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Value-Based Care News

Bundled Payments Rely on Robust Networks, Healthcare Markets

A San Diego-based health system found success with bundled payments by considering an integrated provider network and their healthcare market needs.

Provider organizations need a robust provider network and to consider their healthcare market for bundled payments success

Source: Thinkstock

By Jacqueline LaPointe

- Healthcare providers are finding that it takes a village to succeed in bundled payment models. From primary care to specialists and post-acute care, providers need an integrated network of provider types and to play to their healthcare market to realize savings under bundled payments, stated the assistant vice president of payer relations at Scripps Health.

“The bundles work best when you have an integrated environment,” Michael Bark recently told “We were actually doing our bundles through our medical foundation initially because that is where we have our integration with our EHRs and our medical foundation doctors who work exclusively within the construct of our organization.”

The San Diego-based integrated healthcare system boasts five acute care hospitals and a medical foundation comprising about 30 sites with approximately 400 primary care providers and 600 sub-specialists. The system also contains ambulatory sites, imaging and surgical centers, and a variety of outpatient facilities.

“The bundles work best when you have an integrated environment.”

READ MORE: Bundled Payment Models Here to Stay Despite CMS Program Delays

Without the provider power behind the large integrated healthcare system, Bark explained that Scripps Health would not have been as successful with implementing a variety of bundled payment models with payers in the county.

“When you have a medical foundation environment like we do, you have the right mix of doctors that you need to provide the services,” he said. “You have the integration of all the specialties. If you need any consultations or such you have all that readily available to you and it is all connected within an electronic health record.”

Under bundled payment models, providers must be able to track patient outcomes and costs as a care episode progresses. With care episodes lasting up to 90 days post-discharge, providers should have insight into the EHR of their assigned patients.

The lack of data sharing and access hinders providers participating in bundled payment models, according to a recent Deloitte survey. Healthcare stakeholders told the industry group that effectively managing bundled payments without access to how the revenue or patient flows through the care episode is like trying to hit an unknown, unpredictable target.

READ MORE: Patient Engagement Critical to Bundled Payment Model Success

Healthcare organizations do not necessarily see that level of integration in healthcare markets dominated by independent physicians, Bark stated. Independent practices are under little pressure to use the same EHR system as the large healthcare organizations around them even if doing so would improve alternative payment model success.

Consequently, Scripps Health decided to focus their bundled payment efforts on providers within the medical foundation rather than their affiliated independent doctors. Although, the integrated healthcare system plans to expand to solo providers in the near future.

“The next step for us will probably be to roll it out to our independent doctors in the marketplace, which will be a little bit more of a challenge,” Bark said.

“We have not rolled it out to them yet, but we are going to have to do a lot of qualitative leg work before we do because obviously if we are going to be at risk now for these services, we want to make sure that we are choosing the absolute most efficient and highest quality providers in our independent world,” he continued.

Expanding the bundled payment models to other physicians may also help the integrated healthcare system extend its market power.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

“We viewed it as an opportunity to bring in incremental business that we would not see otherwise.”

“In our medical foundation, we have a lot of control who we hire and who we bring into the tent, if you will,” he elaborated. “We know we have the best of the best in that environment. But, employers, if they are local in nature, may want more geographic coverage within the cities, so we may have to at some point expand the physician population to accommodate that. That is where the independents would come into play.”

The healthcare market in San Diego functions like a petri dish, Bark explained. The market is isolated because the area is surrounded by the Mexican border, Pacific Ocean, and a desert. The room to expand into other geographic locations is limited.

But bundled payment models can be travel-based. “Oftentimes when you think about bundled payments they can be local or they can be travel-related in terms of the circumstances,” he said.

“But for us, it is probably our travel environment we need to work on because we are kind of isolated in San Diego and a lot of these accounts that the care organizations of the world are establishing are more regional in nature,” he continued. “We viewed it as an opportunity to bring in incremental business that we would not see otherwise, as well as an opportunity to build the infrastructure in dealing with not only travel-related business, but how to create the efficiencies with these bundle arrangements to make them successful.”

The travel-based bundled payments also pushed more of Scripps Health’s business into value-based purchasing.

San Diego is a highly penetrated managed care marketplace, Bark pointed out. The area contains mostly small employers who utilize Health Maintenance Organizations (HMOs) with capitated payments versus large, national employers who tend to still function with fee-for-service payments under Preferred Provider Organizations (PPOs).

“Because a lot of large national employers have PPO type environments, you are not going to have capitation,” he stated. “You are always going to have a fee-for-service payment model. These bundles are really an efficient way to align incentives for specific services.”

Patients enrolled in fee-for-service PPOs are now embedded in Scripps Health’s capitated care delivery systems. Care quality is still the same regardless of insurance type, but providers receive the financial incentives under bundled payment models to push the population’s care into a more risk-based value-based purchasing model.

“Capitation is really the ultimate. That is where we need to be to fully align our incentives and create a more efficient environment.”

Scripps Health partnered with the bundled payment platform Carrum Health to identify Diagnosis-Related Groups (DRGs) that presented an opportunity for travel-based bundled payment models.

“There has to be a certain amount of cost associated with the care to make it a travel worthy environment,” he stated. “If you are talking about a very simple routine case, it is going to be hard to justify a price point as enough savings for the employer to find an interest in paying travel-related expenses to send their employees down to San Diego for care.”

Consequently, the integrated healthcare system selected high-volume, complicated procedures that would warrant and fit within a bundled payment model. Some of the procedures included cardiac bypass, surgical interventions, joint replacements, and spinal surgical infusions.

Now that Scripps Health engaged with the bundled payment models, Bark hopes to expand the models to other DRGs and, eventually, capitation.

The integrated healthcare system will start by adding other DRGs around the core procedures to create more advanced bundled payment models. Incorporating additional services into the model will allow providers to develop appropriate, comprehensive care plans for patients undergoing a bundled payment model intervention.

While advancing their bundled payment models is key, capitation is the ultimate goal.

“Capitation is really the ultimate,” he stated. “That is sort of the nirvana. That is where we need to be to fully align our incentives and create a more efficient environment because we have ultimate risk for all services provided to those individuals.”

“We really need to migrate more towards a more risk environment to really make these things as effective as they possibly can be,” he concluded.


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