What are bundled payments?

By Drew Brown | Posted: 03/16/2018

Alternative payments are becoming a reality as health care becomes more interconnected with the transition to value-based care (VBC). Focused primarily on episodes of care, much experimentation already has focused on bundling as a viable option to gain cost efficiencies over today’s fee-for-service model, which reimburses for each service rendered.

Defining bundled payments in health care

In simple terms, bundled payments compensate multiple care providers through a single, negotiated payment for all episodic treatments. By its very nature, a bundled payment scenario creates an incentive for health care providers to work together, achieving improved clinical outcomes by avoiding unnecessary services while staying below a negotiated payment threshold, which is based on expected costs for clinically-defined episodes involving multiple provider types, care settings and services or procedures over the time of care.

Creating a win-win

If effectively implemented, bundled payments can be a win-win for both providers and patients alike. Successful, well-designed bundled payment models should consist of clearly defined quality metrics focused on desired clinical outcomes providers must attain to maximize their reimbursement.

A 2017 JAMA Internal Medicine observational study demonstrated how San Antonio Baptist Health System in Texas achieved significant positive outcomes for patients and providers as a Medicare bundled payment participant between July 2008 and June 2015. For episodes of lower-extremity joint replacement surgery without complications, their average Medicare episode expenditures declined 20.8 percent, with episode complications declining by 13.8 percent. From 2009 to 2015, the number of episodes with readmissions decreased from 6.4 percent to 5.0 percent, with ER visits dropping from 7.4 percent to 6.5 percent. This performance underscores that bundled payments have the potential to generate favorable savings for providers without compromising quality of care for patients.

What’s next?

On January 9, 2018, the Centers for Medicare & Medicaid Services (CMS) and Center for Medicare and Medicaid Innovation (Innovation Center) announced its newest voluntary bundled payment model, “Bundled Payments for Care Improvement Advanced (BPCI Advanced).” Under the BPCI Advanced model, when all expenditures for an episode of care are below a spending target that factors in quality, practitioners can earn an additional payment.

As defined by CMS, “BPCI Advanced participants may receive payments for performance on 32 different clinical episodes, such as major joint replacement of the lower extremity (inpatient) and percutaneous coronary intervention (inpatient or outpatient). An episode model such as BPCI Advanced supports health care providers who invest in practice innovation and care redesign to improve quality and reduce expenditures.”

To learn how your health care system can achieve financial and operational success through a bundled payment model implementation, view our partner educational webinar “Fee-For-Value: Achieving Financial Improvements through Bundled Payments.”

As an added incentive, BPCI Advanced qualifies as an Advanced Alternative Payment Model (Advanced APM) under the Medicare Access and Chip Reauthorization Act (MACRA) Quality Payment Program (QPP). To learn about all things MACRA, view our MACRA educational webinar series here.