Bundled Payment Across the US Today:
Status of Implementations and
Operational Findings
Presentation to:
Partnership for Healthcare Payment Reform
May 22, 2012

Background and Introduction
 Bailit Health Purchasing is a health care consulting firm dedicated to working with public agencies and private purchasers to expand coverage and improve health care system performance.
 We conducted over 25 telephone interviews to obtain the results of this study.
 We are also technical assistance contractors to
AF4Q and are facilitating a multi-stakeholder
PROMETHEUS implementation in South Central
Pennsylvania.
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Purpose and Scope of Study
 Purpose was to convey the experience of organizations that have initiated bundled payment arrangements over the past few years.
 We hope to provide payers and providers with insight into key design elements and considerations to help inform those seeking to implement bundled payments.
 Our research focused upon 19 bundled payment initiatives, including all of the PROMETHEUS implementations, the Partnership for Healthcare
Payment Reform, and other pilots.
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Organization
Aetna
Aligning Forces for Quality (AF4Q) in South Central
Pennsylvania
Anthem Blue Cross and Blue Shield of Missouri
Anthem Blue Cross Blue Shield of Wisconsin
Arkansas Medicaid
Blue Cross Blue Shield of North Carolina
Cigna
Colorado Business Group on Health
Colorado Choice Health Plan
Crozer-Keystone Health System
Employers’ Health Coalition
Geisinger Health System
HealthNow New York
Horizon Healthcare Innovations of New Jersey
Independence Blue Cross
Integrated Healthcare Association integrated Physicians Network
Johns Hopkins Hospital and Health System
Massachusetts General Hospital
Massachusetts Medicaid
Partnership for Healthcare Payment Reform
PCD Partners
PepsiCo
Priority Health
Swedish American Medical Group
Vermont Green Mountain Care Board
Organizational Type
Payer
Multi-stakeholder payment reform collaborative
Payer
Payer
Payer
Payer
Payer
Employer coalition
Payer
Provider
Payer
Provider
Payer
Payer
Payer
Multi-stakeholder quality improvement collaborative
Provider
Provider
Provider
Payer
Multi-stakeholder payment reform collaborative
Consultant to St. Johnsbury, VT pilot
Payer
Payer
Provider
Multi-stakeholder payment reform collaborative
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Why Bundled Payment?
 For the most part, payers and providers referenced experimenting with bundled payment as an approach to achieve one or more goals of the Triple Aim.
 Payer sentiment: “…we currently pay for waste. This is a payment model that will require doctors to think differently and get rid of waste.”
 Provider sentiment: “…there is a benefit to developing clinical pathways [around bundles] even if there is no payment model.”
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Current Phase of Implementation
Implementation Stage
Fully operationalized - at least one bundle 9
Number of Interviewees
Observational phase
Developmental phase
2
8
6

Sites with Operational Bundles by Condition Type
Inpatient
Procedural
7
Outpatient
Procedural
1
Chronic
Medical
Conditions
1
7

Sites with Operational Bundles by Condition Type
Outpatient
Procedural
Inpatient
Procedural Joint Replacements
7 out 9 pilot sites
Chronic
Medical
Conditions
8

Sites with Operational Bundles by Condition Type
Outpatient
Procedural
Inpatient
Procedural Joint Replacements
PCI
CABG
Bariatric Surgery Chronic
Medical
Conditions
9

Sites with Operational Bundles by Condition Type
Inpatient
Procedural Joint Replacements
PCI
CABG
Bariatric Surgery
Outpatient
Procedural
Cataract Removal
Perinatal Care
Chronic
Medical
Conditions
10

Sites with Operational Bundles by Condition Type
Inpatient
Procedural Joint Replacements
PCI
CABG
Bariatric Surgery
Outpatient
Procedural
Cataract Removal
Perinatal Care
Chronic
Medical
Conditions
COPD
CHF
Asthma
Diabetes
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Sites with Planned or Observational
Bundles by Condition Type
Outpatient
Procedural
2
Inpatient
Procedural
4
Chronic
Medical
Conditions
6
Asthma
COPD
Diabetes
CAD
CHF
Developmental
Disabilities
ADHD
Oncology
1
Acute Medical
Conditions
1
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Issues with Defining Bundles
 Time-intensive process with much negotiation
 Organizational culture and relationships strongly influenced the speed at which bundle definitions were established
 Narrow definitions keep volume and risk low
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Choosing the Right Partner
“Bundled payment requires a deep commitment and very strong provider relationships. You can’t impose this on providers – you need to do it with them and not to them .”
- Payer
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Choosing the Right Partner
 Some payers set qualifying criteria for participation
– Facility accreditation
– Physician credentialing
– Use of specific surgical safety and verification processes, etc.
 Employer coalitions did the same
– Review of performance on key metrics
– Internal name brand recognition
 Other payers used less formal criteria
– Readiness for change
– Trusting relationship
– Experience in transforming clinical processes
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Setting Rates
 Risk-adjusted rates are the most common, but also the most laborious and expensive
 Flat-fee rates are less common, but reported to be easier and less expensive to administer
– homogeneous populations / low PAC rates (e.g., elective knee replacements, perhaps)
– narrow bundle definitions
– standardized clinical processes
– lack of resources to invest in risk-adjustment methodology
 Rates are typically set conservatively in the beginning
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Risk Adjustments
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Risk Adjustments
 Shared savings (i.e., no downside risk) is the most popular approach
 Only one pilot was using a shared-risk approach
 Full risk was being used, but with limits on provider risk
– exclusion of readmissions outside of the provider’s system
– use of stop-loss insurance and high-cost outlier exclusion
 Providers are likely to evolve to take on greater risk over time
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Making Payments
- Payer
19

Making Payments
 FFS with retrospective reconciliation is the most common approach to payment
 Some consider it to not be true “bundled payment”
 Two pilot sites were actively using prospective payment; one was considering it for the future
 “…if the provider can’t integrate sufficiently to take one bundled payment [we won’t work with them]”
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To automate or not to automate?
 For most, the choice is manual
– Reports of up to 2 skilled FTEs to do manual reconciliation
– Each claim needs to be touched and either “zeroed-out” and applied to the bundle or paid
 Automation has its benefits
– Single platform where payers and providers can review data
– Dynamic and static reports
– Complexity handled with greater ease
 Is the money spent on bundled payment administration a zero-sum game?
– Set-up fees and monthly processing fees
– Pilots in the early phases tend to think so, while pilots ready to scale see a need to invest in IT tools to be successful
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Tracking and Reporting Spending
 Payers are typically reporting spending to providers on a monthly or quarterly basis
 Administrative lag time is hard to overcome, even with the available software programs
 Some providers want more frequent reports, but others understand the data are meant to impact future patients
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Tracking and Reporting Spending
 One payer went from “dumping data” to creating a report that compares performance to budget and identifies leakage for providers
 More sophisticated payers and plans are hoping to incorporate gaps in care reports
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Identifying Index Patients
 Plan or provider?
 A process to reconcile the entire population of patients must exist to reduce ability to “game the system.”
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Views on Performance Adjustments
“Quality measurements need to be included to demonstrate the value proposition for patients, purchasers and providers. Outcomes need to be improved if this payment methodology is to have staying power.”
- Payer
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Views on Performance Adjustments
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Performance Adjustments
 Despite the strong support for adjusting performance based on quality, only one pilot reported doing so
 Finding measures suitable and specific to the bundle proved to be difficult
– WOMAC scores varied in popularity for joint replacement
– Payers were sensitive to the administrative burden of quality reporting
 Future use of performance adjustments seems likely
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Volume of Bundled Payments
 Volume of bundles has stayed relatively low ~ 10-50 bundles per year per pilot
 Narrow definitions and many exclusions
– One pilot studied the effect of the look-back period on volume and found a 14% drop due to exclusions when expanding the episode time window
 Gaps in continuous enrollment caused a 40 percent drop in expected paid bundles in one pilot
 ASO clients and BlueCard carriers
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Results
 Very few initiatives had a formal evaluation of their program
 One formally evaluated program reported:
– 40% decrease in readmissions,
– 50% decrease in complications, and
– mortality reduced to nearly zero.
 Preliminary results of early pilots are suggesting modest cost savings
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Keys to Success
 Executive support and organizational commitment from both payer and providers
 “Can’t have lieutenants living in the past”
 Trust and patience
 Willingness to “kick the tires” with technology
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Future of Bundled Payments
“We’re worried about the operational investments so we won’t take it to scale until it has proven value.”
- Payer
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Future of Bundled Payments
 Future is promising, but many are still in a “wait and see” approach
 Waiting for results of Medicare’s experience with the
Bundled Payment for Care Improvement Initiative
 Some national carriers trying to establish a consistent methodology
 Can bundled payments exist in ACOs?
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Words of Wisdom from Interviewees
“It’s the road less traveled, so expect some ambiguity.”
- Provider
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Words of Wisdom from Interviewees
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Contact Information
Bailit Health Purchasing, LLC www.bailit-health.com
781-453-1166
Megan Burns
Senior Consultant mburns@bailit-health.com
Michael Bailit
President mbailit@bailit-health.com
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