Q&A: How to Survive and Thrive Under Bundled Payments

Friday, October 14th, 2011
This post was written by Patricia Donovan

Time in the trenches with Acute Care Episode (ACE) pilot participants qualifies Jim Reilly to comment on CMS’s latest Bundled Payments initiative specifically and bundled payment trends in general. The managing partner of TRG Healthcare Solutions shares three lessons CMS learned from the ACE pilot and more in this interview with the Healthcare Intelligence Network (HIN).

(This interview was conducted in advance of Reilly’s presentation on “Evaluating the Bundled Payment CMS Initiative — Legal, Financial, and Clinical Considerations,” an October 19, 2011 HIN webinar.)

HIN: To begin with, what did CMS learn from the ACE Pilot and how is that influencing its newest payment initiative?

Mr. Reilly: First, CMS learned that episodic payments or bundled pricing is a very effective way to incentivize hospitals and physicians to work closer together. They firmly believe combining the fees for an episodic period will lead to better coordinated care, not only between hospitals and physicians but across different specialties, to work together for optimal outcomes. They also learned that it will save CMS money. Through their bundled pricing experience in the past, this has led to lower rates that CMS pays for providers. And they also feel, finally, that it’s going to improve beneficiary health and outcomes. So it’s something that they’re investing in and moving forward with aggressively nationally.

HIN: ACE Pilot participant Baptist Health System, one of the companies that you worked with, refers to its ‘Hallmark moment’ of distributing gainshare checks to participating physicians. What are some other benefits of participation for health systems?

Mr. Reilly: Physician alignment is number one. The level of collaboration has truly increased within that health system. That then drives a greater focus on quality metrics and service metrics — not only the cost side, but also a different level of engagement in trying to move those important cardiovascular and orthopedic metrics in this case. That’s been a great benefit to the health system.

The health system is also benefitting from this experience because CMS is not the only payor that’s going to be adopting bundled payments as a way to pay for care. There will be other payors outside of CMS — outside national payors that will be active in bundled pricing. And a system like Baptist Health is well positioned to take advantage of that as well.

HIN: And finally, our fifth annual survey on the patient-centered medical home (PCMH) found that 9 percent of respondents have already begun experimenting with bundled payments. From your perspective, is this an adequate representation of the marketplace? Where do you think this trend is going?

Mr. Reilly: I don’t think it’s an adequate representation. Sometimes in this industry, we’re a little bit slow to move and be as innovative as we should be. The trend here, particularly with specialties like cardiovascular services and orthopedic services, is definitely more toward acceptance of risk in contracting with Medicare and other payors. You’ll see a great deal of activity beyond CMS, with other payors following suit.

And in order to succeed in that environment, we need more providers out there becoming clinically integrated — not only for the acute care episode, but for post-acute care services, so that we can survive and thrive under bundled payment for CMS. And other payors are going to adopt this. This current CMS bundled pricing initiative is going to escalate to other providers out there moving forward in this direction.

HIN: To follow up on that, could you define ‘clinical integration’ and explain why that needs to happen first?

Mr. Reilly: Certainly. The care process requires multiple caregivers and providers to get the optimal outcome and service. And today many times, we have competing interests among doctors and hospitals. We’ve got physicians that are dealing with challenges of running private practices; sometimes that takes away from collaborating in what is the optimal episode in amounts and levels of care provided for patients.

Once we move into alternative payment methodologies such as bundled payments, it breaks down some of those barriers. We’ve got surgeons and cardiologists and anesthesiologists and radiologists and consultants working more in a united way to ensure that that patient is getting optimal care and efficient care. That’s clinical integration.

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