Bundled Payments and Provider Partners: Who Should Take the Risk?

Monday, January 27th, 2014
This post was written by Patricia Donovan

bundled payment

Bundled payments are changing the face of healthcare reimbursement.

In the new healthcare realm, where every touch now translates to an expense rather than revenue, providers must determine which entity will take the risk before entering into a bundled payment agreement, advises Jay Sultan, associate vice president and chief product portfolio architect for TriZetto®.

Think about whether it’s physicians or hospitals; do you want to be the one owning the episode, taking the risk, indemnifying other parties, giving orders? Or do you want to be an entity that’s taking orders and treated as a vendor? If you’re a hospital, do you really want your doctors deciding which hospital to use?

This can help when you are vertically integrated, but ownership does not equal alignment. You need to think about which providers you need to use. The model where everybody owns each other is not necessarily the best one. In fact, we’ve seen more often than not provider organizations that are not co-owned getting involved in bundles and being successful.

There are a lot of issues. You need to look into what legal form you should create. Again, a lot of people are making new companies that are taking on the risk. You should also consider things like STARK and Civil Monetary Penalty (CMP), and Racketeer Influenced and Corrupt Organizations Act (RICO). You need someone to help you make sure you’ve done all that correctly.

Finally, I’d like to talk about sharing risk among your provider partners. You’re going to have to contract with each other, find a way of sharing gains with each other that everybody can agree to. One traditional model is that the hospital takes all the risk. They indemnify the physicians, and they’re in an upside-only program with the physicians. I think of better models where everybody is at risk and everybody is putting in capital. And if you’re dealing with employed physicians, you need the variable portion of that to be highly aligned with what you’re trying to do in the program.

Excerpted from: Guide to Value-Based Reimbursement: Profiting from Payment Bundling, PHO Shared Savings, and Pay for Performance

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One Response to “Bundled Payments and Provider Partners: Who Should Take the Risk?”

  1. Shane Irving says:

    Interesting…. I can foresee many many different internal payment models appearing. Particularly difficult for some Specialties with challenging patient mixes (Medicaid etc).