Challenges ahead for next generation of bundled payments

In late 2016, HHS announced the final models for the next group of mandatory episode-based payments. Researchers at the University of Pennsylvania in a Journal of the American Medical Association (JAMA) suggested that the next generation of bundled payments should align with population health by (1) extending the duration of the bundles, (2) expanding the accountable entities beyond hospitals, and (3) integrating bundled payments with global budget models within accountable care organizations (ACOs). All hospitals accepting Medicare patients in over 90 metropolitan areas will be required to accept new bundled payments, which include a fixed payment for hospital care plus services for the 90 days following discharge of patients with acute myocardial infarction and coronary artery bypass graft surgery (see Final rule puts quality at the heart of new Medicare payment models, Health Law Daily, December 21, 2016).

In the JAMA article, the authors noted that current bundled payment models have limitations. Namely, these models retain the fee-for-service incentive to do more, especially for conditions without well-defined criteria for intervention, and to select healthier patients, potentially increasing low-value care use that offsets efficiency savings. The researchers believe bundled payments would be more efficient if restricted with defined starting points that limit physician and patient discretion.

Bundle duration

According to the authors the central challenge of current bundles is their short duration. Most cover services up to 90 days after hospital discharge; extending the bundled payments to a year or more would allow for a broader set of conditions to be included. Extending the bundle duration could also mitigate undesirable effects, such as decreasing the incentive to avoid more complex patients who may be at higher risk for poor outcomes in the short term. The authors stressed that more importantly, bundles with a longer duration could encourage greater coordination of care between specialists and PCPs.

Bypassing hospital-centric procedures

Medicare ACOs have primarily generated savings by reducing avoidable hospitalizations. Bundled payments could generate savings in a similar manner, shifting care to non-hospital-centric procedures, such as allowing outpatient clinicians such as PCPs, outpatient health centers, and ambulatory surgery centers to take on financial accountability for performance.

ACO integration

The authors suggested that for next generation bundled payments, care should be coordinated along with ACO programs by aligning incentives and proactively disseminating information on shared beneficiaries. The current policy penalizes care organizations by attributing the high historical baseline payments for patients with poor outcomes within the bundle to the ACO’s global budget rather than the actual payments, which could be lower if an ACO improves efficiency.


Regardless it was unclear to the authors whether bundles which build up the degree of financial risk a hospital or other health care organization bears is better than moving to global budgets in one step. Using bundle payment models to transition to global budgets may be the preferred strategy, giving clinicians several years to adapt and transform care delivery.

Executives focused on population health, clinicians want better mental health integration

Population health management, a hard-to-define concept that loosely means (or seems to mean) strategies employed in a cost-effective manner to improve the health outcomes of a community as a whole, may not be a primary concern for clinicians. The New England Journal of Medicine (NEJM) Catalyst Insights Council surveyed clinicians, clinician leaders, and executives on their health care delivery priorities and found that many believed that better integration of mental health care with physical care was the most important way they could improve community health. Clinician comments, however, indicated that they were less enamored with the idea of population health management than proponents may have hoped.

Survey and comments

Out of the 297 responses, 24 percent stated that if they were given $100,000 to spend on changing their clinical practice to improve community health this year, they would invest in mental and behavioral health services. The next highest responses were building interdisciplinary teams and creating community partnerships with other organizations, both at 13 percent. When the same question was imposed with a long-term view ($1 million over the next ten years), behavioral and mental health stayed at the top, at 19 percent.

 The survey also asked respondents about how important they believed population health to be: a fad, essential, or a middle ground. The average score was a 77 out of 100. While in the top quartile, the survey analysis found it to be a “tepid endorsement” in light of how focused organizations are on implementing population health.

The comments received from administrators and executives showed that they hold a more positive view of population health than clinicians. Leaders are focused on the inevitability of transitioning away from fee-for-service, and while they hold some anxiety about the future, population health seems to be a popular option. Clinicians, however, want to maintain a focus on patients themselves rather than an entire population. Those providing the care want their focus to remain individualized.

While one executive of a nonprofit community hospital said that, “Population health management is key to enabling people to take control of their health care needs,” another at a for-profit payer said that precision medicine was as “equally important” as population health, even though the organization focused on the latter. A clinician at a post-acute care provider stated that he has “not been impressed with the vision nor the outcomes of current population health research and programs,” and a leader at a medical school stated that population health is “important but not sufficient.”

Behavioral health integration

Integration studies and discussions rarely mention population health, even though providers and leaders feel that population heath success depends on better provision of mental health services. The idea of behavioral health integration with physical care is not a new one, but has been gaining traction in recent years. Care collaboration has been pushed by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), but a winning model for mental health care integration has not yet emerged. A Journal of General Internal Medicine article reviewed integration in primary care practices and noted that models requiring significant reorganization were too complex for ready adoption, when compared with “co-location” options. However, when patients show signs of depression when screened in a primary care setting, integrated practices offered treatment faster than other settings.

When behavioral health care is not integrated or co-located, as many as 60 to 70 percent of patients presenting in emergency departments and primary care locations leave without receiving proper treatment. Although some enter the area of health care where mental health problems are exclusively treated, many fail to follow up. Two models have shown particular promise: one where psychiatrists consult on cases where patients have more complicated mental illnesses or fail to respond properly, and another where teams of behavioral health and primary care providers treat mental conditions and other medical conditions simultaneously in order to prevent one improperly managed chronic condition from worsening another.

Transparent medical networks provide cash for services, reduce burden on patients

A new startup is working toward increasing pricing transparency with hopes of reducing patients’ health care costs. Zero Card, a transparent medical network, allows employers to pay cash for services. According to the company, when patients use their card, hundreds of procedures are available with no out-of-pocket costs. Zero Card is able to offer this service due to the wide appeal of cash payors. Hospitals are more likely to set competitive prices if they know they will receive cash for services, and this process reduces administrative burdens of paperwork and collections activities. Patients and hospitals both benefit from the reduction of the payment cycle to about five days, as bills are paid once a week.


Prices that providers set for services are often unrelated to the actual cost of delivering the services, instead based on what the providers are able to negotiate from payors. Zero Card claims that their system results in services priced at half of what insurance companies recover, because members are able to see the cost before they choose where to go. Although Zero Card launched in November 2014, it received a boost when the St. John Health System in Oklahoma, the largest nonprofit health system in the country, joined. David Pynn, CEO of St. John, stated that these health systems need to join in the fight to lower health care costs, which means moving toward population health.

Pricing failure and transparent medical networks

Concerns about surging health care costs are nothing new, especially considering that affordable, cost effective care was the major push behind creating the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Despite major changes in how insurance actually works and shifts away from traditional fee-for-service arrangements, Forbes notes that pricing failure, or a lack of correlation between price and quality, remains a pervasive problem. One thing that has worked to reduce surgery costs over the last few years in Oklahoma by 50 to a whopping 90 percent is simply posting the price of the procedure up front.

Yet simply showing insurance pricing is, according to some, not quite enough. This is where transparent medical networks, like Zero Card, come in. They not only show the costs of care in advance, but also majorly streamline the process. Patients no longer have to reconcile a pile of bills that make little sense coming from the same provider for the same procedure or even worry about co-pays. Forbes also points out that transparent pricing also works well for bundled services such as joint replacements and for providers like ambulatory surgery centers.

Uneasy providers

Not everyone loves the idea of price transparency. Blue Cross Blue Shield of North Carolina (BCBS) decided to release information regarding how much it pays certain providers for specific procedures. Some hospitals and health systems have pushed back against the idea, claiming that pricing is more complex than it appears. They have also expressed concern that patients may focus too much on price and less on the overall value of care.  As health care overall is moving toward an approach where patients are allowed to be advocates and have a louder voice in their own care decisions, some think that there is such as a thing as providing too much information. BCBS even noted that it could have provided even more information, but stuck to a number of procedures representing over 80 percent of nonemergency costs in order not to overwhelm consumers. Although the shift toward value-based care is still in early stages, information transparency is working to move it along as patients question what they’re actually paying for.