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9 Keys to Help Bundled Payments Work

One of the most feared and yet promising aspects of The Patient Protection and Affordable Care Act (PPACA), signed into law on March 23, 2010, is the voluntary five-year national pilot program on bundled payment – for Medicaid by 2012 and Medicare by 2013.  Bundled payment pilots may involve hospitals (including long term care hospitals and inpatient rehabilitation facilities), physician groups, skilled nursing facilities, and home health agencies for episodes of care that begin three days prior to hospitalization and continue up to 30 days post-discharge.  A bundled payment combines reimbursement for multiple providers into a single, comprehensive payment that covers all of the services involved in a patient’s care. The goals of bundled payment are to control cost, integrate care, improve outcomes, and improve the patient care experience.  The question on everyone’s mind is will it work?  Is the investment necessary to create the financial systems and IT integration offset by the cost savings and improved outcomes?

The answer to these questions is a resounding “yes” when you look at success stories like Geisinger ProvenCare, which reduced hospital costs by 5%, and the 5-year Medicare Heart Bypass Center Demonstration that saved $42.3 million, or about 10% of expected spending.  Providers are beginning to sign up for bundled payment pilots in increasing numbers and recent news shows  that about 20% of eligible providers have signed up for Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract.  The numbers are not a landslide, but the fears appear to be subsiding.

The secret to success in making bundled payments really work is developing and implementing best practices and focusing on quality improvement.  Geisinger’s ProvenCare adopted 40 best practice steps from AHA and ACC guidelines, and reduced average length of stay for CABG by 0.5 days and 30-day readmission rates by 44% over 18 months. There are several key components of the ProvenCare approach, including:

  1. Patient-centricity
  2. Appropriate care
  3. Evidence/consensus-based best practices
  4. Highly reliable care
  5. Optimized work flows
  6. Explicit accountabilities
  7. Packaged pricing
  8. Performance-based reimbursement
  9. “Warranty”

The 40 best practice steps are strictly enforced standards that allow number 9, the “Warranty.”  Geisinger strengthened their odds of success and cost management by overriding their cardiac surgeons’ individual operating styles with 40 set best-care guidelines that everyone, every time, had to follow. Even dissent is strictly formulated — doctors who veer from the guidelines have to justify their reason for doing so, selected from a previously agreed-upon list of acceptable justifications.  With this level of standardization, managing costs and bundled payments becomes possible.  What patient doesn’t want an appropriate level of care and reliability?

Performance-based reimbursement is another key to success with bundled payments, as identified in the ProvenCare components.  Blue Cross Blue Shield of Massachusetts (BCBSMA) Alternative Quality Contract has instituted a global payment system tied to nationally accepted quality measures.  In addition, their system has a payment rate set for all services and costs associated with a patient’s care, risk-adjusted and updated annually, and includes a pay-for-performance component.  This program is voluntary and providers can sign up to participate when they are ready.

There are challenges to the bundled payment approach that need to be overcome and today the idea can only be applied to a specific set of medical conditions, primarily acute care episodes with a clear beginning and end, like CABG and cataract surgery.  Some chronic conditions are candidates but they must have well defined services, e.g., end stage renal disease.  However, as healthcare IT gains ground with electronic medical records, and the enforcement of clinical guidelines and standards becomes more practical with more medical conditions, the uncertainty around bundled payments should become less and acceptance more widespread.  What do you think of Geisinger’s approach?  Would it work in your healthcare organization?

Definitely check out this excellent related article: Where Surgery Comes With a 90-Day Guarantee

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