Unbiased Analysis of Today's Healthcare Issues

Are bundled payments the solution? Five key barriers to implementation

Written By: Jason Shafrin - May• 15•17

Alternative payment models, bundled payment and episode-based payments are the latest trend in reducing unnecessary care and making sure care is delivered efficiently.  However, what is a “bundle”?  Based on a recent report from the Health Care Payment Learning and Action Network (HCP LAN), bundled payment can be designed at three levels:

  • At the setting level, whereby the episode is focused on a hospital stay;
  • At the procedure level, in which the episode encompasses a defined surgical procedure; or
  • At the condition level, whereby the episode is defined around a condition. Conditions for which episode payment can be used range from asthma to diabetes to cancer.

So is the solution just to do bundles, bundles and more bundles? Well, there are at least five key challenges for implementation.

First, what services would be included in the bundle at baseline?  The HCP LAN report makes the following point:

Using historical data to determine the episode price creates challenges for payment and care transformation: Setting the episode price is a critical aspect of episode payment design. Yet, it creates a significant challenge. Historical data is crucial to giving payers and providers an understanding of the resources needed to deliver high-quality care and optimal outcomes. However, that same historical data may likely reflect care that was unnecessary or inappropriate, and may not reflect the potential for low-cost, high-value services that have traditionally not been used because the providers do not get paid for them. These include care coordination services, lifestyle change support (in the case of coronary artery disease), or pre-natal parenting education support (in the case of maternity care).

Second, how will prices be set in the bundles?  Currently, payers and policymakers can use market prices of historical component in the bundle to estimate bundle reimbursement rates.  If bundles begin to make up a larger share of payment, however, there will not be market prices for individual components of the bundle.  As the practice of medicine evolves and the composition of the bundle changes, it will become increasingly difficult to price the bundle without market prices on individual components of the bundle.

Third, bundles must be designed with improving patient health always in mind.   The HCP LAN report states that including the patient voice in bundled payment design “involves engaging consumers, patients, families, and their advocates in meaningful participation in the design, implementation, governance, evaluation, and quality improvement of episode payment models.” Although most all stakeholder support patient engagement broadly, what exactly patient engagement means and insuring stakeholders do more than just offer patients token gestures is a challenge.

Fourth, it is difficult to manage and share “…the vast amounts of data necessary to assess, manage, and mitigate risk and to use [these data] to improve quality and outcomes for patients.”  In particular, physicians in small practices or small mom-and-pop providers (e.g., home health agencies) will have difficult analyzing data to see if they are going over or over budget on their budget and may have problems coordinating reimbursement with other organizations that may be in the bundle.

Fifth and finally, there are regulatory barriers to implement bundled payment.  In particular, three regulations which could impede the implementation of bundles include: “physician self-referral law, the anti-kickback statute, and the civil monetary penalty (CMP) laws.”

In short, bundled payment offers the promise of improving the efficiency of how health care is delivered, but there are significantly operational issues that may make bundled payment challenging to implement in practice.

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