Value-Based Care News

CMS Bundled Payment Program Reduces Costs for Consumer

The bundled payment program doesn’t merely benefit public payers and providers but the patients as well.

By Vera Gruessner

At the end of last year, the Centers for Medicare & Medicaid Services (CMS) finalized their bundled payment rule for hip and knee replacement surgery. This type of bundled payment program will hold hospitals more accountable for patient health outcomes through financial incentives.

Affordable Care Act

The Department of Health and Human Services (HHS) stated in a press release that, in knee and hip replacement surgeries, the complication rates including infections and implant problems vary threefold across the United States. The costs for these operations also vary greatly between hospitals, which is why CMS has implemented this bundled payment program.

The way bundled payments work is by providing reimbursement for an entire episode of care including follow-up visits and rehabilitation services instead of paying for every service performed. Value-based reimbursement and bundled payments are making headway across private commercial payers as well as public insurers.

New York University's Langone Medical Center took a look at the bundled payment program from CMS and found that it leads to cost savings as well as improved health outcomes and quality of care enhancements. The most important finding is that the bundled payment program reduce is the length of a hospital stay among Medicare beneficiaries.

The research also illustrated that the number of hospital readmissions  dropped at 30-day, 60-day, and 90-day intervals. This shows that CMS and the federal government are focused on reducing healthcare spending and improving health outcomes in an effort to benefit the patient community.

With better patient outcomes and a decrease in the utilization of medical care, out-of-pocket costs for the consumer will be greatly reduced. The bundled payment program doesn’t merely benefit public payers and providers but the patients as well.

The HHS Blog outlined how affordable medical coverage is vital for consumers. One young man  from Virginia suffered from brain cancer when he was in college and had to undergo various treatments that left him with a debilitating side effect of narcolepsy. Ever since, he has had to take prescription medication to treat his narcolepsy.

He describes how three years ago he spent $1,023 for a one month refill of these drugs. Today, this skyrocketing out-of-pocket cost has decreased to just $2.05 due to the provisions within the Affordable Care Act.

The health insurance exchanges allowed to the young man to purchase a health plan that Cannot discriminate against him due to pre-existing conditions while at the same time providing income-based tax credits to lower his out-of-pocket costs.

It is also important to point out that the Affordable Care Act eliminates out-of-pocket costs for preventive healthcare services such as cancer screenings and cholesterol or blood pressure check-ups. Both the provisions of the Affordable Care Act and the CMS’ bundled payment program are making a significant impact on making medicine and healthcare more accessible for the everyday consumer.

Value-based care reimbursement is the new, hot topic among payers and providers today. Payers who haven’t looked at whether to adopt bundled payments should do so soon in order to effectively compete in the new healthcare reimbursement landscape.

This past winter, HealthPayerIntelligence.com spoke with Dr. Rita Numerof, PhD, Author, Co-founder and President of Numerof & Associates, to gather more information on how payers can successfully transition to value-based care and bundled payments.

“There are five elements that I believe are essential to being able to function effectively in a bundled payment, value-based arena where transparency will be the norm going forward. The first of these is to define clearly the services that are included in the bundle, whatever that bundle may be,” she began.

“The more we can deliver care outside of the hospital setting effectively, the more we’re going to lower cost, improve satisfaction, and get more value. Defining those services across the continuum, engaging employed physicians as well as independent physicians, and having an evidence-based approach to delivering that set of clinical services is absolutely critical,” Numerof mentioned.

“The second area is figuring out what the fixed price is for a set of services that you’ve defined. That has to do with projecting out what you think the costs are likely to be, assuming you’re able to get predictive care paths. You need to model out what those likely scenarios are. You need to understand your historical costs.”

“The third piece of this is that you have to identify outcomes that really matter. They have to be at a high-enough level so that we’re not measuring everything that’s possible but measuring outcomes. Do we have diabetics under control? If we’re looking at bundling in mental health, do we have mental health issues under control?”

“There are specific outcomes that are relevant to the clinical area that we’re going after in the bundle. The satisfaction of the patient is going to be really important in outcomes. We’re going to have to look at quality outcomes. Those three things are very essential building blocks in the bundle,” clarified Numerof.

“The fourth element is you have to be able to manage variation in cost and quality to make this work. It means that clinicians and finance people have to learn different languages and develop different skills to be able to talk together in ways that historically they haven’t been able to. It’s not just the payer here – it’s within the delivery system that this needs to be addressed.”

“Clearly, there needs to be negotiation with payers and providers. Part of the reason that the trust has been so low is that payers understand legitimately that most providers don’t have the discipline to do what I just laid out. That’s part of the reason they’re very concerned about getting into joint products and joint collaborations. I think going forward, that’s essential.”

“The fifth building block is provider organizations need to have a compelling economic and clinical value argument that explains why consumers, why employers, and why payers should want to come to their institution for this set of services because they can stand behind their outcomes and guarantee the price and even warrantee the services,” she concluded.

 

Dig Deeper:

CMS Published Final Rule for Surgical Bundled Payment Model

CMS Includes Rich History of Healthcare Bundled Payments