounter perspective rises in importance. Under VBR, clinicians will make clinical decisions based on the facts and circumstances of the specific patient and based on past experiences with that patient. The specifics of follow-up care and the composition of a care team will depend on the benefits design and utilization patterns of the patient and the patient’s risk panel.

Instead of sweating out an authorization from a payer for a particular clinical intervention, individual clinicians will be responsible for following evidence-based care plans enforced by the HCO through the EHR/HIE. Instead of letting the payer control where patients are referred, providers will want to keep referrals in-house and away from competing providers.

The irony, at least for now, in this is the volume imbalance between administrative payer-provider transactions and clinical inter-HCO transactions (via HIE and other mechanisms) that are occurring today in a HCO.

Payers have invested heavily in transaction-oriented networks to support all of the things so feared by providers: authorizations, claims presentment, referrals, eligibility determinations. A significantly smaller volume of inter-enterprise clinical transactions, on the other hand, are flowing between HCOs to support a relatively narrow range of point-of-care clinical activities. We think that EHRs and HIEs will have to adopt a view and development focus that looks at the totality of information needed to support a clinical encounter — patient clinical data, administrative data and panel level data — to really support HCOs on their voyage from FFS to VBR.

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