WASHINGTON, D.C. — As providers push forward on their "Journey to Excellence," the theme of this year's just-concluded American Hospital Association Annual Membership Meeting, one of the most daunting considerations is bundled payment.

Bundled payment combines reimbursement for the physician, hospital and post-acute services into a single payment for an episode of care.

An AHA issue brief released at the meeting stated that "bundled payment, where providers are reimbursed a set fee for an episode of care, would break down current payment silos and reward providers for improving the coordination, quality and efficiency of care."

But just how bundled payment gets implemented is still being tested across the nation, and varies significantly from one marketplace to another. That was evident in a session at the meeting focusing on three quite different organizations that already have taken the plunge.

Ray Montgomery, president and CEO of White County Medical Center, described the Arkansas Payment Improvement Initiative, a statewide program championed by the governor, which seeks to encompass 90 percent of all health care payments within three years. The initiative incorporates Medicaid, Medicare and commercial insurance into an episodic-based care delivery model.

Under the Arkansas model, a principal accountable provider in each bundled payment partnership serves as the main decision-maker for care during a given episode. The PAP has the ability to coordinate or direct other providers delivering care, and determines the meaningful share of costs or volumes.

Just who serves as the PAP varies by type of episode. For instance, for pregnancy and delivery, it might be the delivering physician; for hip and knee replacement, it might be the orthopedic surgeon; and for acute or post-acute heart failure, it might be the hospital.

Ed Marx, director of strategic analytics at Vanderbilt University Medical Center in Nashville, stressed the need to collect and make sense of data throughout the process. Vanderbilt conducted a number of analyses to identify conditions that were candidates for bundling. For the most promising conditions, multidisciplinary teams reviewed the data to determine if and how they could drive down the total cost of care. And on an ongoing basis, data are analyzed to ensure they are having the desired positive impact on efficiency and quality — and, if those goals are not being met, why not?

At Christus Santa Rosa Health System in Texas, the orthopedics bundled payment initiative is limited to acute care hospital stays only. Patrick Carrier, president and CEO, said the relatively narrow focus allows the initiative to serve as a building block for other alignment initiatives and as a learning lab for physicians and the health system working together in a shared savings environment.

All three presenters noted common themes that have emerged as they move ahead on bundled payment. No surprise to most hospital leaders is the need to aggressively engage physicians. Physicians already think they deliver quality care and are skeptical that bundled payment will improve what they do. They're even more skeptical about having a payment go to somebody else to be disbursed to all the various providers involved in an episode of care.

It is important for hospitals to conduct ongoing educational meetings with doctors prior to implementation and beyond, establish trust, identify physician advocates for bundled payment who can better relate to their medical colleagues, and give physicians an active role in developing process change, quality metrics and care pathways. Perhaps even more important is showing the positive results that collaboration can have on patient outcomes.

"It's not all about payment, it's also about quality," Montgomery reminded attendees. And quality improvement is something physicians readily buy into.

Bundled payment is a complex concept to cover in a single blog. For more, I invite you to read the April cover story in Hospitals & Health Networks, "Bundled Payment: A Gift or Pandora's Box?"

Equally as complex as bundled payment are the changing relationships hospitals are having with insurers in this new world order. Advocate Health Care, the largest integrated delivery system in Illinois, has been at the forefront of this for some time now, having negotiated innovative value-driven contracts with the state's Blues plan. My colleague Marty Stempniak caught up with Advocate CEO James Skogsbergh, who offers some interesting insights into the evolving nature of hospital-insurer relations.