Bundled Pricing: Getting Physician Buy-In

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The healthcare industry has reached a point where all four of the key constituent groups (providers, physicians, payors and patients) have significant economic concerns — providers and physicians about their revenues, and payors and patients about the affordability of care. As a result, concepts like "bundled pricing" — which seek to realign incentives toward better healthcare quality at lower cost — are gaining momentum.  

Many providers have already started to explore bundled pricing as a mechanism to address clinical alignment around cost and quality, and to provide differentiation in the marketplace. Because so many physicians are hesitant to change how they think about the procedures they perform, one concern that has taken center stage is ensuring physician buy-in. Engaging physicians in the process will be critical, and by ensuring appropriate input from physicians, resistance can be minimized. We've highlighted some of the most critical aspects of developing bundled pricing while minimizing physicians' resistance and maximizing their clinical input into the process:

Develop predictive care paths

Any attempt to systematically assign a predictive price to a particular procedure or service must start by creating consistency in the delivery process. While all physicians receive essentially the same training, historically they've functioned more like individual entrepreneurs, each free to solve the health problems presented to them in the way they deem best. Not inconsequentially, the decisions they make control economic consequences for the provider, the payor, and ultimately, the patient.

The answer to the need for consistency as a starting point for understanding cost in healthcare delivery is the predictive care path. To develop a predictive care path, you'll need to map the entire episode, tracking key decision points, resources utilized, diagnostics and treatment administered. This mapping helps define what's included in the bundled price and what's not.  

Care path development is also a starting point for calculating revenues and costs, determining what they would be under different guidelines and managing actual care delivery against the basis for pricing. These calculations are a requirement for any business — if your price is fixed, you need to be able to manage the cost of production or you risk losing money on every sale. If crafted correctly, predictive care paths can account for variability across the complex, non-linear process of caring for patients, while creating enough consistency to predict costs.

Engaging physicians in this process is crucial for several reasons. First, the care path needs to represent consensus among physicians. Those physicians who handle the bulk of patient volume must be included in the process in order for the consensus to be meaningful. The second, related reason is that while the consensus care path may differ from current individual practice, future practice decisions are expected to be consistent with the consensus care path. Physicians who have not had input into the care path are less likely to make decisions that are consistent with it. Without commitment to consistent practice, the care path is an empty gesture. So, obtaining physician participation and buy-in throughout care mapping is essential.  

In addition, predictive care paths can be tools for physicians as well. By mapping how care is delivered and then tracking adoption and outcomes, physicians can develop data-based claims about their efficiency, the outcomes of the procedures they perform and any other benefits related to how they manage a particular episode of care. The development of care paths allows physicians (or practices) to differentiate themselves and become a preferred provider within their specialty area.  

Make the process physician-driven

Since many of the procedures that are candidates for bundled pricing are performed by group practices whose physicians may or may not be employed by the hospital, the group practices will need to define their own care paths. These groups may have varying levels of autonomy, but regardless of their traditional relationship with hospital administration, any attempt by administrators to manage variability in care delivery will be met with resistance. Getting physician practices to develop and adopt their own predictive care paths will help mitigate this resistance.  

Once you've decided which bundles to pursue, the physician leaders of these specialty practices should lead care path development. These leaders will fall across a range of levels of support for the idea of predictive care paths. Some will be openly resistant to the concept, while others may be less confrontational about their concerns.  Administrators and hospital leaders will be challenged to draw any concerns out into the open and address them early in the process, particularly since the physician leaders will be responsible for managing resistance within their own specialty groups as well.  

If there is more than one physician group performing a single service, the care paths may vary slightly between practices, but should still provide the level of consistency necessary to support bundled pricing. Some decisions, such as whether co-morbidities should be included in the bundle, will have to be made in consultation with hospital leaders outside the practice group.  

Other physicians outside of the specialty group may need to be included in care path development.  It may also be appropriate for the group developing the bundle to consult with hospitalists or other providers to make sure that they have included all the procedures and services provided from start to finish. Since these physicians do not report to the specialty group leader, their compliance with the predictive care path will need to be tracked in coordination with hospital administrators.  

Manage the process

Once an organization has implemented bundled pricing, engaging physicians to continually review and improve the care paths will be essential. This will help garner continuing support for the approach, as well as to ensure that the clinical care is keeping up with current research and evolving technologies.  

These reviews should occur on a regular basis, and should include examination of actual practice and current research. Questions to consider include: Are the care paths being used? Are there consistent deviations? Are these deviations supported by evidence-based medicine? If deviations are supported, then the reviews will be an opportunity to update the care paths; and if they are not supported, the reviews will be an opportunity to address compliance issues. The reviews should be physician-driven, but the physicians leading the reviews should have access to actual billing data to compare actual practice with the care paths.  

There should also be a mechanism in place to report any issues with the care paths in between reviews. Details of ongoing process management, such as who is responsible for updating care paths and how often reviews should occur should be clear before the care paths are implemented.  

These measures will ensure that physician engagement extends past the development and implementation of care paths and into their ongoing use and continued improvement. 

What's so critical about physician engagement?

Providers are confronted by a litany of demands around a few common issues facing the healthcare industry: rising costs, lagging quality indicators and a lack of transparency into how care is delivered and paid for. Bundled pricing is an innovation in care delivery that can address these challenges. Getting physician buy-in is a serious consideration in the implementation of any fundamental change in the healthcare environment, and bundled pricing is no exception. If the process is used to appropriately structure and engage physician leadership, and if the care paths developed and used to create the bundles are evidence-based, written at the right level of specificity and allow for legitimate variation reflecting the unique needs of patients, physician buy-in will result.

Michael N. Abrams, MA, is managing partner, and Rita E. Numerof, PhD, is president at Numerof & Associates, Inc. NAI is a strategy consulting firm focused on organizations in dynamic, rapidly changing industries. Dr. Numerof and Mr. Abrams are authors of the forthcoming book, "Healthcare at a Turning Point." For more information, visit www.nai-consulting.com. Mr. Abrams and Dr. Numerof can be reached via email at info@nai-consulting.com or by phone (314) 997-1587.

More Articles on Bundled Pricing:

Do Bundled Payments Make the Grade?
5 Tips for Taking on Risk in New Payment Models
3 Financial Challenges of Bundled Pricing

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