Bundled Payment 101: A Guide to Getting Started Quickly


In the continuing effort to increase quality and decrease costs, health plans and providers are shifting from volume-based care (fee-for-service) to a value-based reimbursement structure (fee-for-value). Value-based reimbursement promises benefits to patients, providers, and health plans, as it encourages delivery of high-quality care at the lowest cost, largely by improving clinical and administrative efficiency.1

This paradigm shift to value-based reimbursement creates increasingly complex reimbursement scenarios for health plans. According to the “Journey to Value” study McKesson commissioned in 2016, an overwhelming 97% of health plans and 91% of hospitals are now deploying a complex mix of value-based reimbursement and fee-for-service reimbursement.2 Health plans and hospitals see bundled payment as the fastest growing value-based payment model and predict that bundled payment will account for 17% of reimbursements in the next five years.3

Bundled payment uses care episodes as a foundation for payment models, but an “episode of care” is itself not a new idea. Obstetrical care, surgical care, and even diagnosis-related groups (DRGs) are long-held examples of clustered services with care pathways, process and quality measures, and specific outcomes. Despite the fact that they have been in use for decades, the rise of bundled payment as a popular value-based reimbursement model is leading some in healthcare to equate bundles and episodes as synonymous.

While bundled payments are always episodes, episodes are not always bundled. Care episodes can have applications and benefits in mixed- and value-based arrangements aside from bundled payment. Moreover, while bundled payment models are appealing to health plans, the complexity of these models makes them difficult to effectively scale.

Leveraging technology such as a claims analytics tool can give health plans access to a comprehensive platform for navigating through their claims data to gain strategic insights that inform their value-based reimbursement strategies. Identifying the best path forward can sometimes be the biggest challenge. This four-step quick-start guide can help you develop, implement, and operationalize a successful bundled payment strategy for your organization.

Step 1: Unlock Access to Your Claims Data

Moving from fee-for-service claims analysis to value-based claims analysis requires specialized tools to ensure your claims data is accessible and actionable. The first step is to get visibility into your organization’s episodic data in a format that allows you to explore the data and easily identify key metrics such as costs by episode. From there you can use the application to slice and dice the data to determine median costs, evaluate provider performance, and to identify outliers within your network.

Your claims data application should present your data in a format that is secure but easy to access, manipulate, and understand. You will be able to analyze episodes at a high level, focus on specific episodes of interest, as well as drill down to view specifics about the providers. Getting even more granular, you can view the actual services attributed to a specific physician or practice in relation to the episode you are researching.

This level of detail, along with drill-down dashboards as well as standard and customized reports, will let you quickly identify areas of opportunity for your bundled payment programs. Accessing data of this depth and breadth without burdening internal reporting teams will ensure you don’t create cumbersome processes tied to enterprise analytics platforms that might force you to extend program launch timelines.

A cloud-based SaaS (Software as a Service) platform requires minimal IT overhead, and lets you start using the platform quickly to inform new bundled payment programs. Accessing your data within a robust, user-friendly application is a crucial first step to developing an effective bundled payment strategy that you can scale.

Key Components of a Useful Claims Platform

·         Business front-end application that makes data analysis quick and easy

·         Secure platform that requires validation and authentication for access

·         Detailed and organized view of episode data and all associated costs and outcomes

·         Access to standard and customized reports

·         Cloud-based to limit burden placed on internal IT and reporting teams

·         Dynamic data updated automatically

Step 2: Use Claims Analytics to Develop Your Bundled Payment Strategy

Claims analytics is essential for the successful implementation of bundled payment. While unlocking access to your claims data is critical, organizing the data into actionable insights is the true value of analytics.

To inform your strategy, you need visibility into the delivery of care through an episode analytics lens. Reviewing claims data by episode and even by pre- and post-trigger lets you identify bundle and care model opportunities, define quality and savings targets, and define budgets.

An effective claims analytics tool also helps you analyze patterns in provider claims history and identify outliers at both ends of the spectrum—where total cost of care seems excessive, as well as where high performers deliver quality care at a reasonable cost. This lets you pinpoint which providers and which episodes of care will benefit the most from value-based reimbursement tactics, such as bundled payment.

Claims analytics also can help guide conversations with providers as you work together to understand where clinical transformation can happen. Useful analytics will empower you to identify ways to improve over- and under-utilization, reduce potentially avoidable costs, and increase clinical efficacy.

Because episodes of care analysis focuses on the total costs within a bundle, it can, for example, identify surgeons whose procedures result in fewer complications and readmissions. With that information, you can align provider incentives to encourage best practices so other providers improve their performance.

Another essential element of an analytics platform is the ability to easily navigate through the application and toggle between different views of the data, such as by episode, by provider, and even by member. Being able to quickly manipulate the data, export it, and pull up graphs or tables within the application will support your analysis and collaboration with colleagues and providers. Using claims analytics to give you actionable intelligence will help you to develop a successful bundled payment strategy and also increase speed to market of value-based products that help increase your organization’s savings potential.

Questions Analytics Should Help You Answer

·         What is the median cost of an episode?

·         What is the average cost of procedure by provider and by practice?

·         What are the costs pre- and post-trigger?

·         What are the potentially avoidable costs?

·         How are providers trending against each other?

·         What are the care variations within the episode?

In the second part of this series, we will cover how these technologies can help foster improved collaboration between payers and providers, and fast-track the implementation of value-based programs.

Andrei Gonzales, M.D. is AVP, Product Management, Value-Based Payments, Software & Analytics, at Change Healthcare

1 Fried, Bruce Merlin, and Jeremy David Sherer. "Value Based Reimbursement: The Rock Thrown Into The Health Care Pond." Health Affairs. July 8, 2016. http://healthaffairs.org/blog/2016/07/08/value-based-reimbursement-the-rock-thrown-into-the-health-care-pond/.

2 McKesson Research. Journey to Value: The State of Value-Based Reimbursement in 2016. June 2016. http://mhsvbrstudy.com.

3 McKesson Research. Journey to Value: The State of Value-Based Reimbursement in 2016. June 2016. http://mhsvbrstudy.com. 

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