With the increased adoption and implementation of various types of bundled payments and episodic reimbursement models among government, commercial and private payers, incentives are now in place to improve care coordination, quality, patient safety and cost efficiency.

However, this shift will place new importance on information technology and providers’ ability to collect and act upon a vast array of new information on their patients.

The widespread adoption of bundled payments has the potential to benefit multiple stakeholders within the healthcare system by shifting accountability and financial risk from the payer to the provider. However, to implement an effective bundled payment program, healthcare organizations will have to successfully navigate many hurdles, such as accurately defining care episodes, bundle pricing, aligning care team members and capturing information across all service levels.

Both payer and provider infrastructures also will need to be modified to calculate claims based on the new reimbursement model. It will be necessary for an effective mechanism to distribute gains—based on performance and level of care provided—to different stakeholders in the care bundle.

Despite these challenges, hospitals that are prepared technologically are realizing that the benefits of a well-managed bundled payments program can significantly outweigh the risks.

Bundled payments are a value-based reimbursement model that uses a single, comprehensive payment to address an entire defined episode of care. Unlike other common alternative payment models, such as accountable care organizations (ACOs) and capitation, bundled payments impose clinical and financial responsibilities on providers for a single care episode for an individual rather than the ongoing outcomes of an entire patient population.

When implementing bundled payment models, providers face multiple challenges, including managing uncontrollable or unforeseeable healthcare costs, preventing adverse events and meeting clinical quality targets. This is especially evident after patients are discharged from direct care.

If total care costs for the episode are less than the bundled payment reimbursement, providers make a profit. However, if total costs exceed the bundled payment amount, providers will typically incur a financial loss. If quality and patient safety goals are met, and savings against the budget are achieved, then these savings are shared between payers and providers.

Most developments in the bundled payment space have traditionally focused on joint replacements, although public and private payers are also adding spine as well as bariatric surgeries to their bundled arrangements.

Humana recently announced that it will partner with eight orthopedic specialty groups in Indiana and Kentucky to expand its own Total Joint Replacement Episode-Based Bundled Payment Initiative for Medicare Advantage members. Under the program, providers are responsible for all costs associated with the entire episode of care. Humana will offer partner organizations patient data, analytics, and chronic disease management and wellness programs.

In another insurer program, United Healthcare in January implemented the Spine and Joint Solution, a bundled payment model for hip, knee and spine surgeries. Since the program's introduction as a pilot in 2015, participating employers have seen average savings of $10,000 or more per operation.

In the Centers for Medicare and Medicaid Services Comprehensive Care for Joint Replacement Program (“CJR”), hospitals receive a fixed payment for all services provided to total joint replacement patients from admission to 90 days after the procedure, with no additional payments for complications, readmissions or post-acute services.

The CJR model incentivizes the submission of total hip arthroplasty (THA) and total knee arthroplasty, patient-reported outcomes (PRO) and limited-risk variable data following eligible elective primary THA/TKA procedures, although the submission of such data is not required for reconciliation of payment eligibility. However, CJR participant hospitals that successfully submit PRO data and risk-variable data can receive two points toward their composite quality score.

Under the federal program, even if hospitals meet their cost targets, they do not receive a payment unless they also post a composite quality score of acceptable, good or excellent in two quality measures. Those scoring good or excellent received a bonus totaling 1 percent or 1.5 percent, respectively, of their cost-based reconciliation payment.

Both CJR program bonuses and penalties will be capped at 5 percent of each hospital's spending target in 2018, rising to 10 percent, 15 percent and 20 percent in subsequent years. Cost targets are adjusted based on each hospital's percentage of cases that involved complications or comorbidities, including hip fracture.

For hospitals and providers across integrated health systems, achieving success in bundled payment models requires greater flexibility and stronger interoperability between solutions and systems that are used for monitoring, measuring, reporting and reconciling clinical and financial performance with payers.

The accompanying chart shows the challenge for providers and their information systems. Healthcare organizations seeking to do well under these programs will need data from a variety of information systems, and then will need to harmonize that information and analyze it in order to improve performance.

Further, interoperability between formerly separate systems will be crucial, to enable organizations to quickly and efficiently evaluate performance and make needed adjustments in care delivery.

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