Catalyst for Payment Reform

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

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

U.S. employers are hungry for new approaches to managing health care costs and improving quality.  The average annual premium for employer-sponsored family health coverage surpassed $20,000 in 2019, 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 pay for health care services in a bundled fashion more often, we might be able to reduce 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 are 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.  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 large 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 by 2022.

Niche vendors?  Niche vendors, like Global OneValueHealth, 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, now Signify Health, and the National Alliance of Healthcare Purchaser Coalitions announced a partnership in June 2018 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 partnership created additional momentum for the role of niche vendors in advancing bundled payment.

CPR?  CPR has been tracking the dollars tied to bundled payment and our members are paying attention – they want to see more of these arrangements. Four employer-purchasers even spent 2019 working directly with CPR staff as part of a Purchaser Collaborative. Through that process, we level set on bundled payment and developed specifications of best-in-class bundled payment programs. Our Toolkit on Advancing Effective Bundled Payment sets the standard of what purchasers are looking for in this space.

At CPR, we road-tested the specifications by evaluating 10 vendor solutions, including three health plans. Like the mental health evaluations we conducted in 2018 and the data warehouse evaluations in 2019, the summary scorecards we produced is an exclusive benefit for CPR member organizations. (If you purchase health care on behalf of a population, don’t be shy about inquiring about becoming a member to gain access to this highly-actionable resource.)

Busting the myth.  After working intensively with four progressive purchasers and evaluating different bundled payment solutions from both health plans and niche vendors, CPR continues to believe that advancing bundled payment is a multi-stakeholder imperative.  We even heard the same from a physician leader, Frank Opelka, MD, FACS, Medical Director for Quality and Health Policy with the American College of Surgeons, when we asked for the surgeon’s perspective on bundled payment.  It will require problem-solvers from across the country working together or simultaneously, more rigorous evaluations, and the sharing of best practices to build out the appropriate use of bundled payment and secure better value care for all.

CPR hosted a Bundled Payment Virtual Summit in July 2020. Watch the recording!

Photo by Ayo Ogunseinde on Unsplash

CPR originally published this blog on November 6, 2018, and updated it in July 2020.

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