Bundled payments, primarily around care episodes, are one form of value-based payment in use by payers and providers throughout the country. However, the use of bundled payments is still in its infancy, with specific contract terms varying widely by payer and provider.
Yet, some key themes emerge when examining these agreement across the country, says Michael Bailit, president of Bailit Health Purchasing.
Bailit Health Purchasing recently completed its third annual study on bundled payments, and he shared a few of the study’s key findings at the Becker’s Hospital Review 5th Annual Meeting in Chicago on May 15th.
The study surveyed seven payers and seven providers involved in bundled payments, including six commercial insurers and one Medicaid program.
1. The number of commercial payers that have really embraced bundled payment is still a relatively small number. In general, smaller, regional payers have been more active entering into bundled contracts than the larger, national payers.
However, those that have embraced the model are expanding the scope of their activity, including more providers, more conditions and more procedures under these contracts. “They are expanding their infrastructure to take bundled payment to scale,” said Mr. Bailit.
“Every initial bundled payment was for joint replacement,” he said. Now, payers are moving “beyond procedures into chronic conditions and also...into behavioral health.”
2. Payers are simplifying their bundled payment methodologies. “Most of them are moving away from customized negotiations,” said Mr. Bailit. “They are simplifying their bundle definition and standardizing contracting process.”
In their efforts to simplify, many payers are eliminating risk factor adjustments into their payment methodology, which is a complicated administrative process. Instead, payers are opting to compare providers to themselves over time.
3. Payers are increasingly contracting with physicians, and not hospitals. “And why physicians? Because they view the physicians predominantly as decision makers,” said Mr. Bailit. Under these arrangements, physician groups pay out the hospital facility fee, saving the insurer from a more complicated three-party agreement. However, this type of arrangement means only the physician groups, and not the hospitals, receive a share of the savings created by the bundle.
4. Almost all bundled payment methodology uses retrospective reconciliation. “Prospective is being tried, but is not as popular due to administrative and legal complexity,” he said.
5. Most include shared risk, with upside and downside risk for the provider, rather than shared savings, where there is no downside risk.
6. Payment reconciliation is increasingly automated. Both payers and providers are using tools like those from MedAssets, Optum and TriZetto for bundled payments, said Mr. Bailit.
7. Insurers are generally providing some sort of support and/or technical assistance to providers they have bundled agreements with. For example, payers may provide practice transformation assistance or alerts to providers whose bundles are “running in the red,” said Mr. Bailit.
8. All of the arrangements build quality into the payment model, but “how they do so varies,” he said. Most often, the quality measures are not specific to the episode due to difficulty in finding appropriate measures for many episodes. Also, quality benchmarks are most commonly “used as a gate and not a ladder,” he added, meaning reaching a certain threshold is a qualification for continued participation in the program.
9. All payers experienced quality improvement, five of seven reported a positive impact on costs. Three payers reported paying out shared savings to “all or a majority” of providers they had entered into bundled agreements with.
10. Many payers reported challenges recruiting providers to participate in bundled payments. “It varies market to market, but I see payers initiating this more than providers,” said Mr. Bailit. “Providers are risk adverse.”
Despite the limited use of commercial bundled payments currently, Mr. Bailit “anticipate[s] rapid growth in use of bundled payments.
“The scope of services and conditions covered by bundles are mushrooming; payers are automating processes and simplifying models in order to make them more scale.”