Bundled Payments Could Gain ‘More Momentum Than Accountable Care’

August 26, 2011

What they are, how they work, and whether it’s a smart choice for physicians to participate.

Physicians should pay close attention the bundled payments initiative recently unveiled by HHS. It, and other reimbursement models like it, will begin playing an increasing role in determining how, and how much, physicians are compensated for their services.

“I think this may well be a model that gains more momentum than accountable care,” Greg Mertz, senior project manager at physician practice consulting company Healthcare Strategy Group, told Physicians Practice via e-mail. “I suspect commercial payers will follow. This has sustainability and physicians should not assume it will simply go away.”

The goal of the Bundled Payments for Care Improvement initiative, announced through CMS' Center for Medicare and Medicaid Innovation is (not surprisingly) to reduce spending while improving patient care.

Here’s how it would work: Rather than paying all providers involved in a patient’s care separately for their services, Medicare will provide a single payment “bundle” for the entire episode of care. That payment will then be distributed between the providers.

“Patients don’t get care from just one person - it takes a team, and this initiative will help ensure the team is working together,” HHS Secretary Kathleen Sebelius said in a statement. “It is a key part of our efforts to give patients better health, better care, and lower costs.”

Here’s how the federal government says bundled payments would lower costs: The bundled amount - predetermined by the participating providers and Medicare, or just Medicare in some cases - would be lower than what Medicare would pay if it reimbursed each provider separately for his services.

Much like participating in an ACO, if the providers managed to treat the entire episode of care at a lower cost than the predetermined bundled amount, they would keep the difference.

Here’s the catch: If the total cost of their care exceeded the predetermined bundled amount, they would eat the loss.

Richard Wagner, managing director of Chicago-based Wagner Healthcare Consulting, LLC, said though participating in the initiative is risky because it’s still unclear what exactly the risks are, the initiative does appear to make participating in new reimbursement models more accessible to many providers than other options - like ACOs.

“ACOs made participation impractical for smaller physician groups that could not shoulder the heavy infrastructure costs,” he said. “It seems like these same fixed costs are not necessary for the bundled payments initiative.”

Participating in the initiative does appear to be more flexible than other reimbursement models.
According to CMS, providers can pick which bundled payments of episode care they’d like to participate in, and they can also choose from four bundled payment models.

That’s something the AMA is applauding.

“We are pleased the initiative provides flexibility and a range of models,” AMA Immediate Past President Cecil B. Wilson said in a statement.

Still, is it a smart choice for providers to participate?

Mertz said it could be for some practices - as long as they do their homework.

“Physicians will need to study cost and resource utilization data and develop a more efficient care process to be successful under the program,” he said. “Once they understand and can quantify the magnitude of the potential financial benefit from their clinical leadership, they can be very aggressive in assuring themselves a portion of the global payment.”

And regardless of participation, both consultants agreed it’s important to stay informed about the latest reimbursement trends. That’s because, they said, physicians can expect to see even more initiatives like this in the future that could very well play into their reimbursements.

“Each physician needs to know what’s going on in the market,” added Lucien Roberts, associate administrator of business development at MCV Physicians, the medical practice of the Virginia Commonwealth University Health System. “You can’t practice in a void.”

And he said, if a practice is in stable shape economically, and if it has the opportunity to participate in bundled payments on a small scale with little risk - it could help it succeed in the long run.

“You learn by doing,” he said. “The more experience you have, the better off you’ll be going forward.”