- Episode-based bundled payments are becoming a sought-after reimbursement model throughout the healthcare industry. Along with the Centers for Medicare & Medicaid Services and its focus on implementing bundled payments, private payers are also attempting to incorporate bundles as they transition to pay-for-performance contracts with providers.
Episode-based bundled payments could be thought of as a system in which reimbursement is provided for the entirety of treating a medical condition instead of reimbursing every single medical service such as in fee-for-service payment models. One white paper from the Health Care Payment Learning & Action Network described how episode-based bundled payments could be used within maternity care.
Currently, maternity care includes a number of steps such as prenatal care, labor and childbirth, and postpartum follow-ups. However, it could be beneficial for mothers and their children if these steps were all combined into episode-based bundled payments between payers and providers. This would ensure that providers follow a pay-for-performance protocol that focuses on quality of services instead of quantity.
The report outlines how episode-based bundled payments could lead to a higher percentage of babies born at healthy weights, better recovery processes among mothers, and healthier infants at birth. For example, providers could implement stronger prenatal care measures, teaching young mothers how to have a healthy pregnancy.
“Episode payment can address the need for appropriate, high-quality, prenatal and postpartum care. Testing for potential problems (such as gestational diabetes or birth defects), monitoring the growth and health of the growing fetus and the woman, providing education to the woman on what to expect during and after birth, and supporting her in making decisions about her preferences for interventions, settings, and provider types, can all lead to a more engaged and healthier childbearing woman,” the report stated.
“Yet these and other high-value services are not always effectively provided since the bulk of payment is focused on hospital-based labor/delivery services. Therefore, the goal of episode payment design in this realm is to incentivize the delivery of the full continuum of services by holding providers accountable for their quality and coordination, and to decrease costs while improving the value of maternity care overall.”
Episode-based bundled payments are also meant to bring a downward shift toward healthcare spending, which would enable payers to cut rising reimbursement rates and allow for families to spend less on out-of-pocket healthcare costs.
The white paper describes how current payment methodologies in maternity care include “a global fee for professional services,” which incentivizes providers to choose more expensive interventions instead of low-cost treatments. For instance, the cesarean rate around the United States stands at 32.2 percent even though the US Surgeon General has recommended hospitals to decrease that rate to 23.9 percent among low-risk women over the next four years.
Since cesareans are more costly services and take less time than the typical period of labor, there is greater incentive among physicians to choose this type of procedure. As such, episode-based bundled payments could be a system to reward physicians not based on the more expensive services but on patient health outcomes and the quality of care.
With childbirth being the most common cause of a hospitalization in the United States and hospital admissions being one of the costliest aspects of healthcare spending, it is necessary to adopt alternative payment models utilizing value-based care reimbursement within the maternity care setting.
Along with maternity care, bundled payments could be used to reduce healthcare spending related to joint replacement surgeries, New York University's Langone Medical Center found in their study. Additionally, patient health outcomes improved - the results show a decline in the length of hospital stays. The typical hospital stay used to last 3.6 days on average after a joint replacement surgery, but bundled payments led to shorter stays averaging 2.9 days.
The typical bundled payment model requires a hospital to take on financial risk with regard to complications after treatment. Treating hospital-acquired infections or surgical failures, for instance, would be paid on the hospital’s dime instead of being pushed over to the health insurer. This type of payment model is expected to incentivize hospitals and physicians to improve their quality of care.
In an exclusive interview, Chip Howard, Vice President of Payment Innovation at Humana, offered advice to other payers looking to implement episode-based bundled payments within their provider network.
“It is important to make sure that you’re partnering with providers when doing a bundled payment arrangement,” Howard began. “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,” he continued.
“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,” Howard concluded. “Those types of things in the contract are extremely valuable.”
Whether bundled payments are implemented within maternity care or joint replacement surgeries, these alternative payment models focusing on value-based care are expected to bring the Triple Aim of Healthcare - better health outcomes, improved quality of care, and reduced spending across the board.
Image Credits: Health Care Payment Learning & Action Network