The demand for value-based care which controls costs and focuses on quality has resulted in a shift from fee-for-service payment system to bundled payments in healthcare. Fee-for-service payment system has been popular for a long time. The providers bill the patients for every service they provide and therefore this system promotes quantity over quality. On the other hand, bundled payments help in aligning financial and quality of care incentives, but how?
Basics of Bundled Payments According to the bundled payment model, a single payment is given to the multiple providers or healthcare organizations who provide services to a patient for a single episode of care. Episode of care is the time period for which a patient with a certain disease undergoes several treatments and receives services from multiple providers. For example, if a person undergoes a hip replacement surgery, the payer will collectively reimburse the providers using a price determined from previous financial records, instead of reimbursing the surgeon, anesthesiologist, etc., separately. In 2013, the Centers for Medicare & Medicaid Services (CMS) established the Bundled Payment for Care Improvement (BPCI) program for controlling healthcare expenditures and assuring quality care to the beneficiaries. The program comprises of four models (consist of 48 different types of episodes of care) on the basis of which the providers receive a lump sum amount of money for the services rendered to patients. The participants of BPCI must meet the quality standards and stick to the set price for each episode of care. If the cost of care is higher than the set bundled price, the organization will bear the financial burden. On the other hand, if the cost of an episode of care is lower than the set bundled payment, then the organization can keep the difference. This motivates the providers to coordinate and make cost-effective as well as high quality care decisions for the patients. In other words, the providers are accountable for their performance as well as the expenditures of episodes of care under the bundled payment system. Under the bundled payment model, either the payer reimburses a single organization which then distributes payments among the providers or it pays each provider separately in a way that the set price in not exceeded. Success of the Bundled Payment Model In 2013, Medicare saved $42.3 million on bypass patients treated in the demonstration hospitals. The Cleveland Clinic Euclid Hospital saved $1.65 million for total hip arthroplasty (THA) and total knee arthroplasty (TKA) by joining BPCI. The readmissions for THA decreased from 5.8 percent to 4.8 percent in 2014, and to 4.0 percent by 2015. For TKA, the overall readmissions dropped by 30 percent in 2015. In the private sector, Blue Cross and Blue Shield of North Carolina (BCBSNC) introduced a bundled payment system for knee replacement in 2011. One episode of care consisted of pre-surgical period of 30 days prior to hospitalization, the surgery, and follow-up care of 180 days after discharge from the hospital. In a period of one year, BCBSNC saved on average 8 to 10 percent per episode. Geisinger Health System has established a performance-based bundled payment model called ProvenCare, which reimburses providers for coronary artery bypass graft surgery (CABG). The model achieved the following results: a 10 percent reduction in readmissions, reduced average length of stay, and reduced hospital charges. Since then, Geisinger has added the following episodes to ProvenCare: elective coronary angioplasty (PCI); bariatric surgery for obesity; perinatal care; and treatment for chronic conditions. How to Succeed in the Bundled Payment Model? The major element for the bundled payment system to be successful is the strong communication between the providers. Based on the goals to be achieved, the providers must communicate and design efficient care coordination strategies. They must ensure that cost-effective decisions are being made at every level of the episode and high quality care is being provided to the patient. Providers can predict the needs of those patients who are less sick, whose care is inexpensive and whose treatment is easy to predict. By doing this, they can make sure that the cost of their episode falls into the set price of the bundled payment. Moreover, providers must understand the risks associated with those patients who are extremely sick because more resources would be needed to restore their health. Challenges Associated with Bundled Payment System A significant challenge with bundled payments is that it may be impossible for a provider to manage the costs associated with an episode of care. For example, the patients might be involved in risky behaviors, they might have several comorbidities which could complicate the situation, they might be at a high risk due to which their treatment would be expensive, etc. All these things are not in the control of the providers and may result in expenditures which are above the set bundled payment. The successful implementation of the model also requires a robust health IT system with comprehensive reporting or data collection tools. Without a strong IT system, the entities won’t be able to analyze their performance, quality improvements and cost effectiveness, efficiently. References
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