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Securing Future Financial Success with Bundled Payments

With the increasing enrollment of baby boomers, an aging population and growing healthcare spending, the need for health systems to improve margins now and secure financial viability in the future is more important today than it ever has been. Organizations participating in bundled payments know this all too well, as these models have become a vital strategic approach to prepare for what’s to come in healthcare’s rapidly evolving value-based environment.

While the first 12 months of the Trump administration delivered mixed messages around value-based care, the appointment of the new Secretary of Health and Human Services, Alex Azar, made the latter 12 much clearer. Keeping pace for healthcare providers means taking on more risk.

In fact, Azar has stated his intent to roll out new risk-based payment models, including additional mandatory programs like the Centers for Medicare & Medicaid Services (CMS) Comprehensive Joint Replacement (CJR) model. This, in addition to the upcoming Bundled Payments for Care Improvement (BPCI) Advanced application period and the new Pathways to Success program for Medicare Accountable Care Organizations (ACOs), means that health systems must understand how to navigate value-based models quickly.

The role bundles play in value-based care

In a recent report on bundled payments, including BPCI models 1-4, the CJR model and the Oncology Care Model (OCM), the Government Accountability Office indicated that providers volunteered to participate in federal programs due to the financial opportunities, their access to claims data and to gain experience in value-based models. Another report published in The New England Journal of Medicine (NEJM) found that the mandatory CJR bundled payment model achieved reductions in spending for hip and knee replacements over a two-year period.

It is evident that when implemented successfully, bundled payment models are saving money for the government and improving care at the same time. In fact, the majority of members in the Premier® Bundled Payment Collaborative that participate in the CJR and OCM models have achieved savings and even outperformed their peers by approximately 30 percent in the most recent performance year for both programs. They achieved these results even though 73 percent of Premier’s CJR participants started at a disadvantage, with a target less favorable than their region.

Additionally, with nearly 1,300 entities participating, the overall objective of BPCI Advanced is as relevant today as it was when CMS first rolled out the original BPCI back in 2011. That’s why third-party conveners, such as private equity-backed companies that have enlisted hospitalist and other physician groups, are moving in to become more involved in these models. In BPCI Advanced, for instance, 80 percent of physician groups are participating are under a convener, rather than running the model themselves. However, providers have the most to gain both clinically and financially by owning these models.

Three ways healthcare providers are using bundles today for future success

While there are varying levels of readiness and each provider has their own unique challenges, successful organizations are taking the following actions.

1. They’re optimizing financial performance by participating in bundled payments now

One pattern evident in any bundled payment program, and particularly the BPCI and CJR models, is that the longer a model runs, overall improved regional performance will create downward pressure on target prices. Because the target price is the most competitive today, waiting to participate in these programs - especially in markets where providers are already participating - means financial opportunities for savings and rewards will be less in the future.

The methodology for each new bundled payment program released from CMS incorporates lessons learned and new standards of care, making new models more complex and challenging than the previous programs. Thus, participating providers will be more prepared as additional models roll out.

Those that have not yet participated in these models have a three-fold challenge. They will either enter the value-based model after targets have already been reduced, they may not have the necessary population health infrastructure to keep pace with their peers or they will become commoditized by third parties that have organized these models in their market. In short, the earlier that healthcare organizations engage in bundled payment models, the more financial rewards they can gain in subsequent years of value-based care delivery.

2. They’re staying the course in BPCI Advanced

While the performance data from CMS will be limited, savvy participants are staying the course because they know the program is a strategic learning opportunity that offers positive financial rewards for success. Premier members call it the tuition paid now to perform well later.

Participants that withdrawal from the program today will not be allowed to rejoin for 12 months under the same convener – meaning applying for the next iteration would either be a significant burden or a lost opportunity since the application deadline is less than a year away (January 1, 2020).

Regardless, CMS has made it difficult to accurately assess performance for the episodes completed so far. For example, claims data for the very early episodes, triggered in October 2018, will not be complete until late April. There is also a 2017 “data gap” because of how CMS calculated the baseline, which only included 2013-2016 performance. Since the program started in October 2018, it will be difficult to compare performance today to post-acute patterns and episode volume shifts to 2017 without the right capabilities. Therefore, Premier is working with its members to analyze claims data and identify opportunities for future success in the program.

3. They’re developing a narrow network of high-value post-acute care providers

The NEJM study referenced earlier demonstrated how much of an impact post-acute care, such as skilled nursing facilities, can have on costs. Bundled payment models provide incentives to take steps that are needed to create high-value care networks of providers.

Successful organizations leverage deep analytics capabilities to manipulate post-acute care data and better understand patient flow. Once they know where their patients are going after discharge and why they are being readmitted, they can target high-value post-acute care providers to partner with and address gaps in care. This includes engaging in care delivery redesign initiatives, such as improving longitudinal care practices, providing pre-admission and post-operative education, and establishing a perioperative surgical home.

Industry Tensions are Winding Tighter

The days of waiting on the sidelines are gone. This administration will continue to pick up the pace for private entities to bear risk and that includes hospitals, physician practices and third-party conveners. All of these stakeholders have an equal opportunity to achieve financial and competitive success in these models. It is just a matter of who gets to the table first in your market.

Participating in voluntary models, such as BPCI Advanced, can offer protection from looming mandatory programs. For example, the organizations located in a mandatory CJR area that were already participating in BPCI Classic for Lower Extremity Joint Replacement, were exempt from having to participate in CJR as long as they continued in BPCI Classic.

Bundled payment models create a foundation for future success in a value-based care delivery environment. There is more profit in building and implementing a bundled payment model today than tomorrow. To learn more, download Ready, Risk, Reward: Keys to Success in Bundled Payments or contact us.

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