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Bundled Payment Models Need to Align Payer, Provider Incentives

Value-based care reimbursement and bundled payment models are predicted to decrease medical errors, hospital admission rates, and hospital-acquired infections.

By Vera Gruessner

- Bundled payment models are growing in popularity throughout the health insurance industry partially due to the Centers for Medicare & Medicaid Services (CMS) pushing forth alternative payment structures as well as the general goal of reducing healthcare spending.

Health Insurance Industry

Currently, 1,500 healthcare providers are taking part in the CMS program called Bundled Payment for Care Improvement (BPCI). Since this is a voluntary program, some providers who initially showed interest dropped out of the running. The program requires medical organizations to assume financial risk when contracting through these bundled payment models with CMS.

Taking on risk-based contracting is expected to decrease healthcare spending and quality improvement goals are met. Value-based care reimbursement and bundled payment models are predicted to decrease medical errors, hospital admission rates, and hospital-acquired infections.

However, many payers and providers are still struggling to adopt bundled payment models, which may be partially due to older technologies being utilized in the health insurance space, according to Ray Desrochers, Chief Marketing Officer of HealthEdge.

“Most of the organizations in the market, whether you like it or not, are still today using 35- or 40-year-old technology. That’s how they’re paying claims. That’s how they’re dealing with enrollment. That’s how they’re dealing with member services,” Desrochers told HealthPayerIntelligence.com.

READ MORE: Private Payers Follow CMS Lead, Adopt Value-Based Care Payment

“As a result of that, they don’t have anything that was built to address the needs of this new healthcare marketplace. They really have a culture that’s built on the one-size-fits-all, fee-for-service models and so they have to fundamentally transform the business including claim processing and everything else they do on a day-to-day basis.”

In addition to the older legacy systems implemented among health payers, physicians can be penalized in a bundled payment structure when it comes to providing certain medical services they couldn’t control.

To learn more about the challenges of bundled payment models and find necessary payer-provider contracting solutions, HealthPayerIntelligence.com spoke with Colin Luke, Attorney and Partner at the Waller Lansden Dortch & Davis law firm.

HealthPayerIntelligence.com: What advice would you offer to health payers and providers seeking to form a bundled payment contract?

Colin Luke: “You’ve got to align the incentives and make sure that the multiple parties to the bundled payment arrangement have equal incentive to make the arrangement work at the end of the day. Without aligned incentives, you would get short-term success for one of the parties, but long-term it’s not going to work.”

READ MORE: Why Healthcare Bundled Payment Models May Expand in 2017

“In order for it to be successful, I think you’ve got to have the ability to control the covered lives and to mandate or at least create incentives for using certain types of providers and for participation in the quality and health improvement initiatives.”

HealthPayerIntelligence.com: What value-based alternatives to bundled payments are you finding providers and payers forming?

Colin Luke: “I think they’re forming some clinically-integrated networks to avoid duplication so that you’re not seeing multiple tests provided on the same patient and you’re seeing better coordination of primary care – particularly alternatives to emergency room care.”

“We’re also seeing a growth in capitated arrangements where payers are pushing down the risk particularly where you have a specialty population, a chronic disease diagnosis, or an underserved population where you’ve got to change patient behavior.”

HealthPayerIntelligence.com: What are the biggest challenges payers and providers face when operating a bundled payment model contract?

READ MORE: Commercial Payers Behind CMS in Bundled Payment Models

Colin Luke: “The biggest challenge is probably plan design so that the patient and the multiple types of providers are all focused on the same thing. You’ve got to have a level of fundamental fairness involving the patient in the decision-making. The patient needs to feel that they’re not part of an overly closed network and remain confident that they’re still getting quality care.”

HealthPayerIntelligence.com: What concerns do healthcare providers have with regard to the CMS Comprehensive Care for Joint Replacement model?

Colin Luke: “I think the concerns are, particularly from a hospital standpoint, that they’re held accountable but don’t have the control over post-acute care that the patient may be experiencing. Also, one concern is that there is much greater emphasis on the penalties than the upside.”

“And lastly, if the path for our health system employs the physicians and owns the post-acute care providers, it’s going to be very difficult to manage the patient after discharge from the hospital. It seems to have too many punitive aspects and not enough in the way of rewards for better outcomes.”

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