Bundled Payment Across the US Today: Status of Implementations and Operational Findings

1. Bundled Payment Across the US Today: Status of Implementations and Operational Findings Presentation to: Partnership for Healthcare Payment Reform May 22, 2012

2. Background and Introduction • Bailit Health Purchasing is a health care consulting firm dedicated to working with public agencies and private purchasers to expand coverage and improve health care system performance. • We conducted over 25 telephone interviews to obtain the results of this study. • We are also technical assistance contractors to AF4Q and are facilitating a multi-stakeholder PROMETHEUS implementation in South Central Pennsylvania.

3. Purpose and Scope of Study • Purpose was to convey the experience of organizations that have initiated bundled payment arrangements over the past few years. • We hope to provide payers and providers with insight into key design elements and considerations to help inform those seeking to implement bundled payments. • Our research focused upon 19 bundled payment initiatives, including all of the PROMETHEUS implementations, the Partnership for Healthcare Payment Reform, and other pilots.

5. Why Bundled Payment? • For the most part, payers and providers referenced experimenting with bundled payment as an approach to achieve one or more goals of the Triple Aim. • Payer sentiment: “…we currently pay for waste. This is a payment model that will require doctors to think differently and get rid of waste.” • Provider sentiment: “…there is a benefit to developing clinical pathways [around bundles] even if there is no payment model.”

6. Current Phase of Implementation

7. Sites with Operational Bundles by Condition Type

8. Sites with Operational Bundles by Condition Type Joint Replacements 7 out 9 pilot sites

9. Sites with Operational Bundles by Condition Type Joint Replacements PCI CABG Bariatric Surgery

10. Sites with Operational Bundles by Condition Type Joint Replacements PCI CABG Bariatric Surgery

11. Sites with Operational Bundles by Condition Type Joint Replacements PCI CABG Bariatric Surgery COPD CHF Asthma Diabetes

12. Sites with Planned or Observational Bundles by Condition Type Asthma COPD Diabetes CAD CHF Developmental Disabilities ADHD Oncology

13. Issues with Defining Bundles • Time-intensive process with much negotiation • Organizational culture and relationships strongly influenced the speed at which bundle definitions were established • Narrow definitions keep volume and risk low

14. Choosing the Right Partner “Bundled payment requires a deep commitment and very strong provider relationships. You can’t impose this on providers – you need to do it with them and not to them.” - Payer

15. Choosing the Right Partner • Some payers set qualifying criteria for participation • Facility accreditation • Physician credentialing • Use of specific surgical safety and verification processes, etc. • Employer coalitions did the same • Review of performance on key metrics • Internal name brand recognition • Other payers used less formal criteria • Readiness for change • Trusting relationship • Experience in transforming clinical processes

16. Setting Rates • Risk-adjusted rates are the most common, but also the most laborious and expensive • Flat-fee rates are less common, but reported to be easier and less expensive to administer • homogeneous populations / low PAC rates (e.g., elective knee replacements, perhaps) • narrow bundle definitions • standardized clinical processes • lack of resources to invest in risk-adjustment methodology • Rates are typically set conservatively in the beginning

17. Risk Adjustments “…this is where the rubber hits the road. We want to provide a fair deal, but we don’t want to preserve the status quo.” - Payer

18. Risk Adjustments • Shared savings (i.e., no downside risk) is the most popular approach • Only one pilot was using a shared-risk approach • Full risk was being used, but with limits on provider risk • exclusion of readmissions outside of the provider’s system • use of stop-loss insurance and high-cost outlier exclusion • Providers are likely to evolve to take on greater risk over time

19. Making Payments “Bundled payment can’t be viewed as just another way to get paid. It’s the care coordination and interaction within the care delivery team that actually improves care.” - Payer

20. Making Payments • FFS with retrospective reconciliation is the most common approach to payment • Some consider it to not be true “bundled payment” • Two pilot sites were actively using prospective payment; one was considering it for the future • “…if the provider can’t integrate sufficiently to take one bundled payment [we won’t work with them]”

21. To automate or not to automate? • For most, the choice is manual • Reports of up to 2 skilled FTEs to do manual reconciliation • Each claim needs to be touched and either “zeroed-out” and applied to the bundle or paid • Automation has its benefits • Single platform where payers and providers can review data • Dynamic and static reports • Complexity handled with greater ease • Is the money spent on bundled payment administration a zero-sum game? • Set-up fees and monthly processing fees • Pilots in the early phases tend to think so, while pilots ready to scale see a need to invest in IT tools to be successful

22. Tracking and Reporting Spending • Payers are typically reporting spending to providers on a monthly or quarterly basis • Administrative lag time is hard to overcome, even with the available software programs • Some providers want more frequent reports, but others understand the data are meant to impact future patients

23. Tracking and Reporting Spending • One payer went from “dumping data” to creating a report that compares performance to budget and identifies leakage for providers • More sophisticated payers and plans are hoping to incorporate gaps in care reports

24. Identifying Index Patients • Plan or provider? • A process to reconcile the entire population of patients must exist to reduce ability to “game the system.”

25. Views on Performance Adjustments “Quality measurements need to be included to demonstrate the value proposition for patients, purchasers and providers. Outcomes need to be improved if this payment methodology is to have staying power.” - Payer

26. Views on Performance Adjustments “K.I.S.S.” -Payer

27. Performance Adjustments • Despite the strong support for adjusting performance based on quality, only one pilot reported doing so • Finding measures suitable and specific to the bundle proved to be difficult • WOMAC scores varied in popularity for joint replacement • Payers were sensitive to the administrative burden of quality reporting • Future use of performance adjustments seems likely

28. Volume of Bundled Payments • Volume of bundles has stayed relatively low ~ 10-50 bundles per year per pilot • Narrow definitions and many exclusions • One pilot studied the effect of the look-back period on volume and found a 14% drop due to exclusions when expanding the episode time window • Gaps in continuous enrollment caused a 40 percent drop in expected paid bundles in one pilot • ASO clients and BlueCard carriers

29. Results • Very few initiatives had a formal evaluation of their program • One formally evaluated program reported: • 40% decrease in readmissions, • 50% decrease in complications, and • mortality reduced to nearly zero. • Preliminary results of early pilots are suggesting modest cost savings

30. Keys to Success • Executive support and organizational commitment from both payer and providers • “Can’t have lieutenants living in the past” • Trust and patience • Willingness to “kick the tires” with technology

31. Future of Bundled Payments “We’re worried about the operational investments so we won’t take it to scale until it has proven value.” - Payer

32. Future of Bundled Payments • Future is promising, but many are still in a “wait and see” approach • Waiting for results of Medicare’s experience with the Bundled Payment for Care Improvement Initiative • Some national carriers trying to establish a consistent methodology • Can bundled payments exist in ACOs?

33. Words of Wisdom from Interviewees “It’s the road less traveled, so expect some ambiguity.” - Provider

34. Words of Wisdom from Interviewees “Keep your sense of humor!” - Provider

35. Contact Information Bailit Health Purchasing, LLC www.bailit-health.com 781-453-1166 Megan Burns Michael Bailit Senior Consultant President mburns@bailit-health.com mbailit@bailit-health.com