Bundled Payment Strategies Move Beyond the Pilot Stage

Bundled payments are no longer being relegated to pilot program status, according to a report from the Health Care Incentives Improvement Institute (HCI3). Instead, more and more public and private payers are committing to this model as a core payment and delivery reform strategy.

Unlike traditional fee-for-service, in which physicians are paid based on the number of services and procedures they perform, bundled payments provide a single fixed payment that covers all providers (hospitals, physicians, physical therapies, etc.) that are involved in each episode of care. The payment includes all covered treatments and are adjusted based on the severity and complexity of a patient’s condition.

“There are now hundreds of hospitals and thousands of physicians participating in bundled payment programs across the country,” said Francois de Brantes, HCI3 executive director. “These providers have bundled payment contracts in force and the majority of the contracts have upside and downside risk. We’re now in the scaling phase of this payment model and no longer in pilot or early stage, and that’s a very important finding of this report.”

Seven payer organizations and 7 provider organizations participated in the survey. Interestingly, the payers reported two different approaches to contracting with providers: specifying bundled payments as the sole payment model for providers delivering selective episodes of care and contracting using bundled payment with only selected, high-volume providers who are interested in bundled payment, and with whom the payer enjoys a strong working relationship.

The report says that leaders of provider organizations who want to be ahead of the curve is essential to forming successful arrangements. Conversely, success seems to be limited with providers whom the payer offers small market share, and with providers who are risk averse.

The most important impact of bundled payments on care delivery is on the systemization of care, ie, providers organizing and coordinating services to create an interconnected system of care. The report says that providers who understand the implications of bundled payments systematize the delivery of care for the entire length of time covered by the episode.

The authors expect a rapid growth in bundled payment models in the next few years. How providers and payers expand these efforts, in concert with the growing medical home and accountable care organization arrangements, remains to be seen.

The full report is available here.