Capabilities for effective participation
Not everyone is excited about bundled payments. Hospital systems, provider networks and medical professional groups said in comments on the proposed rule mandating bundled payments for comprehensive joint repair (CJR) that they needed more time to figure out how to coordinate the care and payments. Recently a bill was introduced by Georgia representatives Tom Price, a Republican, and David Scott, a Democrat, in an attempt to push implementation of mandatory bundles out to January 2018.
In a news release, Gerald R. Williams, Jr., MD, president, American Association of Orthopaedic Surgeons (AAOS), said “The CJR model mandated by CMS requires comprehensive planning and coordination between hospitals, physicians and post-acute care providers, as well as complete infrastructural support. While AAOS embraces initiatives that improve quality and lower cost, it is important that all stakeholders have adequate time to prepare for this kind of substantial change to our healthcare delivery system in order to avoid any disruption to normal patient access and care patterns.”
However, in April 2016, CMS moved forward with mandated bundled payments for Comprehensive Joint Replacements (CJR) within 67 geographic regions that encompass about 800 hospitals, or roughly 20% of the total U.S. market. Bundled payments will be imposed upon CJR hospitals, and by extension their post-acute partners, whether they were ready or not.
Others see bundled payments as an opportunity to win market share, and to be financially rewarded for higher quality and lower costs.They are not waiting for the rules to be dictated to them, but instead are seeking first-mover advantage, so that they have a voice in defining a new paradigm of care.
Whether you are proactively seeking opportunities, or you are being compelled, kicking and screaming, bundled payment models are going mainstream. All providers along the care continuum–physicians, hospitals and post-acute care providers–will need to develop capabilities for effective bundled payment network participation.
There are three key roles in a bundled payment network. An organization may serve in multiple capacities.
This is the bundled payment network hub and organizer. The convener is the entity that has ultimate responsibility for both quality and economic outcomes. The convener will receive a bonus or make up the deficit, depending on the performance of its bundled payment network. Conveners may choose to share downside risk and upside rewards with other network members, but they are ultimately on the hook for results.
For CJR bundles, CMS has designated that hospitals will serve the role of convener. However, in other bundled payment scenarios, the convener can be any entity within or outside the care continuum, such as physician groups, ACOs, payers, post-acute-care providers, technology companies, device/implant manufacturers and private equity firms.
CMS mandated bundles do not allow for negotiation. If you do hip and knee replacement procedures for Medicare patients and fall within one of the designated geographic areas, you are subject to the new payment rules. However, with other payers, pretty much everything about the bundle is negotiable, from inclusion/exclusion criteria, bundled duration, quality and outcome measures and settlement terms. The amount of legal work required to develop bundle payments contracts with payers and network participants can be substantial. Conveners may also have to demonstrate they have the financial assets to cover any downside risks.
Most bundle episodes begin with an elective hospitalization stay or procedure. Generally, a physician will be the bundle Initiator and will have significant influence on which hospitals and post-acute care providers are involved in the patient’s care. While conveners may hold the purse strings, initiators control the referrals. Bundled payments will add to pressure on hospitals and health systems to secure financial alignment with physician groups that are bundle Initiators.
In the case of CJR bundles, surgeons can be paid up to 50% more than the standard rate, provided there are sufficient bundled payment savings. However, no savings and no bonus. Initiators will be highly incentivized to ensure that they are referring bundle payment cases to hospitals with high quality, low cost networks.
Of course, it is the providers that do the work. As a condition of participation, providers may be required to accept downside risk in return for the opportunity be in the network and to qualify for financial bonuses. Other network providers may not be eligible for bonus payments, but will still benefit through higher referral volumes and lower sales/marketing costs.
Regardless of the form of compensation, all network providers will have to share data with the network convener and coordinate care with other network members and meet established quality and utilization benchmarks.Providers that are unable to meet bundled payment requirements for data and quality will have much more at stake than just penalties and bonuses.
Bundled payment networks are likely to be a winner-take-all game. Those in the network will see higher referral volumes and lower-selling costs. Those not in the network could experience substantial loss in market share.
As a convener, you will need to develop network management infrastructure and capabilities to:
- Evaluate the cost and quality of post-acute network providers through analysis of claims and shared network data
- Narrow provider networks to concentrate referral volume with high-quality providers and eliminate poor performers
- Exchange data with bundled payment network providers to monitor cost and quality outcomes and track patients as they transition across care settings
- Deploy analytics to proactively match patients with the most appropriate care setting and provider
- Negotiate gain/risk sharing arrangements to align incentives for improved cost and quality
- Facilitate a learning loop to optimize performance across the network–making adjustments and driving continuous improvement
As an initiator, bundled payments represent a significant opportunity to be compensated for improved care coordination and outcomes.
To get involved with bundled payments:
- Partner with conveners that are best positioned to achieve bundled savings (or consider becoming a convener yourself)
- Identify opportunities to reduce cost variability through standardization of devices, implants and procedures
- Deploy analytics to proactively match care pathways based on patient risk characteristics
- Negotiate gain sharing terms to reward quality improvement and cost savings
- Promote benefits of improved care coordination to patients
As a provider, bundled payments may allow you to redirect resources from sales and marketing to improving care. To become a preferred provider position in the bundled payment network:
- Benchmark performance on a risk adjusted basis relative to competitors
- Share data with conveners to demonstrate cost and quality performance
- Develop capabilities to address unmet network needs
- Improve coordination of care transitions with other network members
- Engage in proactive improvement programs in collaboration with conveners and other network providers
Depending on your perspective, the emergence of bundled payments may be viewed as a fantastic opportunity or existential threat.