Mitigating risk on outpatient bundled payment contracts

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Bundled payments have been around for quite some time. From ‘global’ payments for deliveries to bundling of same-day multiple procedures to episode-based payment models under CMS’ Bundled Payments for Care Improvement (BPCI) Initiative, hospitals and specialists alike have had some sort of exposure to the concept of ‘bundling’. 

More recently, we’ve seen more and more commercial plans looking to the outpatient specialty market to apply the same methodologies. We are now seeing bundling episodes for gastroenterologists, orthopedists, and oncologists. Some of these programs are very straightforward, with the goal being to manage simple procedures, such as colonoscopies, in the most cost-effective way possible. 

Typically, a plan will approach bundling in one of two ways:

• The plan may determine the average cost for these services within a geographic region and offer a bundled rate consistent with that

• The plan may look at the range of cost associated with a particular practice delivering a service and offer a bundled rate at the midpoint (or elsewhere on the cost spectrum). 

The goal is to bring services that are being delivered at a higher cost in line with less expensive approaches. 

For example, a gastroenterologist may perform colonoscopies at three different ambulatory surgery centers and two hospitals. The cost may vary greatly between places of service. By setting a bundled rate, the physician has to control the resources utilized in order to bring that total cost of care below the budget target to share in the cost savings. Most of these arrangements are ‘upside only’ risk, meaning the physicians get paid as fee-for-service, then a retrospective review of the costs of these episodes are undertaken to determine if the practice came in above or below the budgeted target. Any savings are shared, but if costs exceed the budget, the practice is not penalized for those excesses under most current contracts. However, as these arrangements mature, we expect to see more ‘downside’ risk coming in the future.

While colonoscopies are easily to measure and manage due to the limited number of components involved and relatively rare occurrences of complications, it is infinitely more difficult to manage, say, oncology episodes. But where there is more complexity, there is more opportunity for greater savings.

So, how should practices manage opportunities for bundled episodes of care? 

First, control as much of the cost as possible. For example, gastroenterologists that that own ambulatory surgery centers, employ anesthesiologists, and have their own labs are in a much better position to control costs than those utilizing hospital-based places of service, out-of-network anesthesiologists, and external labs.  If you fall into the latter group, sharing the risk with a hospital partner may make sense, and choosing to work with in-network resources can help mitigate risk. 

Second, effectively manage and coordinate patient care. Implementing pre- and post-operative processes that help to manage every facet of patient care can ensure minimization of adverse events and keep costs tightly contained. That may not always be so easy to do-particularly when more complicated procedures are involved, or when there is greater involvement across multiple providers (which is the case for oncology). In those cases, implementing care management systems is essential to understand how costs are trending for any given patient’s continuum of care during an episode. Some plans offer assistance with that management (for example, Aetna’s multidisciplinary care teams work directly with patients), but controlling care at the practice level is ultimately the best way to manage your patients’ care. 

For example, companies such as Simply Vital Health utilize a range of interconnected data to track the care that any particular patient receives across a care episode. Pulling together data coming in from hospital systems, specialists, and other third parties, a patient’s care is tracked along the episode timeline. Pre-built algorithms based on bundled budgets help to forecast costs in near-real time, enabling practices to get in front of any potentially adverse and costly trends before those budgets are blown. 

Third, effectively manage your data. To ensure the highest quality of care is being delivered across every aspect of delivery, it is essential to monitor physician performance and act upon that data. Many of these bundled arrangements have quality metrics associated with them. For example, Horizon Blue Cross Blue Shield (NJ) and United Healthcare both have components in their colonoscopy bundles for cecal intubation rates and adenoma detection rates that must be above certain thresholds in order for upside cost savings to occur.

As these programs mature, expect to see greater sophistication of care management technology being presented to help manage that care and greater consolidation of services across healthcare providers-whether in the form of clinically integrated networks, super-groups, accountable care organizations, or other models-becoming more prevalent. Partnering with effective vendors, health plans, and self-funded employers will be key for practices wanting to successfully implement bundled arrangements in the future.