Industry experts predict private payers will adopt bundled payment arrangements for both inpatient and outpatient procedures

Early evidence indicates that Medicare’s bundled-payment pilot has helped participating providers improve the quality of care while better managing healthcare costs. Should more detailed findings confirm these outcomes, Medicare could decide to expand the range of clinical services it wants covered by a bundled-payment arrangement.

As of the first of this year, in fact, Medicare officials expanded the bundled-payment program associated with the hospital Outpatient Prospective Payment System (OPPS) by requiring certain clinical laboratory, anatomic pathology, and other clinical services be reimbursed as part of the bundled payment initiative. This action was taken independent of the bundled-payment pilot program.

Medicare Is Likely to Expand Bundled Payments to Providers

Just a few years ago, Medicare officials viewed bundled payments as one quick fix for bringing down healthcare costs and improving quality. Consequently, Medicare officials launched the Bundled Payments for Care Improvement (BPCI) initiative last year.

Some early participants already report that the program is moving their organization’s healthcare quality and cost in the right direction. (See Darkdaily.com, “New CMS Pilot Intends to Test Viability of a Universal Bundled-Payment Model for Inpatient Care,” March 15, 2013.)

The bundled-payment model provides one payment for all services rendered by multiple providers for one episode of care, such a hip replacement or open heart surgery. BPCI is a three-prong project with nearly 500 participants. It is designed to be a test of this payment model for inpatient hospital acute care and post-acute care only. If successful, some experts predict the bundled-care model will likely be expanded to outpatient services too.

Why Bundled Payment Improves Quality and Reduces Costs

Healthcare experts discussed reasons why the bundled-payment model is effective in improving quality and lowering costs in a report published by Modern Healthcare. Among top reasons cited are:

  1. the structure aligns incentives among clinicians, providers and payers;
  2. it allows providers to track their patient’s care after the patient leaves the hospital or doctor’s office; and.
  3. it produces results more quickly than other innovative payment structures, such as accountable-care organizations (ACOs) and patient-centered medical homes.

Valinda Rutledge is the Chief Executive Officer (CEO) for Rutledge Healthcare Consulting, LLC, She suggested that there is growing excitement among providers about the effectiveness of this payment structure. A former nurse and hospital CEO, she was tapped by the CMS’ Center for Medicare and Medicaid Innovation (CMMI) to lead BPCI, after developing a 180-day bundled-payment program for CaroMont Health in Charlotte, North Carolina.

 

Valinda Rutledge (pictured) is the Chief Executive Officer (CEO) for Rutledge Healthcare Consulting. She was tapped by the Centers for Medicare & Medicaid Innovation to lead implementation of the largest CMS bundled payment pilot ever. Rutledge predicts that, over the next 12 to 18 months. CMS will expand this payment model to outpatient services, and private payers will begin adopting it too. (Photo copyright Charlotte Business Journal.)

Valinda Rutledge (pictured) is the Chief Executive Officer (CEO) for Rutledge Healthcare Consulting. She was tapped by the Centers for Medicare & Medicaid Innovation to lead implementation of the largest CMS bundled payment pilot ever. Rutledge predicts that, over the next 12 to 18 months. CMS will expand this payment model to outpatient services, and private payers will begin adopting it too. (Photo copyright Charlotte Business Journal.)

Brooks Rehabilitation Reports Lower Costs and Hospital Readmissions

Among those reporting positive results is Brooks Rehabilitation Hospital, a post-acute care facility in Jacksonville, Florida. It experienced both lower costs and fewer hospital readmissions for its patients since launching BPCI last October, reported the Modern Healthcare article. The facility is using its Brooks Care Compass, an electronic tracking tool used to measure the program’s success.

Michael Spigel, Chief Operations Officer at Brooks, credited the program’s early success to three essential components:

  1. care navigators, who manage a patient’s entire episode of care and catch things “before they fall through the cracks;”
  2. analytical and IT tools that track a patient’s vital, clinical and functional signs; and
  3. a cultural change across the system that requires Brooks caregivers to standardize assessments at the beginning and then repeat those assessments throughout the patient’s entire episode of care.

Spigel noted that the Brooks Compass provided clinicians and other caregivers a broader view of the patient’s entire experience and benefits of bundling payments. “They can see why this works for patients because it expands their vision of what they do across time,” Spigel explained. “With all the education we did when the tool was developed, it is the thing that clicked the most.”

Amedisys Facility Experienced 21% Decline in 90-Day Readmission Rate

Amedisys, Inc., (NASDAQ: AMED) a Baton Rouge-based home health and hospice chain with 450 care centers nationwide, is another early success story that was cited by Modern Healthcare. A bundled-payment pilot involving 30 sites in Kentucky and South Carolina was launched in January 2014.

“For one of our regions that went live January 1, we’ve actually seen a 21% absolute decline in the 90-day readmission rate,” said Julie Lewis Sutherland, Amedisys Vice President for Research and Development. Other regions are “holding steady,” she added, explaining that Amedisys is assessing what worked well in one area to apply it to the others. The company also launched the program in April at 30 more sites in Indiana, Louisana, Mississippi and Tennessee.

Hospitals Get Onboard to Deepen Relationships with Physician Specialists

A major incentive for hospitals to participate is the bundled-payment model deepens their connection to physician specialists. Noting that ACOs and patient-centered medical homes do not create relationships with specialists, Hiller said, “Some of our members… see bundles as a way to really pull in and engage with their specialist providers.”

“The intent (of the bundled-payment model) was to develop a program to more effectively use existing dollars and reduce costs related to duplicated tests, unnecessary procedures and poor coordination of services,” noted Kimberly Hartsfield, a Senior Manager at Camden Group, a Los Angeles-based healthcare management and consulting firm, in the Modern Healthcare article. She pointed out that bundled payments provide a better introduction to payment reduction and risk-sharing for providers than ACOs because they offer a better picture of what happens once patients leave the hospital.

Meanwhile, the consensus among healthcare experts is that bundled-payment programs will spread among both public and private payers. Rutledge predicted movement of bundled payments within the entire healthcare industry to outpatient procedures within the next 12 to 18 months, noted the Modern Healthcare report.

Pathologists and Clinical Labs Must Shape Their Own Financial Destiny

How pathology groups and medical laboratories fare in the bundled payment scheme is still an unknown. While this payment model is showing positive results, most pathologists and medical laboratory professionals remain skeptical that it will benefit their bottom lines—and with good reason.

The last time the federal government made a major change in its payment model was when it introduced inpatient DRGs in 1983. As a consequence, pathologist saw a significant decline in reimbursement for clinical pathology professional services because the Medicare program did not specify how much of the DRG payment should be associated with this service. Thus, there is a good reason why pathologists are wary of any Medicare bundled-payment arrangements.

—by Patricia Kirk

Related Information:

Early bundled payment projects test positive

New CMS Pilot Intends to Test Viability of a Universal Bundled-Payment Model for Inpatient Care

Medicare Officials Announce Bundled Reimbursement Initiative and Clinical Pathology Laboratory Tests Are to Be Included

Bundled Payments for Care Improvement (BPCI) Initiative: General Information

CMS Bundled Payment Initiative Could Transform Health Care Delivery

The Bundled Payments for Care Improvement Program: A Hospital Analysis