Leveraging the PHO Model for Bundled Payment Success

Thursday, February 5th, 2015
This post was written by Cheryl Miller

As Medicare begins its ambitious timeline for moving Medicare payments from volume- to value-based models, alternative payment formulas, including bundled payment arrangements for episodes of care, which CMS has tested in a range of pilots in recent years, will come to the forefront. Here, Travis Ansel, senior manager of the Healthcare Strategy Group, explains why the physician-hospital organization (PHO) provides an attractive framework for bundled payment models.

Bundled pricing is appearing in more and more markets across a number of payors. As I’m sure everyone knows, CMS is testing bundled payment pilots across the country. A number of our clients that have been involved with that have had a reasonable amount of success. Overall, the level of success of the bundled pricing pilot program for CMS leaves one to wonder: is that the future of CMS? Is it some combination of accountable care organizations (ACOs) and bundled payments?

Another interesting program for bundled payments is what’s going on in Arkansas with the Healthcare Payment Improvement Initiative. In this program, the state Medicaid program and Blue Cross have actually worked together to create bundled payments for episodes of care based around high volume diagnosis-related groups (DRGs). The responsibilities for hitting the cost targets in this case are assigned to what they refer to as the “principal accountable provider.” For example, for DRG 470, major joint, the principal accountable provider is the orthopedic surgeon, but the orthopedic surgeon in this case was being held accountable for what goes on in his or her practice.

What goes on before surgery? What goes on during the hospitalization and the surgery, and then what happens 30-90 days post-acute care? They’re being held accountable for care across the continuum. This is relevant to the PHO model, because as this is phased into a number of DRGs—it started with eight, but now it includes quite a few more—the need for a PHO model will bring these physicians together.

PHO Models
Travis Ansel, MBA, is manager of strategic services with Healthcare Strategy Group, LLC. Ansel’s practice focuses on helping hospitals and health systems with physician alignment issues through strategic planning initiatives, such as hospital strategic planning, employed physician group strategic planning, physician alignment planning, and clinical integration. Mr. Ansel holds a master’s of business administration from Vanderbilt University, and bachelor of science degrees in finance and business management from the University of Tennessee.

Source: Preparing for Value-Based Reimbursement Models: PHO Development for ACOs, Bundled Payments and Direct Contracting

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