Why Should Organizations Pursue Bundled Payments?

While many providers are exploring the world of bundled payments, far too many others aren’t even paying attention. Here are seven good reasons you should get involved:

• To learn. Fee for service payment, while a primary form of payment today, will inevitably be displaced by episodic or “bundled” forms of payment. Bundles are more predictable and attractive to payor organizations because they transfer risk to actual providers of service. The Center for Medicare and Medicaid Innovation’s (CMMI) Bundled Payments for Care Improvement (BCPI) initiative provides a unique opportunity to test new payment models while limiting risk initially, given the retrospective reconciliation of claims. There is still risk, but that risk is somewhat modulated.
• Free data. The volume of data that will be made available is impressive. Potential participants will be able to review total Medicare payments in a given geographic area for a wide range of treatments and disease conditions. For providers who understand their cost structures, the comparative data will allow them to understand their pricing position in a market. If advantageous, it may provide an opportunity to considerably increase volume.
• Integration and coordination. Growing into bundles will require providers or participants to better coordinate and integrate the provision of care. In effect, organizations will need to establish specific or defined care models for various disease states. This will involve clinical practices, IT integration, improved communication, and governance. Models will ideally become replicable or deployable across multiple sites of service, reinforcing consistent networks of care. These potential synergies may also drive the consolidation of service providers in given markets. The BCPI creates an opportunity to jump start or accelerate this process for many organizations.
• Payor mix diversity. Since an organization already has or seeks to develop experience with new payment methods as a strategy to optimize its revenues from all payer sources, evolving value-based payors (like accountable care organizations or commercial organizations) may prefer bundles over fee-for-service.
• Declining fee-for-service payments. Continued reductions or elimination of market basket increases, sustainable growth rate adjustments, and health care reform will influence providers to do more with less; early adopters who learn to reduce cost and maintain or improve quality or value will be more apt to survive and thrive
• Embracing payment reform (or, “not sticking your head in the sand”). The health care system is moving away from volume based payment (fee-for-service) and toward payment for value (quality outcomes, low cost and patient satisfaction). Bundled payments and the work it will take to be successful (e.g., development of clinical pathways, cost monitoring and controls, and understanding diagnosis-related groups) will move providers in the direction of value.
• Being a solution. Providers who serve as referral sources, such as hospitals, are already faced with challenges, like penalties for avoidable readmissions. They will seek to partner with providers who can be an immediate solution (i.e., a predictable bundled payment price) or a value-added partner that will help the referring organization decrease cost of care, share risk, and ultimately be more successful.