Group Effort: Bundled Payments Require Better Communication

by Damon Braly | September 12, 2011

By January 1, 2013, Medicare must implement a pilot program for bundled payments—a method of paying providers a set amount for a group of related services. As with many aspects of health reform, when Medicare paves the way, commercial payers likely follow.

So, should the industry expect to see all providers moving toward a bundled payment model? That depends, largely, on their ability to adopt new communication methods.

Coordinated Care

Because a bundled payment (also known as a “case rate” or “episode-based payment”) is distributed among all the providers who participate in a patient’s episode of care, this can be a powerful incentive for those providers to coordinate their efforts, explains David Hochheiser, vice president of commercial payment integrity for OptumInsight.

Orchestrating efforts among providers, however, is easier said than done. It requires an unprecedented level of communication, as the providers may be spread across hospitals, physician offices, imaging centers, rehabilitation facilities and other types of organizations, Hochheiser says. These organizations need to coordinate all of the clinical and financial processes that impact care delivery, billing, reporting and payment distribution.

Compounding this free flow of information is the still-prevalent reliance on antiquated methods of communication. Many providers and payers continue to rely on standard mail, fax and telephone to exchange information, says Daniel Dunn, PhD, senior vice president of business solutions for OptumInsight. Under new bundled payment programs, these stakeholders must evolve their communication methods to those that promote efficiency and effectiveness.

To manage a bundled payment, there are four communication components that must take place among the stakeholders involved, Dunn says. These include:

• Registration: Patients who have procedures or conditions that will be billed under bundled payment arrangements need to be enrolled. Also, providers must receive authorization that the patient qualifies for the bundle and has been enrolled.
• Trigger Processes: Once patients are enrolled, certain processes must be triggered to manage the clinical and financial aspects of the payment. Examples from a clinical perspective include updates on the services provided to the patient that are related to the bundle as well as comparisons with benchmarks and the bundle assumptions. When the claims system is used to administer payments for a bundle, a process would be required to notify that system and assess a patient’s ongoing submitted claims relative to the bundle arrangement.
• Coordination: Communication across all providers— sometimes including the patient—supports better care and improvement opportunities. An example of this is to connect all relevant providers and share information at the onset of the bundle and as the bundle progresses.
• Assessment:  On a periodic basis, the success of a bundled payment design—overall and for the individual providers involved—must be evaluated. Sharing information with providers about performance, including cost of care, quality of care and service, supports an understanding of success and helps identify areas for improvement.

The challenges with implementing these components, however, are often more operational than conceptual.

“Conceptually, it’s not difficult to create a bundle for a specific condition; clinical protocols often tell us the types of treatments that are required for a condition,” says Dean Farley, PhD, vice president of reimbursement solutions for OptumInsight. “From an operational perspective, the difficulty is assembling information about services that are being delivered by different providers and coordinating those services when the providers may have no contact with each other beyond a telephone line, fax line or some type of electronic messaging.”

‘A Window Between the Health Plan and Providers’

As of now, there is not an efficient way to manage the bundled payment process. “From a health plan perspective, there are difficulties in coordinating the claim flow and figuring out which claims are part of bundles and which are not,” Farley says. “Providers may not necessarily submit a single claim for a bundle—although that may be the preferred model in the future. Currently, the industry does not have the organizational structure, nor the tools, to make that happen.”

So payers and providers need to determine if their existing technology solutions are sufficient, if they will need to purchase additional systems, or if they will handle the processes manually.

Technology, however, is evolving to improve communications between payers and providers. For example, secure communication strategies, such as an Internet portal, could be employed across relevant stakeholders to view appropriate details regarding a patient and bundle. Such a strategy could also be used to facilitate the registration of patients for a bundle.

“The portal becomes a window between the health plan and providers,” Dunn says. “At any point in time, organizations would be able to share information via the portal, such as the services that have been provided and billed, and how those services compare to the quality measures that are part of the bundle.”

According to Dunn, these portals are currently being developed and may play a significant role in how bundled payments are managed in the future.

And electronically managing communications through such portals creates the opportunity to automate many other processes. For example, specific information could trigger the automatic distribution of authorization requests and notifications. Also, gaps in care could be identified, such as when vital treatments or procedures are not provided to a patient. In this scenario, the system could electronically alert physicians that clinical components of the bundle have not been delivered, Dunn says.

Bundled Payments: Sooner than Later

In the years to come, industry leaders anticipate that health care reform—combined with the industry’s push to reduce costs and improve care quality—will drive the increased use of bundled payment arrangements. And it is clear that the success or failure of these arrangements will depend not only on how such a system is implemented but also on how communications are handled among all stakeholders.

“It’s critical for providers to assess their own capabilities, requirements and risk tolerances objectively,” Farley says. “And payers need to recognize that bundled payments are a tactic, not a goal."

How Bundled Payments Work

Fee-for-service arrangements incent providers to offer more services. “Bundled payments, however, financially reward the providers who deliver effective care, instead of simply paying for the quantity of care  delivered,” says Dean Farley, PhD, vice president of reimbursement solutions for OptumInsight.

Bundles are defined in terms of the services included and the duration of the bundle. They typically include professional, facility and ancillary services for specific conditions or procedures as well as post-discharge services (e.g. readmissions).

“Bundled payments are ideal for episodes of clinical and financial importance,” Farley says. These include chronic conditions, episodes that have significant variations in clinical practice and/or outcomes, as well as conditions that have a history of requiring substantial post-acute care services.

Operational Considerations for Bundled Payments

Besides technology considerations, payers and providers need to address several operational issues dealing with pricing and processes,” says Richard Nelli, vice president of product management for OptumInsight. Answers to the following questions form the foundation of the bundled payment program:

• How are prices set? Will they be derived from benchmark data or calibrated to best-practice standards?
• What is the basis for calculating prices? Will they be based on a fee-for-service model with/without gain-sharing arrangements, withhold or a normative bundled rate with performance bonuses?
• How much risk is to be shared? What provisions will there be for risk-adjustment, potential avoidable complications (PACs), hospital-acquired conditions (HACs) and outliers?
• Who does the bundling? Will it be the payer, health plan or a provider risk-bearing entity?
• When are payments made and how often? One-time or periodic?
• To whom? Individual providers or the risk-bearing entity?
• How will claims be processed? Via the adjudication system module or manual processing?
• How are quality improvements measured? Who monitors the quality metrics and are they trusted by all parties?

For more insight on bundled payment models, read our Payment Reform white paper and watch our video featuring Dean Farley, PhD.