When structured well, bundled payment models can be effective and profitable for hospitals that can reduce the cost of each episode of care, according to a study conducted by Singletrak Analytics and DataGen.
Analyzing about 24 hospitals at the start of the Medicare Bundled Payment for Care Improvement project, the study's authors listed two critical factors in designing structures with the greatest opportunity for success. First, the authors favor defining episodes of care based on broad diagnosis-related groups, as BPCI does, rather than initial ICD-9 diagnosis codes commonly used by private payors. Hospitals can more easily mitigate risk in bundles by pricing to a larger group with a broad diagnosis than it is to a smaller group with a common ICD-9 diagnosis.
Second, the authors preferred BPCI's model of shared savings, in which CMS immediately takes a three percent discount on the bundled fee, but allows the provider to keep all other bundled payment revenue in excess of the cost of care. In private bundled payment agreements, payors pocket a portion of the savings produced when providers deliver care at lower cost, which can offset providers' financial reward for keeping costs low.
The authors were optimistic for the proliferation and impact of bundled payments on the cost of healthcare, but expressed some skepticism on the future of accountable care organizations. "While ACOs encompass a wider range of healthcare services [than bundled payment programs], their breath and conflicting financial incentives may impede their growth and ultimate effectiveness," the authors wrote.
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Analyzing about 24 hospitals at the start of the Medicare Bundled Payment for Care Improvement project, the study's authors listed two critical factors in designing structures with the greatest opportunity for success. First, the authors favor defining episodes of care based on broad diagnosis-related groups, as BPCI does, rather than initial ICD-9 diagnosis codes commonly used by private payors. Hospitals can more easily mitigate risk in bundles by pricing to a larger group with a broad diagnosis than it is to a smaller group with a common ICD-9 diagnosis.
Second, the authors preferred BPCI's model of shared savings, in which CMS immediately takes a three percent discount on the bundled fee, but allows the provider to keep all other bundled payment revenue in excess of the cost of care. In private bundled payment agreements, payors pocket a portion of the savings produced when providers deliver care at lower cost, which can offset providers' financial reward for keeping costs low.
The authors were optimistic for the proliferation and impact of bundled payments on the cost of healthcare, but expressed some skepticism on the future of accountable care organizations. "While ACOs encompass a wider range of healthcare services [than bundled payment programs], their breath and conflicting financial incentives may impede their growth and ultimate effectiveness," the authors wrote.
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