The Bundled Payments for Care Improvement initiative, a three-year pilot program from the Centers for Medicare & Medicaid Services offers a challenge to participating hospitals and health systems: Instead of issuing multiple payments to multiple providers surrounding a single episode of care, accept one payment for a variety of services performed under that care episode.
The thought is that doctors, hospitals and other affiliated care providers will be incented to coordinate patient care better because it better aligns financial incentives with patient care.
And bundled payments, under which organizations can share any savings between the payment and the cost of care, will also reduce complications and cut the cost to Medicare of paying for the services associated with a particular episode of care, for example, in a total knee replacement surgery and its follow-up care.
Such payment regimes are a critical part of the now-affirmed Patient Protection and Affordable Care Act, but at this stage there are only pilots.
The current one, which will last for three years, with a possible two-year extension, is just a first step. But clearly, Medicare and even some innovative commercial insurers are experimenting with bundled payments in the belief that they will reduce the overall cost of care for patients.
As a result, many hospitals, health systems, and other providers will at least learn how they would likely fare under such a radical departure from traditional fee-for-service payment regimes. Yes, it will be at least three years before Medicare's bundled payment program can be thoroughly evaluated, but senior healthcare leaders with an eye toward their organizations' long-term viability should themselves test and evaluate how such a payment methodology would affect their bottom line.
Jumping right into a bundled payment initiative without thorough evaluation of how your organization might perform would be foolhardy. Hospital leaders should take advantage of the time lag between the launch of a pilot project and its possible full implementation to evaluate how various reimbursement models might affect their viability.
Fortunately, there are several ways to get your feet wet on bundled payments without taking risk. For one, the Premier healthcare alliance has its Bundled Payment Collaborative, which involves more than 50 hospitals in 18 states. The program will help hospitals and health systems redesign care without the risk-taking that's involved in joining one of the pilot projects (there are four under CMS, with varying levels of immersion, risk and a choice between prospective and retrospective payment models).
Under the Premier program, launched July 23, participants will share best practices and data with other members, and focus on improving care and reducing costs in hip/knee replacement, lumbar spine fusion, coronary artery bypass graft, heart valve replacement, percutaneous coronary intervention, and colon resection.
Premier participants are focusing on Model 2 of the CMS pilot project, which covers the episode of care defined as including hospital, physician, post-acute provider, and other Medicare-covered services provided during the inpatient hospital stay as well as following discharge. The promise of the program, as in all the bundled payment programs, is to share gains arising from better coordination of care.
Premier's Wes Champion says the program "is based on a decade's worth of experiences and lessons learned through our collaborative that have shown substantial cost and quality improvements."
Some of the Premier participants have already joined CMS's demonstration project, but you don't have to do so to learn how best to structure your approach to bundled payments.
A second opportunity to learn how to approach bundled payments, launched at the beginning of this year, comes from VHA, another national healthcare network, through its Bundled Payment Simulation project. Similarly, that initiative helps simulate volume and reimbursement projections for total knee replacement episodes of care, thus helping senior leaders on both the clinical and financial sides to assess risks and analyze the return of the potential investment in changing care patterns.
For most hospitals and health systems, a change to a bundled payment is fraught not only with financial risk, but also the risk of a change in work patterns and culture within and outside the organization. Like a marriage, such massive changes shouldn't be entered into lightly. Through simulations such as these, changes can be made over time and don't have to be so jolting and risky.
After all, you can't afford to ignore the demand for better value in healthcare, allowing other systems to leapfrog yours in the transformation.
Philip Betbeze is the senior leadership editor at HealthLeaders.