Transforming bundled payments into episodes of care can give hospitals, payers an edge

With algorithms and analytics, first-moving health orgs are reaping alternative payment models to reduce readmissions, incentivize physicians to coordinate care and improve patient satisfaction.
By Tom Sullivan
10:58 AM
benefits of transforming bundles to episodes of care

Hospitals are living in two worlds today: Planning for next-generation value-based care while praying that patient volumes increase under fee-for-service.

The belief that alternative models will transform the way care is delivered and paid for is already impacting many facets of hospital and payer investments, IT not least among those.

In the fee-for-service world physicians are generally unaware of costs. Providers already embracing value-based payment models, however, are empowering doctors to be conductors who control expenses to ensure hard-earned dollars are spent with patient results in mind.

And, no, the Centers for Medicare and Medicaid Services’ revelation that it is cancelling mandatory cardiac and hip fracture bundled payments is not slowing these frontrunners down.

Episodes of care

Lili Brillstein doesn’t call them bundled payments. As the Director of Episodes of Care at Horizon BCBSNJ she prefers the job-title-eponymous fitting phrase “episodes of care.”

The reason: Becoming an early user of bundled payments enabled Horizon BCBSNJ to advance a patient-centered approach that is proving to be a competitive advantage for the payer and participating providers. 

“The model is really about putting the patient at the center and incentivizing physicians to coordinate and communicate across the continuum of care, so the patient isn’t left to determine what they do next,” Brillstein said.

Brillstein and BCBSNJ by extension are somewhat unique in that philosophical regard — but bundled payments, if starting slowly, appear to be on the rise.

The slow gain of bundled payments 

It’s no secret that bundled payments have thus far been catching on at a downtempo pace.

“While organizations continue to navigate the new alternative payment model universe, the bundled payment model comes with its own set of hurdles that may hamper broader participation. One challenge is the coordination of different physicians involved as well as accounting for services across different hospital or practice entities,” said Brendan FitzGerald, Director of Research at HIMSS Analytics. “Additionally, some organizations may have difficulty navigating the bundled payment structure in a way that makes the most sense and impact for their patients.”

That reality points to a sizable opportunity for both payers and providers to move quickly — as well as the inherent risk of not doing so.

Bundled payments are expected to grow by 6 percent during the next five years, according to ORC International, whose research suggests they will account for 17 percent of all payments. But fewer than half of hospitals and payers are currently prepared to implement them.

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“Bundled payments represent a huge opportunity to make more money and win market share,” said Neil Smiley, CEO of Loopback Analytics. “A triple win – more money to invest in improving patient care, new incentives to increase market share and more profits for investors.”

After so many previous attempts and iterations, including high-minded thinking about disease management and pay- for-performance, nothing really took hold because the methodologies weren’t right, according to Dexter Braff, president of the Braff Group.

“We finally have payment models for a unique set of services,” Braff said. “Alternative payment models, real models have turned around the equation.”

There’s also the data. Hospitals get access to Horizon BCBSNJ claims data to improve referral patterns, post-acute performance and process initiatives, which Brillstein said they can use to streamline care and bolster patient satisfaction.

Data takes tech-heavy lifting

To get the information it shares with participants, Horizon BCBSNJ works with technologies from Altarum and Change Healthcare's HealthQx value-based payment software. 

Altarum’s Prometheus is the basis for Horizon BCBSNJ’s stratification, Brillstein said, which is done by taking claims data to look at similar patients so doctors can understand and reduce variations in care. Prometheus built some 100 algorithms that tap claims coding to stratify people into various episodes, such as acute care, chronic or procedural.

“We send our data and Change runs it through the algorithms to produce reports that show us what the patients look like as they go through episodes,” Brillstein said. “We send a mess of data and I don’t want to see it again until it runs through the algorithms and comes back to us.”

What Change returns to Horizon BCBSNJ are reports on each member that went through an episode. And they receive it every quarter, including the types of service and total costs of care. It’s data rather than clinical recommendations.

“My team looks at that data and the opportunities,” Brillstein said. “The providers that are most successful look at data with us and have a team on their end to develop best practice guidelines, eliminate variation and create highest quality for their patients.”

Competitive advantage: Episodes of care

When Horizon BCBSNJ kicked off its alternative value-based payment program, Jack Feltz, MD, President of Lifeline Medical Associates in Parsippany, New Jersey, saw the opportunity as something of a forerunner to true bundled payments and raised a hand to participate.

Lifeline, an integrated practice with 45 offices throughout N.J. that provides pregnancy care for more than 10,000 women annually, worked with the payer to design a program that advances the model of higher-quality and more affordable care for women. 

Lifeline and Horizon BCBSNJ drew up clinical guidelines and quality metrics to create a reimbursement model that gauges outcomes as the result of effort and cost, and ultimately established what Feltz described as a center of excellence. While the model is still evolving, Lifeline has already reduced costs and put shared savings back into the system to create more affordable insurance for patients and employers.

Feltz said the program benefits doctors and patients alike. Lifeline, for instance, has homogenized how physicians deliver care to help outliers adopt best practices and reach a higher level of care.

Feltz likened the patient experience to service Verizon provides, in that users don’t need to see what goes on behind the scenes, or understand the infrastructure; they just know when they pick up their phone and dial it that everything will work. The higher level of service Lifeline provides, however, distinguishes it from rival practices.

“Patients should want to go to a center of excellence and have an experience that’s affordable,” Feltz said. “It’s a competitive advantage for us, it may not have been the intention, but that is the result.”

Feltz added that such programs are blossoming.

“We’re trying to make this whole process of value-based care contagious across the country,” Feltz said. “This will change healthcare.” 

No hospital risk right now 

Today, Horizon BCBSNJ is the only entity at risk so providers such as Lifeline don’t get punished or fined for not achieving savings.

“The reason we started this way, and have had great success with the Triple Aim, is we want to create an environment where payer and provider can learn together,” Brillstein said. “We’ve created a no-risk environment where we figure out what role each plays.”

One of the things Horizon BCBSNJ has learned along the way is that while episodes of care have proven to be a good model for patients in the bundle for knee surgery or diabetes, for instance, the programs have not historically been as effective at determining if patients should have a procedure in the first place.

Since New Jersey has the highest rate of C-sections in the country, at almost 50 percent of births, Brillstein said that pregnancy presents an enormous opportunity. Horizon BCBSNJ has already seen the trend in C-section rates going down among doctors in its program noticeably more so than doctors not participating.

“The goal is to streamline care and make sure patients have the best care across the continuum,” Brillstein said. That includes measuring their levels of satisfaction at every step along the way, including care during the full episode related to their diagnosis, care event or procedure, labs, post-acute care, and so on.

The payer then shares that data among providers and PCPs to build out the medical neighborhood focused on connecting all the elements of care in a collaborative shared savings model.

“In general,” Brillstein said, “patients are reporting extremely high satisfaction rates.”  

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