While partisan wrangling over health care reform dominates the headlines, bundled payment programs continue to proliferate across the United States. A body of evidence, mostly in orthopedics, shows that such programs can improve outcomes, control costs or both.

Bundled payment programs have been implemented at more than 1,300 U.S. hospitals through the voluntary Bundled Payments for Care Improvement program, the mandatory Comprehensive Care for Joint Replacement, and a number of bundled payment arrangements between providers and commercial health plans or employers. BPCI alone, which first saw hospitals bearing risk in October 2013, has grown to represent $10 billion in Medicare spending. Health and Human Services Secretary Tom Price has stated he is a solid supporter of BPCI, in part because it is voluntary. As of this writing, the Centers for Medicare & Medicaid Services had delayed the final rule for the expansion of CJR and the implementation of mandatory cardiac bundles until May 20, with a planned launch date of Oct. 1.

CMS has announced there will be a follow-on program — tentatively called BPCI Advanced — slated for 2018, and CMS intends it to qualify as an Advanced Alternative Payment Model. Because the Medicare Access and CHIP Reauthorization Act provides strong incentives for physicians to participate in Advanced Alternative Payment Models, it is likely there will be broad participation in BPCI Advanced. It will provide a crucial path for a range of specialists and acute generalists — such as hospitalists and intensivists — to participate in an Advanced Alternative Payment Model.

What approaches are health care organizations employing to succeed in bundled payments? Realizing high performance in bundles requires managing change in a diverse group of stakeholders, including patients, physicians, executives, the care team and post-acute care providers. Below are five  of the building blocks of success.

1. Data

For the first time, we are able to view cost data over the entire span of an episode, including acute care and the post-acute recovery period. A surgeon, for example, can access the costs of a patient’s recovery after hospital discharge. In this example, if the skilled nursing facility length of stay is high compared against a benchmark, the surgeon can work with the team — including the patient and caregiver — on an early discharge from the facility or avoid the facility altogether. Administrators and clinicians can identify variation in costs or quality, analyze processes underlying the variation and then implement new processes designed to mitigate such variation.

In addition, information systems are emerging that provide access to a patient’s location and clinical status over the entire course of an episode (something most electronic health records cannot do). These systems allow patient navigators and physicians to track patients’ recovery and intervene when needed.

2. Incentives

Bundled payments disrupt the fee-for-service incentive to increase utilization. BPCI enables hospitals, physician groups, post-acute facilities and home health agencies to bear first-dollar risk for an episode. The risk-bearing entity’s monetary reward for lowering costs can be invested in human resources (e.g., patient navigators) and technological resources (e.g., performance reporting and patient tracking software) that help the program succeed.

Both BPCI and CJR have waivers to allow "gainsharing." Gainsharing, most often offered to physicians, but also possible with hospitals, nursing facilities and other providers, can ensure that the risk-bearing entity and physicians or other providers have the same goal. Gainsharing in these programs can reward either internal cost savings (derived from, for example, bulk purchasing of implantable devices) or the net payment reconciliation amount (derived from, for example, lower post-acute facility utilization or fewer readmissions).

Gainsharing is hindered by the time lag between provider effort and reward: Due to the retrospective nature of the bundle reconciliation, several months must elapse after an episode begins before payments are made. Nevertheless, gainsharing can be effective if there is active support and program management, and if senior leaders are engaging physicians and keeping them apprised of the program’s status. Shortening the time between service and payment, perhaps with prospective bundled payments, may create more predictable rewards for high-value care. 

3. Post-acute performance networks

Successful risk-bearing entities build networks of post-acute facilities and home health agencies to ensure efficient and high-quality care for patients after an episode. Inclusion in such a network can be based on costs, readmissions or quality — such as star ratings, the availability of on-site providers and disease specialty programs. 

4. Care redesign

CMS promotes care redesign, or improving quality while cutting costs, as the defining feature of bundled payments. Successful organizations have redesigned care for specific bundles like joint replacement; others have redesigned care in an across-the-board fashion agnostic to bundle type. For a specific bundle such as joint replacement, providers may offer preoperative education and in-hospital mobilization. They may also focus on post-acute value by, for example, using outpatient physical therapy instead of home-based services.

Examples of across-the-board care redesign include deploying an early mobility program, using a decision-support tool to determine an optimal post-discharge location, applying rules to identify candidates for palliative care, having a structured goals-of-care conversation or using protocols to avoid unnecessary acute care transfers of skilled nursing patients. 

5. Pooling knowledge

The BPCI initiative supports the role of a “convener,” working with “episode initiators” (providers) to deploy the program. Conveners can provide crucial support for health care organizations that aren't able to go it alone because of a shortage of resources or expertise in data analytics, information technology, care redesign and, in some cases, the assumption of a portion of financial risk.

Pooling knowledge can also improve bundle programs to provide a better experience for patients. Current programs have offered a rich learning environment as to what has worked well and what can be improved. Here are a few design improvements that will help deliver better value to patients and the broader health care system:

  • Better risk adjustment to accommodate high-complexity patients and avoid the cherry picking of healthy patients for elective bundles.
  • A BPCI approach enabling more-timely and reliable patient identification, and more-robust quality reporting.
  • Making prospective bundled payments, which will enable greater flexibility in program design and obviate the need to wait for revenue.
  • Better integration of accountable care organizations and bundles, with ACOs focusing on prevention and chronic disease, and bundles focusing on acute care and recovery.

Win Whitcomb, M.D., M.H.M., is the chief medical officer at Remedy Partners in Darien, Conn. He is also an assistant professor of medicine at the University of Massachusetts Medical School and founder and a past president of the Society of Hospital Medicine.

The opinions expressed by the author do not necessarily reflect the policy of the American Hospital Association.