"If they successfully complete the episode of care for less than the contracted cost, while maintaining the appropriate quality of care, they gain financial profit," he notes. "If problems arise due to poor episode management, a preventable hospital readmission, or another complication such as a hospital-acquired infection, however, the provider will bear the cost of fixing them as well as potential penalties from CMS."
CMS is starting with hip and knee replacements because they are easy to define and are relatively routine procedures, Lessila says. There is a clear beginning, middle, and end to the episode and the services required are well-documented, unlike chronic conditions such as diabetes or congestive heart failure where there are a lot of gray areas.
Bundling is not all bad news, though. Bogen believes bundled payments may be easier to implement than the accountable care organization (ACO) alternative, because the infrastructure necessary to accomplish any significant shared savings is enormous under the ACO model.
Still, bundled payments introduce several complexities to care that hospital systems must deal with, Lessila says. One is that the hospital system must think through its care coordination for these procedures, or the likelihood of failure is high. This will require additional resources to ensure the patients' experiences are good and that they follow all of the recommended steps to ensure a successful episode. The bundling also will motivate providers and facilities performing the services to streamline and improve communication.
'Financial administration of the bundle becomes far more difficult since a single bundle procedure will involve payments to one or many physicians, medical devices and hospital facility charges. The hospital system must understand who gets paid how much and in what form, and be able to track all of the details to determine whether the bundle is profitable or not in the end," Lessila says.
"Most legacy billing systems aren't set up to administer these contracts and aggregate the data appropriately so there is going to be a lot of back office work that needs to take place before they can be successful. If it's not done right, there's a potential for lost revenue or contract breaches, especially as the volume increases."