Nevertheless, bundled payments are likely here to stay, because they have proven to be an effective tool in driving improvements in cost and quality.
While mandatory CJR and Cardiac bundles are a relatively new phenomena, the financial impact is very similar to readmission penalties, which have now been mandatory for several years. Readmission penalties have encouraged hospitals to work with physicians, post-acute care providers and communities to break down silos of care and collaborate across care settings.
However, readmission penalties, as implemented through the ACA, have several shortcomings:
– Hospitals have only downside exposure, no upside opportunity for superior performance
– Hospitals are unable to directly share risks and rewards with physicians and post-acute care partners that are essential to managing care episodes
– A 30 day episode is a shorter duration than the care pathway for some hospital procedures
The optimal financial return for a hospital subject to readmission penalties is to be average – not better, not worse. Why incentivize mediocrity? The structure of current readmission penalties put hospital CFO’s in the terrible position of having to choose between the health of their patients and the financial health of their organization.
Bundled payments enable hospitals that are out-performing their peers in cost and quality to share in the savings. Furthermore, hospitals have the flexibility of sharing bonuses with provider partners – particularly physicians – who are essential to any comprehensive solution. Many hospitals have already jumped on the bandwagon with the Bundled Payments for Care Improvement (BPCI), CMS’ voluntary bundled payment demonstration program. Other hospitals were pulled off the sidelines when they landed within one of the mandated 67 CJR territories. Hospitals made early investments to standardize care pathways and streamlined post-acute care networks now see bundled payments as a means to increase their margins and gain market share.
This is not to say that bundled payments is a panacea or without its detractors. Three necessary areas must evolve for broader adoption:
1. How to balance patient choice with the provider’s need to guide patients to high quality / low cost network partners?
There is still a lot of confusion out there about what hospitals may tell patients about options for post-acute care providers. For a long time, Stark Laws and anti-kickback legislation have led many hospitals to conclude it is best to just give patients an alphabetized list of post-acute care providers and let them fend for themselves. However, an uninformed choice is no choice at all. With the Impact Act of 2014, CMS requires hospitals to “take into account quality, resource use, and other measures” in the discharge planning process. Patients have the final say, but hospitals should be providing patients with clear and objective data to make an informed decision.
2. How do you prevent providers from reducing bundled costs by simply denying care to high risk patients?
Bundled payment programs will have to adjust payments for high risk patients. Otherwise, providers will be incentivized to avoid complex cases. CMS has already made some progress in this area. An earlier version of hip and knee bundles failed to account for fractures, but now procedures with fractures are compensated at a higher rate.
Risk adjustment methodology is never going to be perfect. Ongoing revisions should be made as more data is available for analysis. Risk adjustment calculations have been used when calculating rates for readmission penalties, but just this year the methodology was revised by CMS to incorporate socio-economic factors. Expect more tweaks on bundled payment risk adjustment methodology as shortcomings are identified.
3. What’s to prevent payers like CMS from continuing to reduce the bundle target price year over year?
Nothing. In fact, we can expect that CMS and other payers will reduce the bundled target price over time. They have to. Healthcare costs are unsustainable and must come down. Bundled payments provide aligned financial incentives for hospitals and other providers to profit by reducing costs and improving quality.
Whether bundled payments grow by CMS mandate or market forces, for leading providers it represents a compelling opportunity to improve margins and win market share. Expect bumps along the road as the kinks with risk adjustment and gain sharing get worked out, but bundled payments are here to stay.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker’s Hospital Review/Becker’s Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.
