Alternative Payment Models: How to Design and Implement Bundle Payment Programs

“The real difficulty in changing the course of any enterprise lies not in developing new ideas, but in escaping old ones.” – John Maynard Keynes

The healthcare world is changing, moving from old payment ways to new ones. Now, we see more value-based payments, not just fee-for-service (FFS). A bundled payment is a fixed price for a set care period. It pushes providers to work better together and improve care quality and efficiency.

This article will dive into who uses bundled payments, how to set them up, and who plays a part in them. Knowing about bundled payments and other new payment ways helps healthcare groups deal with changing money matters.

Key Takeaways

Bundled payments are a form of value-based payment that incentivize providers to coordinate care and improve efficiency and quality across an episode of care.
Various organizations, including Medicare, Medicaid, and commercial health plans, are implementing bundled payment programs.
Designing and implementing a successful bundled payment program requires careful consideration of stakeholder input, data analysis, and ongoing monitoring and evaluation.
Combining multiple payment models, such as bundled payments and other alternative payment models, can help healthcare organizations navigate the evolving reimbursement landscape.
Physician-focused bundled payment models are gaining traction as a way to engage clinicians in value-based care.

Introduction to Bundled Payments

Bundled payments are a new way to pay for healthcare. They are a different payment model that helps control costs and focus on value. A bundled payment is a fixed price for a specific care episode, like a procedure and all related services.

This model encourages providers to work together better. It aims to improve the quality and efficiency of care. This means cutting down on unnecessary services and choosing the most cost-effective care settings.

What is a Bundled Payment?

In a bundled payment system, one entity, often a provider, takes on the financial risk. This risk-sharing model makes the healthcare system’s financial goals align with delivering quality care.

Goals of Bundled Payment Programs

Reduce medically unnecessary variation in care
Enhance the quality of services during a clinically appropriate time period related to common high-cost procedures and conditions
Align financial incentives with the delivery of high-quality, coordinated, and efficient care

Bundled payments aim to fix the problems of old payment models. These models often lead to unnecessary services and don’t focus enough on patient outcomes. Bundled payments focus on the quality and efficiency of care, not just the volume.

Key Statistics	Findings
Medicare Spending Decrease	15.5% decrease in Medicare spending between 1991 and 1993 during a demonstration project for heart bypass surgery
Total Savings to Medicare	$52.3 million in total savings, with $42.3 million due to negotiated discounts with hospitals
Hospital Cost Reduction	Average total cost reduction per case ranging from 2% to 23% in three out of four hospitals during the demonstration project
Geisinger Health System Cost Reduction	5% reduction in hospital costs for patients undergoing non-emergency CABG procedures after implementing a bundled payment system

The success of bundled payments depends on how well they are designed. It also depends on the services included and the performance of the healthcare systems before starting. As healthcare evolves, bundled payments are a promising way to improve care quality and efficiency.

Organizations Using Bundled Payments

A variety of healthcare organizations are leading the way in bundled payment programs. They aim to reduce care variation and improve quality. These groups include the Centers for Medicare and Medicaid Services (CMS), Medicare Advantage organizations (MAOs), and more.

The Centers for Medicare and Medicaid Services (CMS) are key players in bundled payments. They started the Bundled Payments for Care Improvement (BPCI) program. By 2015, 1,551 healthcare organizations joined BPCI, covering many medical conditions.

Medicare Advantage Organizations (MAOs) also use bundled payments. They create programs for their patients and providers. These models focus on specific conditions to improve care and cut costs.

Commercial health plans have introduced bundled payments too. They work with providers on high-cost procedures. This aims to improve quality and control spending for their members.

At the state level, Medicaid agencies have started bundled payment programs. They use these models to support accountable care organizations and payment reform. Examples are in Arkansas, Ohio, and Tennessee.

Provider-led organizations have also started their own bundled payment programs. These programs reflect the unique needs of local healthcare systems.

Lastly, third-party conveners play a big role in bundled payments. They help healthcare organizations understand and use these models.

Organization Type	Examples of Bundled Payment Initiatives
Centers for Medicare and Medicaid Services (CMS)	Bundled Payments for Care Improvement (BPCI) program
Medicare Advantage Organizations (MAOs)	Condition-specific or service line-specific bundled payment programs
Commercial Health Plans	Bundled payment arrangements for high-cost, high-volume procedures and conditions
Medicaid Agencies	State-level bundled payment initiatives to drive accountable care and payment reform
Provider-Led Organizations	Internally designed and implemented bundled payment programs
Third-Party Conveners	Services and expertise to assist healthcare organizations in adopting bundled payments

These diverse organizations are changing healthcare payment models. They use bundled payments to improve care, coordination, and costs.

bundled payments, alternative payment models, healthcare financing

The Centers for Medicare and Medicaid Services (CMS) is leading the way in testing bundled payment models for Medicare fee-for-service (FFS) beneficiaries. These models cover a wide range of surgeries and medical care, including oncology. By early 2023, most CMS bundled payment programs are optional for providers, not mandatory.

Medicare Advantage Organizations (MAOs) are also diving into bundled payment arrangements for their in-network providers. These providers serve members in Medicare Advantage products. Like CMS, MAOs make participation in these programs voluntary. They often start with CMS’s episode specifications to create their own bundles.

CMS Bundled Payment Models

The Bundled Payments for Care Improvement (BPCI) Advanced Model started in October 2018. It has about 280 providers and will end in December 2025.
The Comprehensive Care for Joint Replacement (CJR) Model began in April 2016. It aims to improve care for Medicare patients with hip, knee, and ankle replacements. It will run until 2024.

MAO Bundled Payment Arrangements

Medicare Advantage Organizations (MAOs) create their own bundled payment plans for in-network providers. These plans might use CMS’s models as a base.

“Successful implementation of bundled payment models requires enhanced provider communication, efficient care coordination strategies, and clear episode of care definitions.”

Commercial Health Plan Bundled Payments

Commercial health plans are using bundled payments to encourage quality and cost-effective care. These commercial health plan models focus on specific conditions or procedures. Examples include joint replacements, cardiac procedures, or cancer care.

Unlike CMS-led programs, providers can choose to join commercial health plan bundled payments. Plans can tailor episodes to their employer groups. They also adjust member cost sharing to encourage care from participating providers.

While commercial health plan bundled payments are not as common as public sector ones, some success stories exist. For instance, Geisinger Health System has seen success with coronary artery bypass grafts. Solid-organ transplantation has also seen long-term bundled payment programs.

Condition or Procedure	Adoption of Commercial Bundled Payments
Orthopedic Procedures	Common
Cancer Care	Common
Cardiac Care	Common
Solid-Organ Transplants	Longest-Running Successful Programs
Oncology Group Practice Pilot	Increased Drug Expenses Led to Termination

Though commercial health plan bundled payments are not widespread, they show promise. Success in certain areas and ongoing efforts suggest growth in the private market.

balance exercises fall prevention

Medicaid Bundled Payment Programs

Medicaid programs are moving away from old payment models. They are now looking into bundled payments. This new approach aims to boost quality, better coordinate care, and keep costs down for certain health services.

State Medicaid Agency Examples

Some states are leading the way with Medicaid bundled payment programs. They are designed to meet the needs of their people and healthcare systems. For example:

Arkansas has started using bundled payments for specialty care like pregnancy and orthopedic procedures.
Ohio’s Medicaid has bundled payments for maternity and neonatal care, and some surgeries.
Tennessee’s Medicaid has bundled payments in its managed care contracts for joint replacements and perinatal care.
Colorado has a voluntary bundled payment program for maternity care, giving providers a new payment option.

Medicaid programs can tailor their bundled payment plans to fit their specific populations. This allows for targeted care and the chance for better health outcomes and cost savings.

“Bundled payments provide strong incentives for providers to keep their costs down while maintaining or improving the quality of care.”

As Medicaid looks into new payment models, bundled payments are a key area of focus. They offer a way to transform healthcare and improve value-based care for Medicaid members.

Provider-Led Bundled Payment Models

Provider groups can join bundled payments from CMS, Medicare Advantage Organizations, and commercial plans. They can also create their own provider-designed bundled payment arrangements. These plans fit their skills and care paths. They can talk directly with payers, like self-insured employer groups.

Studies show provider-led bundled payment initiatives save a lot of money and improve care. For example, ACOs have saved Medicare over $1.29 billion since 2012. Skilled Nursing Facilities also see good returns from these models, especially for long-term care.

The success of these provider-designed bundled payment arrangements comes from several things:

They match the provider’s clinical skills and care methods.
They offer incentives for better, cheaper care.
They make healthcare spending and outcomes clearer.
Providers can earn bonuses and grow their market by offering efficient, evidence-based care.

As healthcare moves towards value-based care, providers are leading in designing and running bundled payment models. These models fit their strengths and goals.

Bundled Payment Characteristics	Insights
Payment Model	10 initiatives used a retrospective bundled-payment model, while 12 chose a prospective bundled-payment model, and one initiative included both payment models.
Risk Sharing	Risk-sharing properties, risk adjustment methods, and distribution of pay were not well-described in many initiatives.
Quality Impacts	32 out of 35 studies reported effects on quality of care, with 18 studies indicating quality improvements for most evaluated measures.
Cost Impacts	32 out of 35 studies reported effects on medical spending, where 20 studies reported modest savings or a modest reduction in spending growth.

“Bundled payment models result in standardized, cost-effective care decisions that improve healthcare quality and outcomes.”

As healthcare evolves, providers are playing a bigger role in shaping value-based care. They’re using innovative, provider-designed bundled payment arrangements.

The Role of Conveners in Bundled Payments

In the fast-changing world of healthcare financing, conveners are key players in bundled payment success. They act as essential partners, helping to bring together different groups involved in these programs.

Services Offered by Conveners

Conveners help manage and run bundled payment network management and financial risk management. They offer several important services, including:

Coordinating care among providers for a smooth patient experience and better results
Leading care redesign efforts to help providers save costs
Sharing financial risk with participants and sometimes taking some of it themselves
Helping with data sharing and tracking to make informed decisions
Guiding through the complex rules and ensuring they follow healthcare laws

Conveners take on big tasks, letting providers focus on quality and cost-effective care. This teamwork is key to making bundled payments work well in healthcare.

“Bundled payments are increasingly preferred over fee-for-service payment structures due to the rising healthcare costs in the industry.”

The importance of conveners in bundled payment programs will grow as healthcare changes. With their help, providers can handle the challenges of new payment models. This way, they can improve patient care and their financial health.

Employer and Vendor Participation

Self-insured employer groups play a big role in pushing for better value in healthcare. However, most don’t create their own bundled payment programs. Instead, they might join bundled payment plans through their third-party administrators (TPAs) or work directly with “point solution” vendors.

Self-Insured Employer Groups

Big employers can buy bundled care for their workers from specific providers. For example, they might choose centers for joint replacement or heart surgery. They use their size to get better deals, including contracts that reward quality and savings.

Workers’ Compensation Programs

WC insurers and vendors are teaming up with healthcare providers. They set up WC episode-based payments for common injuries like muscle problems. Providers get paid less but see more patients and aim for better care.

“The medical part of workers’ compensation (WC) benefits is about 50% to 60% of the total. WC insurers work with healthcare providers to set up WC episode-based payments for common injuries.”

Designing Bundled Payment Programs

Designing bundled payment programs can follow two main paths: provider-led and payer-led models. Provider-led models are created by healthcare providers, fitting their skills and care paths. Payer-led models, on the other hand, are made by payers like CMS and commercial health plans. They then offer these models to providers.

Evaluating the Right Approach

Choosing the right approach depends on the goals, abilities, and limits of all involved. Provider-led models give providers more control and fit better with their care paths. Payer-led models, however, offer a standard way and reach more people. It’s important to think about several factors to pick the best design:

Organizational capabilities and resources
Clinical workflow and care coordination needs
Alignment with payer objectives and incentives
Flexibility in defining episode parameters and quality measures
Potential for scalability and sustainability

The success of a bundled payment program relies on balancing the needs of providers and payers. This ensures a win-win situation that improves patient care and saves costs.

“The distribution of medical and surgical episodes in bundled payment models shows an imbalanced distribution, highlighting the need for careful planning to involve physician groups for comprehensive success.”

Implementation Considerations

Creating and setting up bundled payment programs is a tough task. It needs input from many people, like doctors, experts, and financial analysts. The success of these new payment ways depends on everyone working together in healthcare.

It’s important to plan and roll out bundled payments slowly. Starting small helps healthcare groups adjust better. It also lets them face and solve implementation barriers and use implementation facilitators as they come up.

Stakeholder Input and Feedback

Getting stakeholder engagement is key for bundled payment success. It’s vital to talk openly, listen to feedback, and use insights from doctors, payers, and patients. This helps fix implementation barriers and makes sure the program meets everyone’s needs.

Get doctors involved in making fair and reliable measures and reports.
Work with financial and actuarial teams to create strong systems for new payments.
Involve leaders to create good plans for working with providers.

The first steps in starting bundled payments show the main barriers and facilitators. It’s when you see what’s holding things back or helping them move forward. Keeping feedback flowing and changing the program as needed helps beat these hurdles. This ensures the bundled payment plan works well over time.

“Successful implementation of bundled payments requires a collaborative, phased approach that embraces the diverse perspectives of healthcare stakeholders.”

Monitoring and Evaluating Bundled Payments

To see if a bundled payment program works, we need to watch it closely and check its results. This means picking the right tools and data to monitor and evaluate it. We might use quick feedback, new ways to test, and detailed reports to improve the program.

Studies on bundled payments show they can improve health and lower costs. But, they don’t always make patients happier or easier to reach. It’s also important to talk openly with everyone involved to make these programs work better.

But, there are challenges. Lack of trust, unclear goals, and not enough rewards can hold back progress. The complexity of these models and the need for more experience also slow things down. This is why some studies find mixed results.

Metric	Findings
Clinical Outcomes	Positive effects on preventable hospitalizations
Cost Outcomes	Positive effects on total expenditures
Patient Satisfaction and Access to Care	No change reported in majority of studies
Provider Opinions	Often negative towards VBP models

Working together is key to making bundled payments work. Different goals and ways to measure success need more study. The government showed big interest in bundled payments by starting a national program in 2011.

Combining Multiple Payment Models

In the fast-changing world of healthcare, providers and payers are looking for new solutions. They are exploring the use of multi-model payment approaches or blended payment strategies. This method combines different payment methods to create a better system. It aims to improve both quality and cost outcomes.

For example, a provider might join a bundled payment arrangement with a payer. At the same time, they could use warrantied payments or condition-based payments for specific services or patients. This mix of methods can lead to better efficiency, cost savings, and patient care.

Studies have shown that combining payment models can be effective. Blended models might not cut costs much but make the system more efficient. Bundled payments often lead to more efficiency and cost savings. Meanwhile, cost-containment rewards help manage health spending growth.

Payment Model	Key Findings
Blended Payment	Moderate to no substantive reductions in expenditure growth, but increases in health system efficiency
Bundled Payment	Consistently reported increases in efficiency and corresponding cost savings
Cost-Containment Rewards	Generated cost savings contributing to effective management of health expenditure growth

As healthcare keeps changing, using multiple payment models is a promising strategy. It helps tackle the industry’s challenges and aims for better cost, quality, and patient care.

Physician-Focused Bundled Payment APMs

The Medicare Access and CHIP Reauthorization Act (MACRA) encourages the creation of “Physician-Focused Payment Models.” These models offer flexibility for different health problems. Physician-focused APMs include condition-based payment, multi-physician bundles, and episode payment for procedures.

The right APM depends on the patients, conditions, and opportunities a practice faces. MACRA allows for Medicare APMs and physician-focused payment models. These models involve Medicare as a payer and eligible clinicians in the payment process.

Clinicians in Advanced APMs (AAPMs) can get bonuses if they take on significant financial risk. The Centers for Medicare & Medicaid Services (CMS) defines this risk as at least 8% of total Medicare revenues for all providers in the APM Entity.

Insurance Coverage in Los Angeles	Number of Enrollees
Private Insurance	228,317
Blue Shield Promise	326,000
Kaiser Permanente	215,000
Anthem	460,000
Molina	90,000
Health Net	1,000,000

In California, 20% to 80% of provider payments are value-based. About 83% of Medi-Cal enrollees are in managed care plans. Public hospitals and managed care plans must assign 60% of patients to APMs under the PRIME program.

Potential submitters should review the PTAC Reports to the Secretary. These reports discuss the strengths and weaknesses of PTAC proposals. The evidence base for APMs is evolving, so submitters should use available evidence to propose new or improved PFPMs.

Conclusion

The healthcare world is changing, moving towards value-based care. Alternative payment models, like bundled payments, are key in this shift. Organizations like the Centers for Medicare and Medicaid Services (CMS) are leading the way.

They are working with Medicare Advantage plans, commercial health insurers, and others. Together, they aim to improve care quality and keep costs down. This effort is crucial for the future of healthcare.

The success of these programs depends on careful planning and execution. It’s important to monitor and evaluate them regularly. This way, we can overcome challenges and make the most of this new approach.

By listening to all stakeholders and using data wisely, we can make a real difference. Bundled payments can help transform healthcare. They can also help us move towards a more value-based care system.

The shift from old payment models to new ones has taken time. But the benefits of bundled payments are clear. They can align financial incentives and improve care coordination.

As healthcare keeps evolving, the lessons from bundled payment programs will be key. They will help shape the future of how we finance and deliver healthcare.

FAQ

What is a bundled payment?

A bundled payment is a fixed price for a specific care episode. This includes a procedure and all related services. The provider takes on the risk if costs go over the fixed price.

What are the key goals of bundled payment programs?

The main goals are to cut down on unnecessary care variation and improve service quality. Bundled payments aim to make care more efficient and high-quality.

What types of organizations are designing and implementing bundled payments?

Many groups are working on bundled payments. This includes CMS, Medicare Advantage organizations, and commercial health plans. Medicaid agencies, provider groups, and third-party conveners are also involved.

How do CMS and Medicare Advantage organizations use bundled payments?

CMS is testing different bundled payment models for Medicare FFS beneficiaries. Medicare Advantage organizations use them for in-network providers of their members.

How do commercial health plans and Medicaid agencies use bundled payments?

Commercial health plans use bundled payments for in-network providers of their members. Some Medicaid agencies have started using them for Medicaid beneficiaries and plan members.

What is the role of provider organizations and conveners in bundled payments?

Provider groups can join payer-designed bundled payments. Some have also created their own. Conveners handle financial liability for providers in these programs.

How do employers and workers’ compensation programs use bundled payments?

Self-insured employers often don’t create their own bundled payments. But, they might join through their third-party administrator or vendors. Workers’ compensation insurers and vendors are working with providers to set benchmark payments for common episodes.

What are the key considerations in designing and implementing bundled payment programs?

Creating bundled payment programs needs input from various experts. It’s important to phase in the program and design fair measures. Building financial systems and supporting providers are also key.

How do you monitor and evaluate the success of a bundled payment program?

To see if a program works, you need to monitor and evaluate it closely. This involves choosing the right methods and tools. It also means getting feedback quickly and reporting on long-term results.

How can bundled payments be combined with other alternative payment models?

Combining different payment models can be beneficial. For example, a provider might join a bundled payment and use other payment types for specific services or patients.

What are some examples of physician-focused bundled payment APMs?

MACRA encourages the development of physician-focused payment models. These include condition-based payments, multi-physician bundles, and warrantied payments for physician services.