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How Payers Can Build a Successful Bundled Payment Strategy

Payers can create a successful bundled payment strategy by determining payments for certain care situations and by collaborating with providers and patients.

Payers can use examples of bundled payment models from CMS to develop their own models

Source: Thinkstock

By Thomas Beaton

- Bundled payment models are a popular reimbursement option for payers because they present an opportunity to improve healthcare quality, lower costs, and participate in value-based agreements with limited financial risk.  

However, if payers arrange a bundled payment without the proper tools and data to fairly define bundle amounts, then providers could experience challenges with bundled payments such as healthcare expenses beyond their control. A bundled payment strategy that lacks insight and thoughtful cost determination may dishearten providers from participation.  

Payers have to support a bundled payment strategy that utilizes realistic and actionable design components and leverage provider-patient collaboration in order to achieve value-based care goals.

Payers developing an initial bundled payment model should consider using a retrospective bundled payment model before gradually moving to a prospective model. The retrospective model is more popular with fewer administrative complications than more advanced models.

Commercial and private payers can adapt strategies from CMS, a pioneer in bundled payment reimbursements, to design and implement retrospective and prospective models for acute and post-acute services.

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The Bundled Payments for Care Improvement (BPCI) Initiative helped cut Medicare reimbursements at participating hospitals by $3,286  during its first 21 months for lower extremity joint replacements.  The BPCI is split into four bundled payment models with different strategies for when an episode of care starts. Each of the models relies on 48 MS-DRGs codes to identify applicable care episodes for bundled payments.

Model 1 is no longer in operation, but set the example for how future BPCI models by paying hospitals discounted amounts for retrospective acute care. The first BPCI model was novel and used seperate fee-for-service payments for physicians.

Model 2, or the Retrospective Acute & Post Acute Care Episode model, uses a bundled payment model where actual costs of services are compared against a targeted price for an episode of care.

An episode of care under Model 2 includes a Medicare beneficiary’s inpatient stay in the acute care hospital, post-acute care, and services during the episode of care ending either 30, 60, or 90 days after a hospital visit.

Model 2 also contains a three-day hospital stay waiver that allows Model 2 beneficiaries who are discharged from an inpatient hospital stay of less than 3 days to receive post-hospital care from skilled nursing facilities (SNFs) covered under Medicare Part A.

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Model 3, or the Retrospective Post Acute Care Only model, uses the same payment determinations as Model 2 but defines the start of an episode care at the start of post-acute care services. These episodes begin at the start of post-acute care within a SNF, inpatient rehabilitation facility, long-term care hospital, or a home health agency.

Payers that have more developed bundled payment models and higher expertise in bundling payments may look to Model 4 for the BPCI as guidance in designing a prospective model.

Model 4, entitled the Prospective Acute Care Hospital Stay Only, is the latest CMS model and had four participating organizations as of October 1, 2017.

In this model, CMS makes a single, pre-calculated bundled payment that accounts for all services furnished by the hospital, physicians, and other practitioners during the Episode of Care. Payments do not cover post-acute care, but do cover the costs of hospital readmissions within a 30-day period.

Additionally, payers can borrow design features of the Comprehensive Joint Replacement (CJR) model as a way to determine which populations benefit most from the model, how to develop bundle pricing, and which organizations can effectively use bundled payments.

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The CJR model is no longer mandatory among Medicare providers, but is expected to continue adoption among commercial payers outside of Medicare according to Colin Luke, a partner at Waller Lansden Dortch and Davis.

“With private payers that already have value-based purchasing programs underway, whether they are in a beta phase, a demonstration project or throughout its network, I do not think that these CMS delays and move away from mandatory programs is going to delay that or alter it significantly.” Luke said.

The CJR bundled payment model identifies the start of an episode of care with an admission to a participant hospital of a beneficiary, who is ultimately discharged under the proper MSR-DG code, and ends after a 90-day post-discharge period.

The CJR targets 67 geographic areas with counties containing core urban populations with at least 50,000 individuals. Beneficiaries can choose their services and providers within the model.

CMS designed CJR pricing with benchmarks based on historical standardized spending totals and regional spending totals from lower extremity joint replacements (LEGRs).

Payers have to actively work with both providers and their beneficiary populations to develop bundles that will financially cover all the necessary healthcare services to deliver quality care.

Payers can help ease tensions or potential concerns with providers by increasing data sharing to support provider success in bundled payments, says Chip Howard, formerly Vice President of Payment Innovation at Humana.

“There are obvious challenges that come with making such a big transition,” Howard, said. “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.”

“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 is key.”

Patient engagement will also allow payers to succeed in bundled payment models because communication and feedback from individuals receiving care helps support the movement towards a bundled payment model.

Robert Raspa, PA-C, and the Coordinated Care Manager at OrthoCarolina explained to that patient navigators help beneficiaries learn the positives of being in a bundle such as lowering their care costs and improve their care experiences.

“The navigator is essentially the personal concierge or travel agent for the patient and they do everything from the initial reach-out to the patient to explain all of the great benefits of being in a bundle, which includes having a navigator,” Raspa said. “The navigator will then walk them through what an episode of care will include.”

Payers can further support patient engagement by identifying opportunities to improve satisfaction through data-driven marketing, supporting positive healthcare behaviors, and digitally-connected health plan communications.

The bundled payment is still relatively novel but the strategies outlined can give payers a head start towards creating successful bundled payments.


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