4 Questions to Ask About Bundled Payments

January 31, 2015

New Insights into Bundled PaymentsWhen we look at healthcare payment reform, and our move away from fee-for-service When we look at healthcare payment reform, and our move away from fee-for-service models of payment, the focal alternative this year has been bundled payments. In this scenario, physicians are paid a set amount for treating a certain type of patient, and assumptions are made by the payer about what services or treatments a patient like that would need. They compensate according to that average. Under the fee-for-service model, when they were paid for whatever tests they ordered or treatments they rendered, they certainly had more freedom of choice. They could custom-fit the treatment to the patient right down to a T if they had the time and resources. And of course they would be paid accordingly. Gone are the days when such an ordering free-for-all can exist, because with bundled payments physicians will have to be very discerning about which “package” best suits their patient. Now, the “packages” within the scope of bundled payments are diagnosis-specific and are based on statistics gathered from all patients in that diagnosis-related group. This means that they aren’t willy-nilly gift baskets: they do have the requisite specifics for diseases and conditions. This might include standing orders for tests (like a HA1C to monitor diabetes) or encompass the cost of a necessary procedure (like a polypectomy).

As an organization, you are ultimately choosing which bundled payment programs to use and you’re asking yourself a few important questions concerning quality, cost effectiveness, and specificity. You have to weigh the pros and cons and try to predict outcomes based on each individual patient while keeping the somewhat generalized bundles in mind: just because “most” patients require X doesn’t mean that your patient won’t also require Y and Z. You have to account for those specifics and decide which of the bundled payment programs is the best fit.

When we consider that the overall theme of medicine and healthcare for the last few years since the ACA has been “personalized”, everything from technology to shared decision making, it might seem counterintuitive to even discuss bundled payments. But the question that’s posed by them is, how much specificity to we require to treat patients? It’s unlikely that there is a one-size-fits-all approach to every case – but could it apply to the vast majority? Is there money to be saved by grouping patients this way and giving them, indeed, the best possible care for the lowest cost? Because we all know that if money wasn’t an issue, if it “grew on trees” as they say, then every patient could afford the best possible care. Bundled payments ask a slightly different question: without breaking the bank, what’s the best you can do? Because it’s unsustainable, if not unfortunate, that we simply can’t afford as a healthcare system to create highly specific diagnostic and treatment pathways for every single patient.

By utilizing bundled payment models, there is a set amount under which physicians must work to provide care. What’s interesting is that instead of sticking to the status quo, bundled payments offers the inspired physician to attempt to challenge the pre-existing “best” treatment; they have the same amount of money as other physicians, but can they do more with it? Can they be creative, innovative – can they best the rest?

Economic theory supports competition. Especially in healthcare, it can be difficult to remain motivated when it seems that each year, more of what physicians know about the healthcare system and practicing medicine is uprooted or threatened. Bundled payments actually offer an opportunity to patients and physicians to think outside the box.

Bundled payments aren’t entirely capitation, though. In capitation models, providers get a lump sum for a patient regardless of what type or duration of treatment they receive. With capitation, providers who are caring for generally older and sicker populations are routinely penalized – sicker patients require more comprehensive care, and thus, it would appear that these physicians are order more treatments than, say, pediatricians whose patients may not have the same complex healthcare needs. Bundled payments are something of a middle ground between capitation and straight fee-for-service models, which we know don’t work: not just because they are fiscally unsustainable, but because it is too easy for that system to fall victim to abuse.

Before your organization begins to contemplate this payment method, you should ask yourself a few important questions:

  • Identify all associated costs and do the math: is it feasible right now? Will it be in six months, a year?
  • Know the contents of the package inside and out: don’t be caught off guard when you find something hidden at the bottom, so to speak.
  • Understand what you’re getting for services and the process for reimbursement. Know when and where your money will come from.
  • Know who within your organization is a key stakeholder. Identify all who are involved in shouldering the risk, and keep the lines of communication open.

Over the summer, a reported 4,100 new applicants were considered as applicants for Medicare’s Bundled Payment for Care Improvement initiative. Only time will tell how many applicants ultimately are prepared to move into the risk-sharing involved in bundled payments; the first “crop” of applicants saw a fairly large number pulling out of the program, but as we approach the end of 2014, experts still are sure why.