Commercial Payers Embrace Bundled Pricing for Cost Containment, Better Outcomes

Updated on May 11, 2018

Shane Wolverto is Senior Vice President of Corporate Development for QuantrosBy Shane Wolverton

As commercial payers seek strategies to lower costs and improve care quality, they are paying closer attention to bundled payments.  While many payers express concerns about the impact of recent regulatory reversals that removed mandatory requirements for bundled payments, the benefits of bundled pricing still resonate strongly throughout the commercial marketplace. 

This is evidenced by a recent announcement from Humana, which expanded a bundled payment model into seven additional states that will cover hip and knee replacements within the Medicare Advantage beneficiary populations. This model is designed to improve outcomes and patient satisfaction during an entire episode of care while reducing their costs. More comprehensive data sharing with providers to evaluate and improve care across the continuum helps both Humana and providers meet quality and profit requirements.

Commercial Payers Drive Improvements

Private payers and employers recognize the benefits to be gained from healthcare bundled payments and other alternative payment models that are designed to decrease the cost of care. The idea is to attract plan sponsors who are looking to create options that promote higher-quality care and price transparency. Plan sponsors can then underwrite these benefits as an incentive for members to choose the higher-quality, low-cost provider.

With the increase in deductibles and copays, consumers are now in the first dollar and more motivated to shop for care. Providers that can develop and improve bundled care may put themselves in a position to thrive as risk-based contracting increases. While there may be many avenues to success, the following steps might serve as a starting point for providers to get oriented in this new manner of delivering care.

Four Steps to Success

First, identify physician leaders to guide the study of current practice patterns, patient throughput, and post-acute care. While the physicians facilitate this process, it is recommended that nursing, supply chain, pharmacy and other stakeholders be included.

Second, develop the analytic tools to assess care across the continuum using claims, EMR, and process and patient-reported outcomes. Organizations should look for analytics that allow stakeholders to see severity-adjusted episode of illness across the entire continuum of patient care. 

Accurately comparing the total cost and utilization of medical services against peer groups, national norms, and best practices is important as the trend in bundles is to cover post procedural spend for as long as 90 days.  It is essential to compile analytics refined enough to define the current performance and model the expected bundled rates and outcomes. If this step is not performed rigorously, the organization faces considerable risk and discontentment by stakeholders. 

Third, determine how the bundles rate will be distributed to the physicians and facilities. This must include incentives for improvement for all stakeholders as margins improve and quality increases.

Fourth, educate the patients and families, and key stakeholders to empower them to work as part of a coordinated team. Providing clear information about the episode can reduce anxiety and improve adherence to recommended therapies and medications pre and post-surgery. Using navigators is a proven approach to help patients through the episode of care.

Patient Selection

As the journey into bundled care begins with the selection of patients best suited for this type of care, it is advantageous to build a repeatable and evidence-based approach to delivering this care. More variability in the clinical and demographic attributes of the patient leads to greater potential variance in treatment.  It is vital that the teams develop a consistent care path especially early into the program. This fosters the knowledge required to set utilization and quality outcomes firmly in alignment with the bundled rate. Even the slightest inconsistencies can have a significant impact on the program’s performance.

Healthcare Performance Management & Analytics

With bundled payments, commercial payers, providers, and healthcare delivery organizations benefit from the savings, provided the outcomes of the patient meet expectations. In some arrangements, quality performance guarantees are included as part of the agreement. For instance, one of the most comprehensive arrangements is the inclusion of a lifetime guarantee for hip arthroplasty.

Demonstrating high-quality care to patients regardless of setting will foster greater trust with commercial payers and employers and reduce the reluctance for patients to seek treatment in the outpatient setting.

Assessment of risk-adjusted mortality, complications and unanticipated readmissions along with Agency for Healthcare Research and Quality patient safety indicators is essential in building and maintaining a bundled program. These indicators must be risk-adjusted properly to validate performance, remediate poor outcomes, credential providers and market the program. The use of statistical process control techniques is also required to discern random versus special cause variation in utilization or outcomes. It would be desirable to use methods published in peer-reviewed journals for integrity with the medical staff.

The introduction of bundled pricing has already changed the face of the industry. What’s more, commercial payers and other stakeholders are taking the lead in considering and adopting new and effective approaches.

Shane Wolverton is Senior Vice President of Corporate Development for Quantros.

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