Bundled Payments Health Care Industry Committee

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Bundled Payments Health Care Industry Committee Ready-to-Use Presentation Slides

Redefining the Acute Care Episode Bundled Payments Redefining the Acute Care Episode Bundled Payments Drive Delivery System Integration Fee-for-Service Environment Bundled Payment Environment Individual Payments Reinforce Siloed Care Delivery Lump Sum Payments Drive Integration through Shared Accountability Payer Physician Services Hospital Services Post-Acute Services Payer Physician Services Hospital Services Post-Acute Services Source: Advisory Board interviews and analysis.

Elevating the Episodic Care Ambition Reform Legislation Expands Bundling Across the Continuum 3 Days Pre-Acute1 Hospital Inpatient Stay Inpatient MD Services Post-Acute Facility Services MD Services Related Readmissions Model 1 Model 2 Model 3 Model 4 Case in Brief: Medicare’s Bundled Payments for Care Improvement (BPCI) Program seeking voluntary participation in four bundled payment models Models 1-3 provide retrospective reimbursement; Models 2 and 3 include post-episode reconciliation; Model 4 offers single prospective payment Acute care hospitals, physician groups, health systems eligible for all models; post-acute facilities may participate without hospitals in Model 3 Participating providers may share in the financial gains resulting from a more efficient care model if cost savings are achieved  Includes all hospital diagnostic testing and related therapeutic services furnished by an entity wholly owned or operated by the admitting hospital. Source: Centers for Medicare and Medicaid Services; Advisory Board interviews and analysis.

Over 6000 Providers Participating in BPCI1 BPCI1 Participation by State August 2014 50-100 providers 100-200 providers 200-300 providers >300 providers Bundled Payments for Care Improvement. Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.

Favoring Retrospective Bundling Models Participants Targeting Models 2 and 3 in BPCI BPCI Model Selection Rates n=6,801 Providers Bundled Payment Mechanics Retrospective payment method: (Model 2-3) Reimburses providers through traditional FFS payments, subject to post-episode reconciliation against a pre-determined target price Prospective payment method: (Model 4) Reimburses hospital and physicians through single, lump sum payment; hospital collects and distributes funds to providers involved in episode of care Hospital Inpatient Services Hospital and Physician Inpatient and Post-Discharge Services Post- Discharge Services Hospital and Physician Inpatient Services Model 1: 16 participants Model 2: 2150 participants Model 3: 4617 participants Model 4: 18 participants Total participants=6801 However, despite the big participation numbers, few providers are currently being reimbursed through bundled payments. BPCI has two phases, designed to give providers time to implement their bundled payment programs. During Phase I, providers don’t bear any financial risk. If participants transition to Phase II, which is optional, then they begin receiving bundled payments. Right now, only 243 providers are in Phase II—that’s just 4% of total BPCI participants. However, the organizations joining Phase I are taking an important step toward implementing bundled payment programs. Although BPCI offers providers a choice of four different bundling models, few participants have selected Model 1 or Model 4, which both focus on inpatient care rather than the full care continuum. Only 15 organizations signed up for Model 1 and 17 for Model 4; together, these two models represent roughly 0.5% of total program participation. Why the limited interest? Two main reasons. First, both Models 1 and 4 have some practical disadvantages. In Model 1, participating hospitals face a price discount on every inpatient Medicare admission. In contrast, Models 2-4 allow participants to selectively choose among 48 different clinical conditions. So under Models 2-4, some providers are bundling for just one or two clinical areas, such as orthopedic or cardiac surgery. And Model 4 uses a true prospective bundled payment, meaning that participants need to collect the single bundle and distribute payments among partner providers. Models 2 and 3, however, use a retrospective (or virtual) bundling model, which is much less disruptive to existing revenue cycle operations. Second, there are some strategic advantages to implementing more expansive bundles. If participants opt for Model 2, which includes post-discharge care and readmissions, they may enjoy more cost savings opportunities. And focusing on care spanning across the continuum may also have greater alignment with other ongoing initiatives, especially efforts to reduce readmissions or prepare for population health. Source: Centers for Medicare and Medicaid Services; Health Care Advisory Board interviews and analysis.