How hospitals can be successful in a world of mandatory bundles — 5 learnings + insights

The Biden administration has signaled plans to evolve from voluntary bundled payment programs to mandatory bundles.

Given that this evolution would mean the average U.S. hospital has seven-figure financial risk, hospitals must begin preparing now. 

During a Becker's CEO + CFO Virtual Forum session sponsored by Sound Physicians, CEO Robert Bessler, MD, and Chief Clinical Officer John Birkmeyer, MD, shared learnings about bundled payment programs and offered insights on how hospitals and health systems can be successful with mandatory bundles. 

Four learnings and insights: 

1. The features of the Bundled Payments for Care Improvement framework show how future bundled programs might be structured. Dr. Birkmeyer explained that bundled payment models aren't new; CMS has done pilots for more than a decade. The key features of the BPCI program include participants accepting a fixed payment (target price) for all services around 90-day episodes of care triggered by an acute care hospitalization. Target prices primarily reflect a hospital's historic episode spending, with risk adjustments for patient and market factors. CMS exacts a 3 percent discount. For calendar year 2021, CMS has 32 discrete bundles in eight groups by clinical specialty, such as orthopedics and cardiac procedures. These features are likely to be part of a new model.

2. Bundled payments reduce spending. "The majority of savings is attributable to a reduction in the use of facility-based post-acute care," Dr. Birkmeyer said, citing research that suggests a learning curve of one to two years before a hospital realizes savings. "In our experience, success depends on completely redesigning care and ensuring clinician buy-in," Dr. Birkmeyer added.

3. CMS may make bundled payments mandatory. While health systems have generated savings, CMS has lost money on bundled payments. Dr. Birkmeyer indicated that program participants have "cherry-picked" bundles with favorable pricing, avoiding bundles with less favorable pricing.

Dr. Birkmeyer believes CMS intends to migrate to mandatory bundles. However, there remains uncertainty about the program structure, clinical scope and benchmarks for target prices. Despite this uncertainty, if bundled payments become mandatory, the financial risk (and opportunity) for most hospitals is in the millions of dollars. 

4. Sound Physicians offered five keys to managing the total cost of care across the acute episode. Sound Physicians has experience managing over 400,000 episodes and $10b in at-risk spending. They have seen a decrease of $1,000 in spending per episode and a 26 percent decline in 30-day hospital readmissions.

"In a 90-day period, half of every dollar in the U.S. health system is spent," Dr. Bessler said. "The anchor admission makes up only about 35 percent of the total cost." The other 65 percent of costs are after discharge, with 38 percent being spending for skilled nursing facilities. 

Based on Sound Physicians' experience, Dr. Bessler suggested five keys for successfully executing successful bundled payments:

  • Align physicians around managing cost across the episode. 
  • Standardize clinical workflows and lock them in with IT. This includes redirecting patients to the right level of care and having a two-week protocol for home health. 
  • Focus on the right patients. These are usually high-risk patients.
  • Have rigorous feedback and accountability.
  • Establish collaboration and continuity of physician oversight between acute and post-acute settings. Physicians should be deeply involved in where patients go post-discharge. "It shouldn't be about who has available beds, but instead about who's got better outcomes," Dr. Bessler said. 

To learn more about the event, click here.

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