It’s true mandatory bundled payment programs have been criticized for putting heavy burdens on providers, especially low-volume and rural hospitals. Plus, in 2017 many hospitals faced the added pressure of “extreme and uncontrollable circumstances,” i.e., a series of major hurricanes. A voluntary program can relieve some of these pressures by allowing providers more flexibility and choice in how they treat Medicare patients. However, a similar voluntary bundled payment program, launched in 2013, struggled with retention. Paige Minemyer from FierceHealthcare cites a study published in the Journal of the American Medical Association that found only 12 percent of eligible hospitals joined the 2013 voluntary alternative payment model (APM) and 47 percent of those who did join dropped out.
In a bundled payment model, multiple providers and/or healthcare facilities coordinate efforts to complete an episode of care. Once the treatment is complete, providers are paid a lump sum at a set price based on historical costs. A joint replacement surgery, for example, requires precise care coordination between hospitals, rehabilitation centers, skilled nursing facilities, home health agencies and others. If the team delivers the complete episode of care at a cost less than the set price, providers pocket the savings. If not, they absorb the cost. It’s a shared risk.
The clear intent is to move toward value-based payment and better quality of care, but it gets complicated fast. Such risk-based payment models require substantial discipline in treatment protocols and communications processes. Providers need to be ready. Also, patients have a wide range of risks and comorbidities that must be factored in. Managing costs for a patient’s treatment can often be out of a provider’s control, such as a patient refusing to take medication or very high-risk comorbidities exacerbated by patient behaviors. For the payment model to work, every provider team must perform effectively within set cost limits. Success with bundled payment models, whether voluntary or mandatory, comes down to teamwork.
Let’s step back for a minute and talk about how teams can win. I grew up in running-crazy Portland, Oregon, where I experienced teamwork across the episode of a 5K race. In cross country, like golf, the lowest score wins. Team scores correspond to the finishing place of the first five runners from each team. The first-place runner receives one point, the second-place runner two, and so on. The team with the lowest score wins. And no one wins until the first five runners from each team finish the race. This means that even the sixth and seventh runners on a team can win a race by displacing a scoring runner from the other team. Here’s an example. To calculate the score, add up the first five places.
Sunset High School: 3rd, 4th, 6th, 7th, 8th, 9th, 10th (winning score of 28)
Skyline High School: 1st, 2nd, 5th, 11th, 12th (score of 31)
Even though the Skyline team took first and second places, they still lost the meet because the sixth and seventh runners from the Sunset team beat several of Skyline’s scoring runners. More than once, I was that seventh runner. The coach would point 20 yards ahead of me at a lagging fifth-man opponent and shout: “Cantwell. You gotta pass that guy or we lose!” Every member of the team was part of the win.
Though no analogy is perfect, it helps me to look at bundled payment in a similar way. All teams involved in a complete episode of care are crucial to success. Excellent performance by one or two teams—like the first-place and second-place runners—is not enough to win. Individual teams cannot succeed without the success of the other teams. This is true both in terms of quality patient care and fair reimbursement. Under a fee-for-service model, if a patient has surgery, payers would separately reimburse the surgeon, the hospital, anesthesiologist and the internist providing follow-up care. This happens as treatment progresses, regardless of individual clinicians’ performance or escalating costs.
In contrast, to succeed under a bundled payment model, every provider team must perform well, within cost limits. A star runner can’t win a cross country meet. Each care team must coordinate with the other teams and make cost-effective care decisions with the entire care episode in mind. All teams share the risk for elements they can’t control—runners slipping in mud on a rainy day or wilting in blazing heat, or severe patient comorbidities or dangerous behaviors. And there is no payment until the entire episode of care is complete. Or until the race is won. Remember that red-faced seventh-position runner sprinting past his opponent just before the finish? The team can’t win without him.