Bundled payments pilot not a total loss

In response to a recent study by RAND Corporation and a report in Health Affairs that detailed shortcomings of a bundled payments pilot in California, the Integrated Healthcare Association shared some of its lessons learned following the three-year project that started with high hopes. Tom Williams and Jill Yegian of the IHA said the original goal […]

In response to a recent study by RAND Corporation and a report in Health Affairs that detailed shortcomings of a bundled payments pilot in California, the Integrated Healthcare Association shared some of its lessons learned following the three-year project that started with high hopes.

Tom Williams and Jill Yegian of the IHA said the original goal of the pilot “was to implement over 20 payer-provider bundled payment contracts, resulting in completion of more than 500 bundled cases within the first two years of the project,” and that during the third year, researchers would evaluate clinical and economic factors to see how bundled payments impacted the quality and cost of care.

Instead, the pilot, which focused on orthopedic procedures, suffered from extremely low volume, with only 35 cases in three years at hospitals and 111 cases at ambulatory surgery centers.

“Looking back, these targets seem highly optimistic,” Williams and Yegian wrote. “But at the pilot’s launch, both IHA and its stakeholders had a number of reasons to be confident. The pilot was well funded by a three-year grant from the Agency for Health Research and Quality, building on two rounds of planning and feasibility work over four years funded by the Blue Shield of California Foundation and the California HealthCare Foundation. In addition, there was a high level of interest and enthusiasm among a core group of providers and health plans that had a prior history of collaboration in a California physician pay for performance program.”

When IHA realized it wasn’t going to meet its goals within the first two years, it reported its lack of progress to the Agency for Health Research and Quality, which in turn suggested IHA begin “fully documenting all that could be learned” and “broadly disseminate ” the results so that other payers and providers could learn from the experience.

Despite the failed pilot, IHA said it’s important “that the results be interpreted not as a death sentence for bundled payment, but as an early, hard-fought battle offering important lessons.”

So what are those lessons?

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Starting a retrospective versus prospective payment model for bundled payments would have been perhaps a better approach. IHA first chose prospective since it’s “well established” in California.” With a retrospective payment model, “fee for service claims could continue and be reconciled later to determine shared savings,” according to IHA, which would have been a better approach.

“Any bundled payment model requires considerable effort by clinicians and hospital administrators to redesign the approach to care delivery, but a prospective payment model also faces off against existing legal, regulatory, insurance benefit design and claims payment systems in ways we did not fully appreciate,” they wrote.

The prospective model also raised a number of concerns for regulators in California, among them whether providers would assume that much insurance risk and how existing copays and coinsurance would be applied. Regulators also wondered if consumers should be made aware of the payment changes, and stakeholders in the study did not anticipate what level of difficulty commercial insurers would face for prospective bundled payments.

Another idea going forward is to focus more on care design versus payment innovation.

“The true benefit of bundling payments derives from re-engineering care delivery, not from combining separately paid line items into a single tab. Bundled payment provides the impetus, but the work of care redesign must follow if the promise of bundled payment is to be realized: reductions in unnecessary care, reductions in readmissions, lower risk and complication rates for patients, and improved patient function and outcomes,” IHA wrote.

In California, the bundled payments were slower to catch on, particularly with non-hospital providers, with much of the state’s payers and providers “deeply engaged in the development of ACOs and related contractual arrangements.”

“Total population management, the holy grail of the ACO movement, was a more logical extension of existing capitation payment arrangements. To some organizations, particularly non-hospital based physician organizations, bundled payment appeared to be a distraction,” IHA said.

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