Challenges

There are challenges for providers participating in bundled payment models. One of the major challenges with bundled payments is managing costs for a patient’s treatment that may be out of the provider’s control, like medication adherence or other patient behaviors that lead to increased resource utilization because of adverse events. Also, patients undergoing the same treatment might have vastly different comorbidities which can change their outcomes if a boilerplate therapy is used. These may be out of the provider’s control, and so a bundled payment model may not be the best choice in those situations.

There are also technical challenges as some providers have older IT systems that lack comprehensive reporting and data collection functions. This tends to leave the provider without a clear understanding of where their costs can occur when accepting bundled payments for care.

Bundled Payment Success

Keys to success for providers

The key to success as a provider under a bundled payment arrangement is increased provider communication. The best care coordination strategies must be used to ensure patients are being treated optimally at every step of their care. And providers need to account for patients who will be easier to treat as they enter an episode of care, versus those who will be more difficult to treat. Providers need to allocate resources more precisely to mitigate risk based on that patient’s needs-not based on the fact that they’re simply undergoing a hip replacement, for instance.

Capitation

Partial or blended capitation models use a single payment for a defined set of services, while other services involved in the patient’s care are paid for on a fee-for-service basis. This means that a particular patient may have care that is covered under a capitated arrangement, and other care that is still fee-for-service. Scenarios where partial capitation applies include primary care capitation--where a capitated amount is paid to primary care practices for primary care services and then (in this example), ancillary care services are provided under the direction of the primary care practice. Another scenario is where specialists are paid on a capitated basis for services they provide while the primary care services are paid fee-for-service. Other “carve-out” capitation arrangements have been made where mental health care is paid for on a capitation basis. This differs from episode-based payments in that all of the services included to care for a patient by the mental health provider are covered.14

Partial capitation models are also being considered under accountable care organizations (ACOs) whereby the ACO would be at financial risk for some, but not all, of the items and services it provides.

Under either type of capitation agreement, risk adjustment is essential to adequately compensate providers for the risk they take-on. Each group of enrollees may have a different contributing rate based on their risk to the provider (including their health history, prior healthcare utilization, demographics, income and other factors), that is factored into a global capitated rate “per member per month”.15 

Pay for Performance/Value-Based Purchasing

Pay for Performance, also known as “Value-Based Purchasing” is a payment model that offers incentives to providers for meeting patient-care performance measures. These financial incentives are bonuses on top of the customary fee-for-service fees the provider charges, and the performance measures typically evaluate process quality and efficiency, as opposed to clinical outcomes. Think lowering blood pressure or smoking cessation. Also, some Pay for Performance models penalize providers for medical errors, poor outcomes, hospital readmissions, and increased costs.

The payer uses data to evaluate provider performance in four areas:

Process--activities that have been demonstrated to improve patient outcomes (like counseling patients to quit smoking);

Outcome--the effects the provider’s care had on patient health (for example, lowering blood pressure in a stroke patient);

Patient Satisfaction--patient’s opinion about the quality and delivery of care (for example, how were their wait times and communication from staff);

Structure--the facilities, personnel and equipment used during care (such as electronic medical records).16