bundled payment health plans

MYTHBUSTER: Health plans will lead the way in advancing bundled payments

November 06, 2018

U.S. employers are hungry for new approaches to managing health care cost and improving quality.  The average annual premium for employer-sponsored family health coverage is nearing $20,000, and annual increases remain above the Consumer Price Index.  And with that added cost, we are not seeing better care or outcomes.

If we were to start more often paying for health care services in a bundled fashion, we might be able to reduce health care costs and improve the quality of care.  A bundled payment is a single payment to health care providers or facilities (or jointly to both) for all services to treat a given condition or to provide a given treatment.  Providers assume financial risk for the cost of services as well as costs associated with preventable complications.  Conditions or episodes that lend themselves well to bundles include those with a well-defined beginning and end that also have a lot of variability when it comes to costs, quality, and outcomes.  Good examples are a knee replacement or delivering a baby.

So, health plans, with their recent track record of shifting toward value-oriented payment approaches, will lead the way in advancing this alternative payment model, right?

Not so fast… For several years, Catalyst for Payment Reform has been tracking the percent of total dollars health plans pay to doctors and hospitals that flow through various payment methods, including traditional fee-for-service, shared savings, shared risk, and bundled payments, among others.  In the time that we’ve been tracking, the percent of total payments made to providers through bundles has not budged above 2%.  Borrowing a line from Jerry McGuire, the health plans have yet to “show us the money.”  To their credit, some health plans have recently shared plans to implement more bundled payment.  But they haven’t yet tipped the apple cart with providers by shifting shared savings arrangements to shared risk, so are they likely to negotiate more bundles that put providers at financial risk?

If health plans don’t make moves in this area soon, who will help purchasers along the yellow brick road to make greater use of bundled payments?

Employer-purchasers?  Innovative employers and other health care purchasers are increasingly establishing direct contracts with providers.  These direct relationships range from providing all levels of care (i.e., a direct contract with an Accountable Care Organization) to care for specific conditions or procedures (i.e., a direct contract with a center of excellence).  For the latter, purchasers are negotiating bundles for these conditions or episodes directly with providers.  Health plans likely have their concerns about this development, though it’s primarily just jumbo purchasers exploring these strategies.  Most purchasers don’t have the bandwidth or patient volume to contract directly with a provider.  But some CPR members tell us they plan to explore a direct contract with bundled payment sometime in the next two years.

Niche vendors?  Niche vendors, like Carrum Health, Remedy Partners, and others, are disrupting the traditional health plan-purchaser relationships, bringing direct contract bundled payment options directly to purchasers, like the County of Santa Barbara.  In addition, Remedy Partners and the National Alliance of Healthcare Purchaser Coalitions announced a partnership last June to “accelerate development and employer adoption of bundled payments across the country.”  With the National Alliance representing 12,000 purchasers and 45 million Americans, this could be the necessary jolt to create momentum.

CPR?  CPR has been tracking the dollars tied to bundled payment and our members are paying attention.  They want to experiment with bundled payment and we’re prepared to help.  We’re launching our next purchaser collaborative, Advancing Bundled Payments, in early December.  We’ll level set on bundled payment, discuss the specifications of best-in-class bundled payment programs, and evaluate the vendor solutions in this space.

Busting the myth.  In all likelihood, it will take several of us problem-solvers working together or simultaneously to advance bundled payment.  It’s CPR’s hope that the lessons we (each stakeholder) collectively learn will result in better value care for all.

Are you a purchaser interested in learning more about the collaborative?  Email Ryan Olmstead, CPR’s Director of Member Services, at [email protected].

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