Does Guaranteed Payment Guarantee Benefit?

"Everybody wants to see the patients' health improve; that's not only cost effective, it's our mission. With ProvenCare, our incentives align to lower the cost and improve clinical outcomes," Friel says.

The quality results have been telling (for quality results, see "ProvenCare Elective Coronary Artery Bypass Graft Numbers," page 43) and payers are recognizing the savings of this type of program. Currently Geisinger is negotiating with other third-party payers to test out bundling in this year.

Geisinger isn't the only large health system that sees a lot of promise in bundling. Salt Lake City-based Intermountain Healthcare is also studying bundled care with an eye on possibly implementing it systemwide in the future. With 2,336 staffed beds spanning 23 hospitals and more than 150 clinics, Intermountain is modeling the program in 22 acute care facilities focusing on orthopedic, cardiac, obstetrics, and primary care.

Though the clinical care program they currently have in place has initially generated some financial decreases for facilities due to development costs and not billing for every service, in the long term, Intermountain believes the costs are recouped with better vendor negotiations, cost reductions, and eventually quality-based incentives.

"Right now we're doing this program without incentives, so it reduces our revenues. But we are focusing on the high-value care and the differences we're seeing in outcomes," says Greg Poulsen, senior vice president for Intermountain Healthcare. "We have been successful at explaining why this program is good for payers, and they're enthusiastic about how it reduces their expenses and produces better outcomes."

This is a huge administrative challenge for providers, for the hospitals, and for the payers, Poulsen explains. "What it means is you have to take the entire fee-for-service system and reconcile it to the overall payment for an episode," he says.

Intermountain has looked at cost projections for this type of tracking in areas such as utilization, length of stay, ancillary use, and complications—and like Geisinger, across the board, these areas are showing cost reductions and quality improvements with this model. "We believe it makes sense to do this, and it's the right thing to do."

In the coming year, Intermountain plans to test a bundling model with its payers and payment system by creating a parallel system and then reconciling the numbers after the fact. That will help determine the approach for rolling out this model to the rest of the system. Though a bundling program is still not in effect at Intermountain, Poulsen is adamant that this is something the system intends to move forward with.

"We believe this is where we are going to be going with healthcare in the future. For us it's really just a question of how to do things, not whether to do them," he says.