An editorial by Shane Wolverton

As commercial payers seek strategies to lower costs and improve care quality, they are increasingly paying closer attention to bundled payments.

While many payers express concerns about the impact of recent regulatory reversals that removed mandatory requirements for bundled payments, the benefits of bundled pricing still resonate strongly throughout the commercial marketplace.

In late 2017, CMS canceled mandatory bundled payment programs for cardiac care, and surgical hip and femur fracture treatment, along with the cardiac rehabilitation incentive payment model. CMS also switched participation requirements in the Comprehensive Care for Joint Replacement (CJR) model from mandatory to voluntary while reducing the selected geographic areas from 67 to 33.

The canceled mandatory bundles are expected to be replaced in 2018 with a voluntary program, called the Bundled Payments for Care Improvement Advanced (BPCI Advanced). Despite these uncertainties, astute commercial insurance leaders recognize the potential of bundled reimbursement programs. In fact, many health plans have already invested in these models after seeing positive results from CMS' demonstration models.

Outcomes improve when physicians are engaged in the process. In cardiac bundles to treat heart failure, for example, health systems experienced an average 9.9 percent savings, and 14 to 17 percent when cardiologists were in charge of the process. This demonstrates that meeting the needs of physicians in caring for their patients helps to optimize the bundled payment model, ensuring that it will factor into healthcare in years to come. Many healthcare organizations are scaling to meet increasing demand for this type of value-based care and ushering in greater competition.

Commercial payers drive improvements
As CMS withdraws, private payers and employers can rush in to meet the need, and gain from the benefits of healthcare bundled payments and other alternative payment models designed to drive down the cost of care.

Responding to market realities, commercial payers are likely to remain responsive to employers who face the growing burden of healthcare insurance costs. Employers recognize that they can no longer spread premium costs to employees but must find real solutions. As they continue to advocate for changes to healthcare delivery, payers will be forced to turn to providers and demand innovations – like bundled pricing.


With private payers and employers implementing bundled payments, providers should avoid seeing CMS actions as a reason for scaling down alternative payment model participation. Instead, they should engage with bundled payments across payers to give themselves a competitive edge. Commercial payers will be more motivated to work with innovators, rather than those clinging to the status quo.

The idea is to attract consumers, employers, and payers who are looking to create a narrow network that will provide transparent pricing.

Maximizing the benefits of bundled payments
For providers in this environment, the key to success depends on the ability of the organization to foster multidisciplinary teamwork organized around more refined episodic analysis, looking at structure, process indicators and outcomes. These advanced analytics serve as the road map to thrive with this payment model. It is vital that the analytics be clinically focused and risk-adjusted to determine whether variation is manageable or due to the clinical and demographics of the patients.

Four steps
First, identify physician leaders to guide the study of current practice patterns, patient throughput and post-acute care. While the physicians facilitate this process, it is recommended that nursing, supply chain, pharmacy and other stakeholders be included.

Second, develop the analytic tools to assess care across the continuum using claims, EMR, process, and patient-reported outcomes. Organizations should look for analytics that allow stakeholders to see severity-adjusted episodes of illness across the entire continuum of patient care. Accurately comparing the total cost and utilization of medical services against peer groups, national norms, and best practices is important as the trend in bundles is to cover post-procedural spend for as long as 90 days. It is essential to compile analytics refined enough to define the current performance and model the expected bundled rates and outcomes. If this step is not performed rigorously, the organization faces considerable risk and discontentment by stakeholders.

Third, determine how the bundled rate will be distributed to the physicians and facilities. This must include incentives for improvement for all stakeholders as margins improve and quality increases.

Fourth, educate the patients and families, and key stakeholders to empower them to work as part of a coordinated team. Providing clear information about the episode can reduce anxiety and improve adherence to recommended therapies and medications pre- and post-surgery. Using navigators is a proven approach to help patients through the episode of care.


Patient selection
As the journey into bundled care begins with the selection of patients best suited for this type of care, it is advantageous to build a repeatable and evidence-based approach to delivering this care. More variability in the clinical and demographic attributes of the patient leads to greater potential variance in treatment. It is vital that the teams develop a consistent care path especially early into the program. This fosters the knowledge required to set utilization and quality outcomes firmly in alignment with the bundled rate. Even the slightest inconsistencies can have significant impact on the program's performance.

Healthcare performance management and analytics
With bundled payments, commercial payers, providers and healthcare delivery organizations benefit from the savings, provided the outcomes of the patient meet expectations. There are some arrangements where quality performance guarantees are included as part of the agreement. For instance, one of the most comprehensive arrangements is the inclusion of a lifetime guarantee for hip arthroplasty. As more care moves from the acute care setting into ASCs or HOPDs the price of bundles will be commoditized and attractive margins harder to maintain.

Patients may also believe that lower cost settings of care translate to the delivery of lower quality of care. This puts tremendous pressure on hospitals to begin diligent work on bundles, knowing they have a cost disadvantage compared to outpatient settings. Demonstrating high-quality care to patients regardless of setting will foster greater trust with commercial payers and employers and reduce the reluctance of patients to seek treatment in the outpatient setting.

Assessment of risk-adjusted mortality, complications and unanticipated readmissions, along with ARHQ patient safety indicators, is essential in building and maintaining a bundled program. These indicators must be risk-adjusted properly to validate performance, remediate poor outcomes, credential providers and market the program. The use of statistical process control techniques is also required to discern random versus special-cause variation in utilization or outcomes. It would be desirable to use methods published in peer-reviewed journals for integrity with the medical staff.

The introduction of bundled pricing has already changed the face of the industry. At the very least, commercial payers and other stakeholders are considering new approaches. While CMS has backed off bundled pricing, it has left room for commercial payers to take the reins in the drive toward greater healthcare efficiency.

About the author: Shane Wolverton is senior vice president of corporate development at Quantros