Bundled Payment

Bundled Payment

Bundled Payment

Concepts and Introduction

In an interesting confluence of the stars, most of the reform objects spoken of as new or innovative today, were actually conceived in the annus mirabilis of 1967-68: episodes of care, medical home and HMO /ACO. As Jerry Solon laid out the original idea of a medical episode, it was a way of focusing the three major perspectives of care on patients – the patient, the provider, and the payer, as determined by the disease states that drive health care demand. As such, the episode framework could used be used as a planning, measurement and payment instrument. Conceptually, the idea of concentrating payment on the value stream as perceived by the patient to cure or palliate his / her condition is as simple as simple gets; operationally, it can be quite complex.

In the current policy vernacular, it has become known as “bundled payment”, but this term underserves the power of the idea. Fully understood, it is a means of rationally reconceiving the relationship between health insurance and health care, re-engineering care processes to make patients the center of the medical universe, and to establish new and powerful feedback loops that transparently make price and quality information ubiquitous. Attempts to package or bundle treatment pathways into a single case rate or global payment can be traced all the way back to 1984 (Bailor’s orthopedic program), 1989 (the Utah Public Employees Health Program Designated Service Provider), 1991 (the Medicare Participating Heart Bypass Center Demonstration Project), 1993 (Anthem BCBS of Ohio Cardiology Services Network), 1996 (Oxford Health Plan Oxford Specialty Management), 2007 (Prometheus Payment) 2010 (Medicare Acute Care Episode demonstration), 2011 (IHA Bundled Episode Payment and Gainsharing Demonstration) and, most recently in August 2011 (Medicare Bundled Payment for Care Improvement pilot).

Lessons Learned

Barriers to adoption – up until recently, there existed several barriers that either overwhelmed early EOC payment attempts or prevented them from being scalable. Among these were a lack of standard episode definitions, legacy FFS infrastructure impediments, and the fact that the nation’s largest payer, Medicare, was uncommitted. These barriers no longer exist. CMS will release a standard episode logic system in 2012, new scaling technologies like EOC engines are coming on line, and the ACA has committed CMS to bundled payment for both inpatient and chronic care episodes starting in 2011 / 2012. Now that the major barriers have fallen, pilots are springing up across the nation.

Vision and leadership – EOC payment cuts straight against the grain of FFS payment, which is to say, how things have always been done. For adopters and pilots, involved organizations must understand why they are doing this and have a vision for working it into their strategic plans for the future. Deploying a little corporate Body English will not get the job done. It takes committed executive leadership willing to push the vision through several layers of management and make sure that the new methods and procedures are thoroughly socialized into the intellectual fabric of organizational culture. The latter insight cannot be emphasized enough.