What Are Bundled Payments and Are They Here to Stay?
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.
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.
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.
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.
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.
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.
Matt Guldin · 2 years ago
Chilmark Team · 1 month ago
Matt Guldin · 1 month ago
Chilmark Team · 2 months ago
Expanding the Clinical Network for Value-based Care
The 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.
Free Research: Migration to Clinician Network Mgmt
Last summer we published another edition of our popular Health Information Exchange (HIE) Market Trends Report. Over the years, this report has for many, become the “authoritative source of information on the HIE Market.” That’s not me talking, that is exactly what we have heard from those who have purchased this report.
This, of course, makes us feel quite proud as our mission here at Chilmark Research is pretty straight-forward:
Provide research that will assist Healthcare Organizations (HCOs) in their understanding, assessment, adoption, deployment and use of IT to improve the quality of care delivered.
This is what get us up in the morning. This is what motivates us for everyone here at Chilmark wants to make a contribution to improving this crazy, at times frustrating, market sector.
With the release of the latest 2013 HIE Market Trends Report, however, I had an uneasy feeling. The vast majority of the market continued to view HIE as just that, moving basic health information from point A to point B. If anything, HIE has been further dumbed-down with the advent of Direct Secure Messaging, which is really nothing more than secure, point-to-point email – a far cry from interoperability and query-based information exchange.
Another issue was that I was not seeing much thought going into what is next for HCOs and their investments in HIE. Recent reports such as HIEs reduce ED visits is something we have been talking about for years. Seriously, is this the best we can come up with? What new capabilities will HCOs want (or be able) to enable across their HIE? What is the next level of value realization beyond basic records exchange and lab orders/referrals?
I increasingly came to the realization that the vocabulary of how we talk about HIE needed to change. Language is powerful and our current fixation on HIE and the vocabulary associated with it may be preventing this industry from looking beyond this limited construct. For the purposes of that 2013 HIE report, we used the term HIE 2.0 (did I ever mention I have never been a fan of 2.0 attached to any acronym) to signal a change.
In late fall of 2013, after some discussions with clients, consultants and HCO executives, we decided there was the need to test these ruminations. Chilmark put together a prospectus for a research project on Clinician Network Management (CNM) and found five willing sponsors for this research (CareEvolution, McKesson, Optum, Orion Health and one that prefers to remain anonymous). The research objective was to conduct primary research to determine the state of the market in moving to enable CNM, which goes under many guises including physician alignment, clinically integrated networks, etc. but none of these terms have quite the scope that we envisioned for CNM.
Some of the results of our CNM research are quite telling.
Of course, we learned far more than the above which you’ll find in the report itself. Since this report was sponsored with the intent of helping to educate the market, it is being offered for free. I encourage you to grab a copy – you won’t be disappointed.