Outsmarting Risk: Winning Strategies for Bundled Payment

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Outsmarting Risk: Winning Strategies for Bundled Payment

Ian Jeong, University of Pennsylvania, SUMR '16

There is a four-letter word that is used a lot in health care, and that’s risk. With the goal of making health care more affordable, financial risk is being redistributed among payers, providers and patients, with a particular focus on shifting the risk onto providers to change the way they deliver care.

More Risks for Hospitals

In 2011, under the Affordable Care Act, the Center for Medicare and Medicaid Services (CMS) launched the Bundled Payments for Care Improvement (BPCI) initiatives to test whether bundled payment can reduce cost while maintaining or improving the quality of care for patients. The BPCI initiatives include four different models of bundled payments.

Penn Presbyterian Medical Center and Pennsylvania Hospital, where I am working this summer, are participating in the BPCI Model 2 for their total joint replacement patients. Under this model, Medicare retrospectively reconciles fee-for-service payments to providers against the target amount for the episode of care, from 72 hours before admission to 90 days after discharge. Based on the difference between providers’ spending and the target sum, Medicare rewards or penalizes the providers. By giving a sum amount for a given period, CMS incentivizes providers to strive for both quality improvement and cost containment while taking on greater risk for their care delivery.

Is Bundled Payment a Game of Risk?

For some of you, the first thing that comes to mind when you think of the word “risk” may be your childhood board game, Risk—a game in which players expand their territories by rolling greater dice than their opponents. With the fate of each player determined by the random roll of dice, each player takes a risk every time they battle each other.

By making the providers responsible for unexpected or unrelated health problems that arise during the episode, hospitals are asked to play a game of chance much like Risk on their patients.

Where It’s Played: Beyond Hospital Walls

Eric Hume, MD., an orthopedic surgeon from Presbyterian, says “Bundled care… is not about OR or hospital costs. The focus is on safe transitions of care.” To win this game of risk, Dr. Hume says, “Transition to home safely and support through 90 days postop must be better understood and developed.”

In fact, in 2013, the Institute of Medicine found that post-acute care was one of the main drivers in Medicare spending variations and accounted for as much as 73% of regional variation in Medicare’s cost per beneficiary. The large variations in quality and spending in post-acute facilities represent opportunities for improvement and savings for the hospital.

To thrive under the new higher risk environment, hospitals must devise ways to reduce cost and improve outcomes after patients leave the hospital. The winning strategies can be explained through three key aspects of Risk: rolling the dice, protecting and expanding the border, and centralizing command.

Make Your Dice Roll Un-random

Let’s think about each surgery as a battle in Risk. In the game, players roll the dice to battle each other, and the victor of each battle is decided randomly, by the luck of the roll. Unlike dice, each surgery does not come with equal probability, and depending on the severity of the patient’s risk, the amount of care coordination varies drastically. Therefore, it helps for the surgical team to know each patient’s risks before going into surgery. Without the knowledge of the patients’ risk, care coordination gets pushed to the back end of the patient’s stay at the hospital and can impede the process of the patients’ transition from the hospital to another level of care. 

One of the ways that Presbyterian Medical Center and Pennsylvania hospital are reducing random variations in their patients is using is the Risk Assessment and Prediction Tool (RAPT) to predict patients’ post-acute risks before the surgery. The RAPT score initiates discharge planning before admission, allowing the health care team to deliver quality care in shorter hospital stays and improve coordination along the care continuum. By essentially making the roll of the dice un-random, the heath care team is able to frontload care coordination and deliver more efficient care to the patients.

Border Protection/Expansion

The second strategy specifically focuses on the relationship between the hospital and post-acute care facilities. Think of the interplay between the hospital and post-acute care facilities as the interaction between adjacent territories in Risk. In the game, neighboring players protect their borders, form alliances, and attack each other to expand their territories. Likewise, with the aim to better coordinate care, the hospital must examine the post-acute care facilities that receive its patients.

Discharging patients to high-quality care facilities is particularly important in a bundled payment initiative. With research indicating increased rates of readmission for patients discharged to post-acute care facilities, hospitals may be putting patients at greater risks by discharging them to facilities for care that that they do not need and that could potentially be harmful. Readmission rates and other health outcomes at post-acute care facilities are especially relevant given how costly post-acute care can be. For bundled payment patients at the UCSF Medical Center, more than 35% of the bundled payment was related to post-discharge care, and of the post-discharge payments, post-acute care facility payments accounted for 70%. According to Finnah Pio, the Director of Quality and Patient Safety for Penn’s Musculoskeletal Service Line, Penn is “looking to create closer partnerships with facilities that we send a large volume to, with the hopes of reducing unfavorable outcomes such as readmissions.” This summer, I will be looking into the discharge pattern for both Penn hospitals to see if the patient’s discharge disposition matches the clinical needs and to examine variations in patient outcomes by facility.

Centralizing Command

The third strategy is to create a single point of contact for the patients. In the game, command is already centralized to each player, with each player being able to command armies even at the farthest end of the territory. However, point of contact is not traditionally centralized in the hospital.  Surgical patients enter the hospital through several different pathways and exit all without a single point of contact. However, centralizing the patient care experience through a single point of contact allows the clinical team to better communicate with patients and follow them along as they transition to different settings. Peer institutions use different names for the same role – NYU Langone’s clinical care coordinator, Cleveland Clinic’s specialty care coordinator, and Hoag Institute’s nurse navigator. In this role, the clinician provides preoperative education to patients and follows the patients as they transition through various levels of care during their episode. As part of my project, I will be evaluating the cost-effectiveness of a nurse navigator in improving patient outcomes and coordinating care.

By 2018, 50% of Medicare payments will be tied to some form of value-based payment models. With health experts like Peter Orszag calling for “more mandatory bundled payments, similar to the joint replacement bundle,” soon, providers may have no choice but to participate in the game. Luckily, bundled payment is a game providers can learn to play.