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Success with bundled payments – Strategies for Medical Practice and Providers

April 16, 2019

Outsoruce-Provider-Credentialing“Bundling 101” explained

What is bundling? Simply put, bundling (also known variously as value-based, episode-based payment, evidence-based case rate and several other names) is reimbursement for health care services by hospitals or providers “on the basis of expected costs for clinically-defined episodes of care.” Bundling is thought of as a “middle-ground” between the longstanding practice of fee-for-service, where providers are paid for each individual service given, and capitation, which normally pays a lump sum per patient regardless of the number of services that patient receives. 

Unlike some other alternative payment models such accountable-care organizations (ACOs) and capitation, bundling payments places both clinical and financial responsibilities on providers covering a single care episode for that individual instead of ongoing outcomes affecting a larger patient population.

When clinical outcomes proceed as anticipated, bundling can save money and reduce waste and duplication of services and charges. However, bundling can come up short when the unexpected happens: the patient experiences unexpected complications after discharge, fails to follow post-discharge instructions, or experiencing an accident in the home – all of which can endanger a provider’s expectations of staying within the capped payment.

On the other hand, providers can earn value-based incentive payments when they don’t incur additional excessive financial risk.

Bundling in the views of payers including CMS

The CMS, which usually sets the standards for other payers, has approved bundled payments for Advanced Alternative Care Models, including the Oncology Care Model and Comprehensive Care for Joint Replacement programs. Provider participants in these programs were incentivized with an automatic 5 percent payment as of 2017. The agency also plans to add bundled payment models to the Quality Payment Program Track.

Bundling offers many specialists a chance to participate in value-based reimbursement structures, as opposed to participation in other alternative payment models. Many ACOs put more emphasis on a primary care provider’s role in reducing cost while improving quality, often to the exclusion of specialists such as surgeons, who may not have direct ongoing patient-provider relationships.

Medicare program models intended to address these issues include the Acute Myocardial Infarction (AMI) model, catering to surgeons and cardiologists, and the Comprehensive Care for Joint Replacement (CJR) for orthopedic specialists.

Bundled payments have already successfully paid off for both payers and providers: spending on lower-extremity joint replacements dropped by $1, 166 per episode under the Medicare for Bundled Payments Initiative. Oncology bundled payment models reduced inpatient stays by 17 percent and cut emergency department visits by as much as 30 percent.

What some hospitals and healthcare organizations think of bundling

While acknowledging that the healthcare industry needs to solve the problems of patients receiving “surprise bills”, some hospital administrators and others, including the American Medical Association (AMA), the American Hospital Association (AHA) and the Federation of American Hospitals (FAH) opposed bundling payments due to their concerns that bundling “would be administratively complex…change the relationship between hospitals and their physician partners and, alone, does nothing to protect patients from surprise bills” they wrote in an opinion.

Christen Linke-Young, a fellow with USC Brookings Schaeffer Initiative for Health Policy, told a group of healthcare policymakers at a House hearing in early April, 2019 that bundled payments could help resolve issues of using non-network specialists in emergency rooms. She explained that emergency medicine physicians and anesthesiologists regularly treat a steady flow of patients, regardless of their network affiliations. These specialists have little incentive to join any particular network and be compensated at in-network services’ lower rates.

Linke-Young added that policymakers should work to eliminate incentives that result in encouraging ER specialists to remain outside of networks. Utilizing bundled payments can not only enable hospitals to pay specialists for care within their facilities, but could be a strategy used by Congress to correct a currently-distorted market. 

Other ways to control high patient costs using risk stratification analytics tools

Providers could leverage stratification techniques to identify patient risk and higher-cost patients, particularly prior to admission. Bundlers can utilize robust tools, including analytics, to help allocate resources to high-risk and high-need patients in order to reduce or prevent incidents of adverse events and other costly outcomes.

As one example, according to Dr. Susan Nedza, Sr. VP of Clinical Outcomes at MPA Healthcare Solutions, hospitals can’t afford to provide the same high-intensive care management for both in-patients and post-discharge. She believed that providers and organizations need to understand risk levels when assessing patients for elective surgery or high-risk acute-care services and treatments, particularly those cases where the outcome may be poor.

This should start prior to actual admission, Dr. Nedza wrote, and would include the kind of services needed, duration, possible complications and the kinds of outcomes that could be encountered. Then patient risk levels should be re-evaluated during care transitions, as with from hospitalization to post-acute care, including post-discharge. Any unexpected incidents following or during hospitalization and post-acute care need to be noted during such evaluations to determine whether the patient needs additional levels of services.

In other words, resources should properly be allocated on an individual patient’s needs, not just because he or she is undergoing a hip replacement or other procedure.

Does your billing staff know how to handle bundled billing?

Billing bundled payments can be challenging for the average back office due to the need for more specialized billing software and the ability on the part of the practice’s billing and coding staff to properly utilize it.

While some practices may decide to join a Special Group Purchasing Organization (GPO) to spread and share cost savings on acquiring the necessary software and other technologies for accurately processing bundled claims, many others decide to partner with an experienced practice management and billing service.

M-Scribe can help your practice and its busy back office get claims out right the first time while taking control and managing costs associated with billing and revenue management activities. Contact us at 888-727-4234 or email for more information and a free analysis of your individual practice’s needs and revenue goals.


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