Different Approaches to Bundling Revenue Cycle Payments to Healthcare Providers

Bundled PaymentsAlthough people tend to think about bundled payments at the highest level - payment for a complete package of care for a particular condition - there are a variety of potential forms and nuances to payment mechanisms. A recent study by Booz & Company found 70 different bundled initiatives many that have different payment types and structures. Different forms include bundled payments for all inpatient and physician costs associated with acute episodes generally centering on a surgical intervention (hip replacement) or catastrophic event (coronary artery bypass graft). Temporal care cycle bundles can include the surgical intervention plus defined time periods before and after procedure. This approach would bundle in the routine pre-surgical tests, preparation, surgery, inpatient stay and a post-surgery rehab period. Organ transplant would be a potential fit here. Medical condition bundles cover a relatively long-term medical event such as pregnancy or cancer treatment. Finally, subscription bundles are focused on ongoing treatment of chronic disease conditions such as diabetes or congestive heart failure. In the study by Booz & Company, most of the demonstration projects studied focused on acute episodes and temporal care cycles with the majority focusing on cardiac and orthopedic procedures. This makes sense as these are high volume, high cost procedures that consume significant health dollars and where clinical protocols and outcome measures are both fairly well defined. Payment structures can be retrospective or prospective. Most projects to date have focused on retrospective payments as that provides the steady stream of care-based income that providers are generally used to as well as the greatest potential for risk mitigation for the providers. With a retrospective approach, providers and payors agree on a budget for the target medical condition(s) as part of a new agreement. The provider will continue to bill and receive payment on a fee-for-service basis. Then on a quarterly or annual basis, there will be a budget reconciliation of the total charges billed versus the budget amount for a given volume of patients. If the total billed charges are lower, the provider will receive a bonus. If they are higher, the provider will be subject to withhold on future charges. While the retrospective approach is fairly easy to administer, it leaves consumers out of the loop and doesn't provide incentives for consumers to understand the cost of their treatment options. With a prospective payments structure, a budget is still set but there is a fixed, risk-adjusted price for a bundle. This approach is more convenience and transparency for the consumer as there is one price thus eliminating complex co-pays. The challenge with this approach is that most bundles will need to be risk-adjusted at the patient level based on health status and comorbidities in order for the provider to avoid the risk of significant losses on a few high-cost cases. These risk adjustment protocols are not well developed yet for most disease states and clinical and financial systems are not yet well integrated. Bundled payments hold a great deal of promise for improving care coordination, reducing costs and increasing transparency but there is much work to do before it is possible for most organizations to implement bundles widely across disease categories.