In the new era of healthcare reform, providers and payers must manage a delicate balance between financial responsibility and increasing positive patient outcomes. The shift towards a value-based care model is a reflection of this movement. Standing somewhat in opposition to value-based care is the fee-for-service reimbursement model, which is often criticized for allowing for overtreatment and misuse of resources. However, alternative payment models including bundled payment arrangements are becoming more popular as time advances. How can providers grow the value-based system as new alternative payment models increase in popularity?
What Are Bundled Payments in Healthcare?
The bundled payment model shifts the financial responsibility from the payer to the provider. Under a bundled payment model, providers and facilities are paid per episode of care — meaning there is a single payment for all services performed as a result of a specific condition or treatment within a certain period.
For example, in obstetric care, patients would traditionally have to pay the hospital, their obstetrician, and the anesthesiologist (if any) separately and often after the claim has been submitted. In a bundled payment model, the patient would remit payment at one time for all three services using a set price for the care episode. Providers can base the payment amount on historical costs.
Bundled payments are a preferable payment model because they are often correlated with increased positive patient outcomes and a reduction in overall healthcare costs. With this model, oftentimes costly health events such as emergency room visits and hospital readmissions are lower, and patient care is coordinated across multiple touch points (specialists, facilities, and more, if needed), which increases patient access to quality healthcare.
What Are the Challenges Associated with Bundled Payments?
Challenges like patient compliance, technology limitations and resource underuse all threaten the efficacy of a bundled payment model. When faced with factors outside the physician’s control, like patient adherence to the plan of care or unforeseen complications due to co-morbidities, the financial risk for organizations increases. In these instances, the needed level of care may outpace the budgeted amount in the bundle, making treatment cost-ineffective.
Technology limitations and resource underuse both threaten the bundled payment model. Outdated software often cannot offer the data needed to evaluate the benefits of the model nor adequately support the new methods of reimbursement. Due to the perceived threat of poor reimbursement, providers may inadvertently block access to quality care by under-prescribing needed treatments. For these reasons and some others, the bundled payment model has been slow to be fully adopted by providers–although most experts agree the model is here to stay.
Slow adoption of the bundled payment model is due to a number of complicating factors. For one, providers struggle to contend with the previously mentioned risk factors. Risking patient care and their organization’s bottom line without specific evidence of efficacy can be a bitter pill to swallow.
Additionally, hazy agreement between providers, payers, and private and public governing institutions about who administers what services and how to define bundles (by either including or excluding certain services) further complicate the issue. Providers can create a tailored plan for using bundled payments by analyzing their own practices’ historical data and planning for contingencies such as high-risk patients and procedures.
How do providers succeed in the bundled payments model?
Succeeding in a bundled payments model can be attributed to a few critical success factors:
- Strong leadership from providers
- Efficient, up-to-date analytics and reporting
- Predictive modeling of various use cases
- Case management
- Network management
As the financial risk shifts from the payer to the provider, it is important that care providers and physicians take the lead in communicating with additional providers and payers. Using efficient, evidence-based care plans to ensure continuity of care for the duration of the episode is a solid first step. In addition to this, providers must ensure patients are receiving quality care across the additional providers and facilities in order to continue to reduce costly adverse events such as re-hospitalization.
Communication is key, and by analyzing historical data and reporting on use cases, providers can make smart decisions for their practices, backed by solid evidence. Creating a plan for adverse outcomes such as high-risk patients and implementing solid technology backed by thorough case management will help providers be successful in this alternative payment model.
Recent studies have shown that when providers forego a fee-for-service model in favor of a bundled payment model, patients have better health outcomes and overall spending is generally reduced. With these significant health goals realized, providers can be encouraged that the alternative payment model offers significant benefits to their patients and their bottom line.
By planning for medical outliers, clearly defining exclusions and inclusions in the bundle agreement, coordinating care between additional specialists and facilities, and planning ahead for adverse outcomes, providers can embrace this new payment model and continue to offer excellent care to the patients who rely on them.