Key Considerations for Bundled Payment Model Adoption, Success

February 08, 2017 - As the value-based reimbursement transition pushes on, many provider organizations have turned to bundled payment models as a stepping stone to alternative payment model adoption.

“Bundled payments can be an organization’s first step into APMs [alternative payment models]; they are relatively focused, engage specialists, and do not upend a hospital’s fee-for-service (FFS) business model,” stated a recent Deloitte Center for Health Solutions report. “Furthermore, bundling can be compatible with a population health strategy where savings from reducing post-acute care count towards reducing total cost of care.”

Provider organizations have also become increasingly interested in bundled payment model adoption after Medicare released several models. One such model was the Bundled Payments for Care Improvement (BPCI) initiative, which was launched in 2013 and contains 48 episodes of care.

CMS reported last year that the 1,400 participating providers in the BPCI initiative reduced Medicare spending on 11 out 15 care episodes studied, with orthopedic bundles seeing the most healthcare cost savings with $864 per episode.

In July 2016, the federal agency also unveiled compulsory bundled payment models for heart attack treatment, bypass surgery, and surgical hip and femur fracture treatment in select areas.

READ MORE: Understanding the Basics of Bundled Payments in Healthcare

With bundled payment models maturing and new models developing, providers are searching for strategies to implement and succeed under the alternative payment model.

Based on 20 interviews with provider organizations, health plans, and other stakeholders, Deloitte detailed the major challenges providers faced with existing bundled payment models and key ways to achieve bundled payment success.

What are the challenges providers experienced with bundled payment models?

Healthcare stakeholders in the Deloitte report identified financial, cultural, and structural issues with bundled payment model adoption.

Provider organizations reported that bundled payment models carry significant financial challenges with them, including difficulties tracking an episode’s total healthcare costs and upfront investments.

“When healthcare organizations begin their bundling initiatives, one of the biggest unknowns is how the money will flow and whether or not their investment will pay off in the long term,” the report stated. “It is challenging to track patients in real time in order to influence care.”

READ MORE: How to Address Bundled Payment Cost Reduction Challenges

In addition to tracking patient outcomes and costs, providers may not be able to accurately project if they are going to save or lose revenue on an episode. Payers determine bundled payment savings or losses based on provider benchmarks. If providers perform care under a target price, they may be able to share in all or a portion of the savings. But they could also lose revenue if care costs exceed the target price.

Since benchmarks regularly change and are based on average care costs per episode, providers oftentimes find it difficult to predict if a particular case will produce savings or losses. Furthermore, payers sometimes do not provide regular feedback.

“One interviewee described the process as trying to hit an unknown, unpredictable target,” added the report.

Another financial challenge was upfront costs for bundled payment adoption. Provider organizations stated they needed to invest in additional staff, employee training, and data analytics to implement the model. However, they were still unclear if bundled payment savings would pay off initial investments.

Culturally, healthcare organizations reported challenges with shifting providers away from fee-for-service models to bundled payments.

READ MORE: Understanding the Value-Based Reimbursement Model Landscape

“Nurses and care managers often need training on how to transition patients to the next appropriate care setting rather than follow protocols they relied on in the past,” the report stated. “Physicians, surgeons, nurses, discharge planners, and care managers also may need to consult more with each other and get used to a new workflows and protocols.”

Providers also had trouble adapting and merging workflows. The report stated that some providers spent significant time identifying patients included in bundled payment models and developing a separate workflow for those patients.

Instead, providers should try to develop an all-encompassing workflow that also accommodates bundled payment requirements.

Healthcare organizations also found that some patients had specific expectations about their hospital stay, such as length and discharge plans, that did not conform with bundled payment care plans. Providers stated that they had to educate patients about new care delivery models.

In terms of structural troubles, interviewees experienced time lags receiving data and a lack of coordination with other organizations, including CMS.

Some healthcare organizations also reported that payers, like CMS, typically provided quarterly data on care episode performance. But some providers preferred getting performance data more often, such as monthly, to better track outcomes and costs as well as to gain more understanding about their benchmarks.

Also, many bundled payment models, including the BCPI initiative, are new to payers, too, resulting in some coordination road bumps. But boosting communication could solve some challenges.

“Continued communication and collaboration between CMS and health systems is likely to reassure individual organizations that CMS understands and will consider their experiences ‘in the trenches’ as the agency develops future guidance,” Deloitte stated.

Another structural challenge that healthcare organizations mentioned was high staff turnover rates at both CMS and their organizations, which made it difficult to integrate bundled payment models and appropriate workflows.

3 key strategies for bundled payment model success

For smoother bundled payment model adoption and reimbursement success, Deloitte recommended that healthcare organizations implement data analytics and other health IT solutions, decrease skilled nursing facility use, and engage care teams and patients.

First, developing data analytics and health IT solutions to track patients as they move through a care episode is key to bundled payment model success.

“While CMS provides data to BPCI participants, it is often delayed, limited in detail, and needs a fair amount of ‘slicing and dicing’ for organizations to understand resultant opportunities,” wrote Deloitte. “Organizations have found that having their own analytical capabilities or leveraging a technology company or convener is critical to identifying variation sources and savings opportunities.”

Healthcare organizations should have data analytics capabilities to identify what patients are in the bundled payment program, provider referral patterns, where patients are discharged to, and resource use and outcomes during the post-acute care period.

Some interviewees also said that more robust data analytics solutions helped them to engage providers in modifying referral patterns.

Deloitte advised healthcare organizations to specifically consider predictive analytics tools that allow providers to identify and track high-risk patients. Organizations should also invest in health IT solutions that allow providers across the care continuum to communicate about patients.

Larger healthcare systems may look to an in-house solution, especially if they plan to implement more advanced alternative payment models. Smaller organizations, on the hand, should look to vendors for cost-effective, convenient options.

Second, interviewees agreed that reducing skilled nursing facility use would improve bundled payment model results because most healthcare organizations reported more bundled payment-related savings from post-discharge care.

“Organizations reported that, as a first step, they used detailed analytics to review utilization and outcomes across all the SNFs [skilled nursing facilities] in their market area,” stated the report.

Healthcare organizations could reduce healthcare costs by preventing skilled nursing facility use through post-discharge patient preparation. Organizations could also try to shorten skilled nursing facility length of stays by identifying facilities that are willing to work with the organization and change care delivery to align with bundled payment goals.

Another way to reduce costs to keep care episodes below benchmarks is to prevent hospital readmissions through appropriate post-discharge care. Some organizations said that they hired non-provider care coordinators to help high-risk patients navigate the healthcare system, select the most appropriate care, and follow-up on their care.

Third, healthcare organizations found bundled payment success by engaging care teams and patients to motivate care delivery transformations. Organizations can start at the care team-level by facilitating patient monitoring, care plan sharing, and communication across the care continuum.

One healthcare organization shared that its care team engagement initiative initially aligned post-discharge care referral patterns to the bundled payment model. Other organizations saw success with using physician champions for care delivery transformations.

Most healthcare organizations also agreed that patient engagement is key to bundled payment model success. By helping patients take a more active healthcare role, some patients were more motivated to adhere to care plans and better their outcomes.

“Health systems interviewed also stressed the importance of educating patients and families early about their condition, the surgery or procedure they were going to have, and steps they could take to be as healthy as possible,” the report added.

Before point-of-care, Deloitte also advised providers to talk to patients and caregivers about typical length of stays for that care episode, what to expect while in the hospital, and potential post-discharge plans. Discussing care plans and expectations before treatment starts may help patients to understand what care to expect and how they can get better.

Bundled payment models may serve as an organization’s first step to implementing more advanced alternative payment models because providers take on less financial risk and the model is based on fee-for-service. But the models may also play a larger role at healthcare organizations participating in the Quality Payment Program.

In December 2016, CMS revealed three new bundled payment models for acute myocardial infarctions, coronary artery bypass grafts, and surgical hip and femur fracture treatment. The models qualify for maximum incentive payments through the Quality Payment Program’s Advanced Alternative Payment Model track.

“Since MACRA enjoys bipartisan support, many in the health care industry have said that implementation is likely to continue, further accelerating the adoption of APMs including bundled payments,” concluded the report.

“As APMs become more prevalent, though CMS requirements may change, our interviewees agreed that bundled payments are likely here to stay.”