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Humana’s Top Suggestions for Operating Bundled Payment Models

Bundled payment models are based on a value-based care reimbursement system that improves the quality of services along with patient outcomes while reducing costs across the continuum of care.

By Vera Gruessner

The major health payer Humana will be moving toward adopting additional bundled payment models that will serve Humana Medicare Advantage members. The payer will be partnering with four orthopedic specialty establishments through these bundled payment models, according to a company press release.

Medicare Advantage Beneficiaries

In particular, this new payment structure will be used to monitor hip and knee replacement surgeries among Medicare Advantage beneficiaries. Bundled payment models are based on a value-based care reimbursement system that improves the quality of services along with patient outcomes while reducing costs across the continuum of care.

Appalachian Orthopaedic Associates, OrthoTennessee, Tennessee Orthopaedic Clinics, and Premier Orthopaedics & Sports Medicine will be teaming up with Humana throughout the state of Tennessee to bring these bundled payment models to hip and knee replacement surgeries.

Chip Howard, Vice President of Payment Innovation at Humana, told about some tips and tricks that other payers could use when transitioning toward bundled payment models. What are some of the biggest challenges that Humana faces when transitioning into bundled payments? Are there any solutions?

READ MORE: CMS: Payers May See 2.95% Rise in Medicare Advantage Revenue

Chip Howard: “I think, in general, some of the same challenges in implementing any type of value-based arrangements, we are partnering with providers to move from the volume-based, fee-for-service world to a model where physicians are going to be rewarded for producing better outcomes, higher quality, and lowest cost.”

“It’s a general process in working with providers to move along that path together. It’s a different way of doing business. There are obvious challenges that come with making such a big transition. 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. I would say that as number one.”

“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.”

“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. That would be the number one solution that I would outline as trying to meet that challenge.” What advice would you offer other health payers looking to implement bundled payments?

READ MORE: Humana Expands Orthopedic Bundled Payment Program to NC, VA

Chip Howard: “I would really start with an overall piece of advice around looking at retrospective versus prospective payments for bundles. Retrospective is essentially fee-for-service where providers are getting paid as usual, but at the end of a performance period, the cost of the bundle is reconciled versus the cost target and savings are evaluated and shared.”

“The prospective model is the upfront payment to the provider responsible for the bundle: the fixed rate that is intended to pay for all bundled services. I won’t advocate for one method or the other, but I do think from the payer perspective, there are some things to think about with prospective bundling around changing infrastructure and claims systems to be able to accommodate the upfront payment versus the traditional fee-for-service world.”

“If you think about member cost share where traditionally in an episode, a member may pay a physician copayment or coinsurance for the inpatient stay and then various other member cost shares to all the different providers involved. With a prospective bundle, all of that goes away and so you really have to think about the implications to your systems and your member cost sharing implications to be able to deal with that.” How will Humana track patient outcomes for hip and knee replacements across the entire continuum of care?

Chip Howard: “We will have data and reporting that shows, at a member level, what occurred during the bundle. Specific to hip and knee replacements, we will actually have information for providers that says, for member A, this member received pre-surgery testing and consults at this provider and received an MRI at this provider.”

READ MORE: Humana Expands Medicare Orthopedic Bundled Payment Programs

“We will be able to show all the detail around the actual procedure itself and the inpatient stay that accompanied the procedure. We will also be able to show the 90-day window post surgery where the member is rehabiliationizing in a post-acute setting.”

“We will show what post-acute setting was utilized whether it be home health, a skilled nursing facility, or inpatient rehab. Being able to also show readmissions and complication rates at a member level is part of our work. The short version is that, at a member level, we will be able to track all that and share that information with our providers. Clearly, having that ability drives the opportunity to track outcomes and look at potential opportunities for where to improve.” Do you have any tips for creating bundled payment contracts so that both payers and providers are satisfied?

Chip Howard: “It is important to make sure that you’re partnering with providers when doing a bundled payment arrangement. It is not going to be successful unless both the payers and providers are successful. From a contract perspective, I would suggest  looking at a glide path to what I would term provider full-accountability.”

“In other words, this would mean the provider sharing in the ups and downs of the financial results. I think you should take a measured approach to that and not go immediately to a full-value accountability type of arrangement with a provider.”

“Also, making sure that the responsibility of the payer and the provider are clearly outlined in the bundled payment contract so that there aren’t any hiccups down the road that are unanticipated.”

“For example, making sure that the reporting and data that is available to the provider is outlined in the contract and the timing around that is outlined. Outlining some of the expectations of the provider would be as far as making sure that the member is getting high quality care and is  being referred to the right setting of care. Those types of things in the contract are extremely valuable.”


Dig Deeper:

How Risk-based Bundled Payment Arrangements Boost Quality

Top 4 Factors Necessary for Bundled Payment Model Contract


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