Kevin Lieb, senior director with TRG Health Care Solutions, and James Reilly, managing partner with TRG Health Care Solutions, share three common mistakes hospitals and other providers make when entering into bundled pricing contracts.
1. Not being prepared. While bundled payment is likely inevitable post-healthcare reform, very few providers have begun to seriously prepare for this new paradigm. "Many times the hospital just isn't prepared to do the work and due diligence necessary to understand what it's getting into," says Mr. Reilly. "The data analysis required to really dig into the risks and upsides is a very time-consuming process."
A typical RFP for a bundled pricing contract, whether Medicare or commercial, is required to be submitted in 90 days or less, which can be tight for hospitals, says Mr. Reilly. If a hospital doesn't have internal resources to properly analyze its risk under the contract, it should work with a consultant with experience in this area, and it's important that hospitals reach out sooner rather than later. "Hospitals have the tendency to sit on the RFP, and often you have a situation where there's no real analysis until 30 or 15 days out," he says. "It doesn't leave a lot of time to do your homework and truly understand the benefits and risks.
2. Lack of communication to physicians. In order to be successful under a bundled payment, hospitals must engage physicians in better coordinating care and improving efficiency. Physicians are key drivers of the cost of care, and their active participation is critical to any bundled contract's success. Hospitals should communicate the rewards and risks of bundled pricing, educate physicians on what exactly is included in the bundled fee and offer financial incentives to physicians for meeting certain measures to gain alignment, says Mr. Lieb.
3. Over discounting contracts. Hospitals should avoid offering too big of a discount to payors to win the business when it is not necessary. A hospital may be so focused on getting the contract that it offers too much of a discount, says Mr. Lieb. "Hospitals need a disciplined process to understand why they're offering a discount and whether or not they can provide the type of care needed to account for any reimbursement cuts," he says.
Learn more about TRG Health Care Solutions.
1. Not being prepared. While bundled payment is likely inevitable post-healthcare reform, very few providers have begun to seriously prepare for this new paradigm. "Many times the hospital just isn't prepared to do the work and due diligence necessary to understand what it's getting into," says Mr. Reilly. "The data analysis required to really dig into the risks and upsides is a very time-consuming process."
A typical RFP for a bundled pricing contract, whether Medicare or commercial, is required to be submitted in 90 days or less, which can be tight for hospitals, says Mr. Reilly. If a hospital doesn't have internal resources to properly analyze its risk under the contract, it should work with a consultant with experience in this area, and it's important that hospitals reach out sooner rather than later. "Hospitals have the tendency to sit on the RFP, and often you have a situation where there's no real analysis until 30 or 15 days out," he says. "It doesn't leave a lot of time to do your homework and truly understand the benefits and risks.
2. Lack of communication to physicians. In order to be successful under a bundled payment, hospitals must engage physicians in better coordinating care and improving efficiency. Physicians are key drivers of the cost of care, and their active participation is critical to any bundled contract's success. Hospitals should communicate the rewards and risks of bundled pricing, educate physicians on what exactly is included in the bundled fee and offer financial incentives to physicians for meeting certain measures to gain alignment, says Mr. Lieb.
3. Over discounting contracts. Hospitals should avoid offering too big of a discount to payors to win the business when it is not necessary. A hospital may be so focused on getting the contract that it offers too much of a discount, says Mr. Lieb. "Hospitals need a disciplined process to understand why they're offering a discount and whether or not they can provide the type of care needed to account for any reimbursement cuts," he says.
Learn more about TRG Health Care Solutions.