Also called a ‘bundled payment’ model, under this plan, hospitals and clinical laboratories will receive ‘lump sums’ for certain healthcare procedures

Employers and insurers continue to move healthcare providers away from fee-for-service (FFS) payment models and toward value-based reimbursement arrangements, also called Pay for Performance or bundled-payment models. While intended to save money, such payment models can have adverse financial consequences for clinical laboratories that are dependent on billing for each individual procedure.

Medical laboratories and anatomic pathology groups should closely monitor these moves. Labs are increasingly being asked to participate in contracts where they are not paid for specific services, but instead required to participate in per-member-per-month-fee arrangements with the lab assuming at least some utilization risk. This is coming.

The latest example involves Connecticut and Maine. Both states recently announced plans to use bundled payments for certain health services as part of their state employee health plans.

Incentivizing Quality in Connecticut

With an FFS model, healthcare providers bill insurance companies, government agencies, and consumers for all individual healthcare services rendered. Under the fee-for-service payment model, every visit to a medical provider, every procedure, every test and every drug administered for a particular health issue are itemized and billed separately. 

However, in an interview with Connecticut Public Radio (WNPR), Josh Wojcik, Policy Director, Connecticut Office of the State Comptroller, said, “The incentives in that [FFS] model are problematic. It incentivizes volume. It does not incentivize quality.”

By contrast, with a bundled or episode-of-care payment model, providers and healthcare facilities are paid a lump sum for all services performed to treat a patient for a particular health issue or episode within a certain time frame. Some believe this type of payment model could help curtail skyrocketing medical costs, while delivering a high level of care for patients. But it is not an easy change. 

“It’s heavy lifting, and it’s important because we are talking about realigning the incentives in the healthcare system,” Kevin Lembo, Connecticut State Comptroller, told WNPR.

Connecticut Centers of Excellence for Healthcare Services

Connecticut also introduced a plan to identify certain hospitals and medical facilities as “Centers of Excellence” and encourage their state employees to utilize those facilities for medical procedures. In addition, the state has negotiated a 5% to 10% discount on procedures performed at these facilities.

“We’re not just telling them what we are going to pay them. We’re negotiating. We expect savings,” Wojcik told WNPR.

The state of Connecticut has approximately 250,000 employees and retirees who are currently covered under the state’s health insurance plan. The Comptroller’s office estimates that these changes will result in a savings of about $95 million annually.

“What makes me even more excited is, if we can get this right with a quarter million people, pretty soon quality of care increases and cost increases slow not just for our folks, but for everyone,” Lembo said.

Maine Implements Bundled-Payment Model for Surgical Care

The state of Maine also introduced a healthcare plan where state employees, their dependents, and early retirees are encouraged to use designated facilities for some surgical procedures under the state’s Center-of-Excellence (COE) program.

Through a partnership with the Healthcare Purchaser Alliance of Maine, a non-profit collaborative of private employers and public trusts, Carrum Health, a cloud-based platform that connects employers and employees with COEs for surgical procedures, pairs the state’s patients with selected providers and bundled-payment options for more than 100 musculoskeletal, bariatric, and cardiovascular procedures.

Sachin Jain, Founder and CEO of Carrum Health
In a news release, Sachin Jain (above), Founder and CEO of Carrum Health, said, “Carrum Health is excited to partner with the state of Maine to improve employee benefits while reducing the cost of care. This partnership further demonstrates our continuing ability to meet the needs of large public sector employers.” While Maine’s bundled-payment model for surgical care may indeed save the state money, might clinical laboratories soon be required to give up billing for all individual services? (Photo copyright: Carrum Health.)

Patients who utilize the health plan in Maine will not have to pay a deductible or any cost sharing and may receive medical services at any healthcare facility in the Carrum network nationwide. Self-insured employers who use the Carrum network typically pay up to 35% less for services, Modern Healthcare reported.

Under Carrum’s bundled-payment plan, the company pays a fixed price for medical procedures and clinical care associated with each episode of care. This fee covers consultation, the cost of any procedures, facility costs, and all professional expenses. Any readmissions or complications related to the treatment will also be covered for a period of 30 days after the initial date of the procedure. 

Jain hopes the new agreements—such as the one with the state of Maine—will serve as a catalyst for more companies and organizations to change to bundled-payment methods for episodes of care.

“Before, hardly any providers in Maine were interested in bundles,” Jain told Modern Healthcare. “But now that a large, sophisticated employer like the state of Maine is seeing the potential, providers there are very interested in working with us. It greases the wheels for more providers to adopt bundled payments.”

Bundled-payment plans continue to gain in popularity as employers, health insurers, and Medicare officials seek ways to lower costs while simultaneously providing high-quality care and improving patient outcomes. However, clinical laboratories and anatomic pathology groups have long depended on fee-for-service billing and may find it difficult to receive payments as part of an episode-of-care or bundled-payment arrangement.

—JP Schlingman

Related Information:

State to Change ‘Problematic’ Health Care Pay Model

Bundled Payments Get a Boost in Two States with Employee Programs

State of Maine Combats Rising Healthcare Costs with New Centers of Excellence Program from Carrum Health