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5 Solutions for Conquering Challenges of Bundled Payment Models

Payers and providers face various challenges when implementing bundled payment models including mistrust on both sides, low case volumes, difficulties of defining a bundle, and inadequate infrastructure.

By Vera Gruessner

Despite strong optimism and stakeholder enthusiasm, a new bundled payment program operated by the Integrated Healthcare Association and the RAND Corporation faced major problems and delays. A report from the Agency for Healthcare Research and Quality outlined the difficulties associated with defining bundled payment models, a general lack of trust between payers and providers, and insufficient infrastructure necessary to support claims processing of bundled payment programs.

Bundled Payment Programs

Out of six health plans and five hospitals, only three payers and two hospitals along with two ambulatory surgery centers successfully created bundled payment contracts and began operating bundled payment models. One of the major problems for other payers and providers may deal with the difficulty of defining a bundled payment model.

The stakeholders had problems agreeing on how broad a bundle should be, which patients should be included such as those with or without pre-existing conditions, and what type of medical services should be included in the bundled payment model.

Health plans tended to want more services covered with most patients managed through the bundle. However, hospitals and providers were looking to decrease their financial risk under the new payment structure.

When the bundled payment models created were too narrow to make enough of an impact in reducing healthcare spending, providers and payers lacked the incentive needed to invest in new infrastructure to design new claims processing systems under an alternative payment program.

READ MORE: Prospective vs. Retrospective Healthcare Bundled Payment Models

Many of the current claims processing systems in place both in hospitals and health insurance companies are unable to manage the complexities of bundled payment models. When software became available for operating bundles, health plans participating in these alternative payment models were unable to implement the systems due to high cost and a lack of patient volume to make it a worthwhile endeavour. The lack of infrastructure capable of supporting bundles led to delays in getting providers reimbursed in a timely manner.

“There are obvious challenges that come with making such a big transition,” Chip Howard, Vice President of Payment Innovation at Humana, told last June. “A couple of challenges include infrastructure, data, and reporting that, frankly, were not needed in the fee-for-service world. Providers absolutely have to have that to be successful in the value-based world.”

“Number two is establishing a new dynamic in the relationship with providers where it’s not arguing over unit cost price any longer and it’s actually coming up with shared solutions to produce the results we want around quality outcomes and cost,” Howard continued. “First and foremost, producing a robust set of reports and data for the providers to be able to show them there are opportunities for quality improvement, outcome improvement and cost efficiencies.”

Another challenge that payers and providers face is a general lack of trust. Stakeholders on both sides were skeptical of the other’s motives, according to the report. The lack of transparency and trust between payers and providers has a historical precedence relating to decades of “aggressive contract negotiations,” the Agency for Healthcare Research and Quality stated. Mistrust was related to payers looking to reduce healthcare spending in their move away from fee-for-service payment structures while providers were hoping to keep reimbursement at the same levels.

Despite the problems associated with implementing bundled payment models, stakeholders remain optimistic that these problems can be overcome. The report outlines several vital solutions that commercial payers will need to consider when operating a bundled payment contract.

READ MORE: Why Accountable Care Organizations Should Adopt Bundled Payment

First, payers and providers will be properly incentivized to invest in infrastructure and other resources for the bundled payment when case volumes are sufficient in number. To keep the volumes higher, payers and providers will need to focus on finding common conditions among the patient base and limiting any exclusions from the bundle.

Secondly, payers can help providers more successfully manage financial risk and reduce provider risk through “mutually acceptable methods” such as provider reinsurance, stop loss provisions, and risk-adjusted reimbursement, the report stated.

Thirdly, experts encourage payers to keep the initial definition of their bundled payment program as simple as possible. Since creating bundled payment definitions was found to be a very complex process, more simple definitions could create a more achievable payment structure for both payers and providers.

One other beneficial solution for payers and medical billing departments is to incorporate automation software for managing provider reimbursement. Using automation software could reduce the need for the more time-consuming and costly manual approach. The higher costs of automated systems is also expected to decrease as patient volume numbers increase and more products enter the market.

Also, the report states that payers should consider changing benefit design to more clearly push patients in the direction of physicians operating bundled payment models. This may include decreasing out-of-pocket payments patients face among participating providers. With more patients being steered toward participating physicians, stakeholder enthusiasm and incentive to pursue bundles is likely to increase.

READ MORE: Are Bundled Payment Models or Capitation the Better Choice?

Payers using the solutions outlined in the Agency for Healthcare Research and Quality report are likely to more quickly overcome the challenges associated with operating bundled payment programs.


Dig Deeper:

How to Overcome the Challenges of Bundled Payment Models

How Payers Should Prepare for Value-Based Reimbursement


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