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May 14, 2015

What’s on the Horizon for Bundled Payments?

Published

May 14, 2015

We recently sat down Brian Fuller to discuss the latest developments that are occurring with risk models and bundled payments.

Q1. How are risk models affecting patient care?

A1. Risk models are doing a few things in terms of changing how providers view patient care. First, there's a much more longitudinal perspective on the care that the provider delivers to the patient. So, it’s not just about a limited period of time or what happens within a provider’s four walls, but more about how does what the provider is currently doing affect the patient’s care into the future or the hand off to downstream providers? What does the patient need 30, 60, 90 days after they leave the provider? Because providers are being held accountable for spending and utilization downstream under bundled payment, they are taking a much more long-term focused perspective on their patients’  care plan, assessing their functional status changes over time and evaluating how and what their patients might need and use in the healthcare delivery system. The second thing we're seeing is a much more innovative approach for new programs and features the provider may offer to patients and/or their families in the areas of care coordination, patient education and engagement and evidence-based care protocols. We're also noticing advancements in the area of technology, including data analytics and data collection, telehealth and home-based monitoring. Providers are still evaluating how they invest in these programs/technologies and whenyet bundled payment arrangements are re-ignited interest and incentive to consider these investments. Also, there’s a fundamental difference in the thought process around what the return on those investments are for the provider depending on the risk incentives/disincentives within the bundled payment model in which they're participating.

Q2. Do you think that quality and cost go hand in hand?

A2. There's some relationship. I wouldn't say that they go hand in hand. I do not think increased costs equals increased quality and I do not think that if you decrease costs that you decrease quality. We know now that under current fee-for-service payment system there are incentives within the system that increase cost to the system, but don't necessarily increase quality. Or, they do not meet the patient’s standard of quality or create an optimal patient experience. So to give you some examples, under these risk-based models there are really two themes that are emerging. One is a decrease in institutional care. At the end of the day, if you ask any patient and their family where they would most desire to receive care, it would be their home - wherever they define home to be, whether it's truly in a home-based setting or in a community-based setting such as senior living facilities. Secondly, for those who do require institutional care, there is a much more concerted effort to be more diligent about evaluating how much care they need. For example, if they require a hospitalization, how quickly can we get them out of the hospital? If they do require a skilled nursing stay, how do we lower their length of stay in that facility and how do we move them to the next level of care as quickly as possible? Those thought processes and resulting care delivery changes will ultimately decrease costs, enhance the patient’s experience and improve their perception of the quality of care that they're receiving. Historically, the fee-for-service incentives did not encourage those thought processes and approaches until alternative payment models like bundled payments. Secondly, as I mentioned you don't have to increase cost to increase quality. Many of these risk models are changing the incentives and allowing providers become more innovative, looking at things more from the patient’s perspective, driven again by quality, not by the reimbursement system. If I could do what I needed to do to meet my patient's needs when and where they needed them, what would that look like? We’re seeing many of these care innovations just start to take hold under these risk models where there's some incentive to do things differently than what the previous reimbursement system allowed them to do.

Q3. In the future, do you think that financial structures will stay the same?

A3. No, we firmly believe that the current financial structures are under a constant state of change and will undergo pretty significant change in the next three to five years. Earlier this year, HHS set out for the first time - explicit goals on moving the current fee-for-service reimbursement system into fee-for-value. This involves tying 90 percent of payments directly to quality or value in some way by the year 2018. It also includes moving the fee-for-service reimbursement system into alternative payment models (most notably defined by accountable care organizations and bundled payments) where the total Medicare reimbursement would be about 50 percent within these alternative payment models by 2018. We think we are less than three years away from a real sea change where the majority of healthcare reimbursement will no longer be paid under fee-for-service. If you step outside of Medicare and government payers for a minute, you will also see financial structures changing in the commercial and the health plan space. Similarly, there’s a lot of implementation and experimentation in accountable care, including various structures and types of bundled payments. 

Avalere is actively tracking issues in this space, so stay tuned for further updates!

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