4 Considerations for Hospital Bundled Payment Programs

In a session at the Becker’s Hospital Review 4th Annual Meeting in Chicago on May 10, Jonathan Pearce, CPA, FHFMA, principal for Singletrack Analytics, and Kelly Price, director of DataGen group of the Hospital Association of New York State, discussed how hospitals could make bundled payments work for their systems.

In a session titled "Leveraging Lessons Learned From Medicare's Bundled Payments for Care Improvement Program," Mr. Pearce and Ms. Price show how data can be used to determine which procedures could be performed feasibly with bundled payments, as well key areas overlooked.

Here are four considerations for health systems interested in participating in a bundled payment program.

1. Study data to determine feasibility. By looking at the historical claims data from CMS' bundled payment program, hospitals can see what their financial exposure and risk for selected episodes are, Mr. Pearce said. This data can also help determine greatest cost-saving opportunities for bundled payments and how to structure contracts.

To make money from bundling payments, hospitals must pick procedures with sufficient volume in terms of number of episodes and actual dollars, he said, such as joint replacements.

2. Understand CMS' structure. CMS is structuring their bundled payment program based on the diagnosis-related group, rather than by condition or ICD-9 code. As the program currently stands, if healthcare providers are going to bid on a DRG, then they are going to participate for the whole family not the average across the family.

3. Determine if your physicians are interested. A bundled payment program will not be successful without physician leadership and support. "You need them to be involved an enthusiastic," Ms. Price said. Physicians and health systems need to know that CMS is going to take 2 percent off from any profits earned and anything else is the system's to keep.

4. Be aware of readmission costs. Mr. Pearce and Ms. Price's data showed that the most expensive potential cost is an acute readmission after discharge. Procedures can cost between 30 and 50 percent more if a patient is readmitted immediately after discharge, so hospitals will need to have a plan in place to avoid those unexpected readmission at all costs. "The opportunity to save is through readmission," she said. "Stopping them will save a significant chunk of dollars. However, this is harder to solve. If you are trying to do something about readmissions, you have to know what the patient came back for."

She recommended analyzing all readmissions to discover is patients were simply discharged too quickly and if any strategies could reduce this cost.

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