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Bundled Payments: What Physicians Need to Know

Bundled Payments: What Physicians Need to Know

For OrthoTennessee in Knoxville, Tenn., the switch to bundled payments could not come soon enough. After an initial unsuccessful attempt to negotiate payment reform with BlueCross and BlueShield of Tennessee, the medical group managed to reach agreement with the plan in May 2012 to begin using a bundled payment system for total knee and hip replacements starting in the fall. The model will provide a fixed payment for the entire episode of care — from surgery to post-care to physical therapy — creating a financial incentive for the providers to deliver better care more efficiently.

"We opened dialogue because we recognize the need for new forms of payment in response to the Affordable Care Act (ACA) and we wanted the opportunity to influence some of these payment models," says Teresa Copeland, director of managed care for OrthoTennessee. "We feel there's a great incentive to have hospitals and providers work together to deliver quality care. In addition, whatever dollar amount we can save above the negotiated payment is an opportunity for gain sharing."

Bundled payments are being hailed, by many, as the most promising solution to the problem of rising healthcare costs in the United States. CMS and commercial health insurers are currently testing a variety of episode-based payment models in their quest for a reimbursement system that rewards physicians for value, rather than volume. Under the bundled approach, two or more providers receive a single payment based on the expected cost of a defined episode of care, such as a hip replacement or heart bypass surgery. The provider pool might include the physician, hospital, anesthesiologist, and rehabilitation specialist.

The idea, of course, is to motivate providers across the healthcare continuum to control costs by coordinating care, while maintaining or improving the quality of that care for patients. If the cost of delivering services is less than the negotiated bundled payment, the provider team keeps the savings. If the cost is greater, they absorb the loss. Bundled payments would replace the traditional fee-for-service model, in which providers are paid separately for each patient encounter — a system long-criticized for breeding inefficiency and fragmented care.

While sound in theory, however, the concept of bundled payments has a great many hurdles to overcome. Echoing the criticism of earlier risk-based reimbursement models, for example, some providers fear the move to bundled payments forces them to assume too much financial risk. Others suggest the infrastructure required to process bundled claims would be cost prohibitive for smaller practices. And patient advocate groups are voicing concern that cost incentives may compel physicians to limit pricey, but necessary, patient care. As healthcare stakeholders weigh in on the national debate, we explore the challenges and opportunities that bundled payments present for your practice.

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