Guest Commentary: 4 hard truths about bundled payments

Guest post by Deirdre M. Baggot

The Centers for Medicare and Medicaid Innovation (CMMI) recently announced the national expansion of bundled payment (BP) pilots, signaling the beginning of the end of physician fee-for-service with the country's largest insurer. As we know, as goes Medicare, so goes healthcare, and commercial payers are vigorously following suit.

Success under bundled payments is predicated on visionary leadership, effective decision-making, and ultimately, practice grounded in the best available evidence. Healthcare organizations need to fully understand what it takes to make bundled payments work. Four hard truths of bundled payments include:

1. Provide everything patients need and nothing they don't
While most of us are masterful at providing diagnostics and therapeutics for our patients, the discipline required to follow current best evidence and commit to providing only the tests and procedures that patients need does not come easily for those who also are trying to balance the desires of the patient and family with the litigious nature of medical practice. Bundled payments provide the impetus necessary to commit to developing discipline around the "nothing they don't need" part of fee-for-value. Committing up front to a fixed price with the potential for physicians and hospitals to share savings that result from particularly efficient care has been found to be highly effective in previous bundled payment demonstrations.

2. Recognize there's no volume play this time
While with the ACE Demonstration, the Centers for Medicare & Medicaid Services offered applicants market exclusivity, this perk does not exist in bundled payment expansion pilots. Giving Medicare a discount with no promise of incremental volume to offset the risk of undertaking the physician Part B payments, the readmission risk (although this is quickly becoming moot) and the development and administration of a gain sharing program create a much deeper discount than the 3 percent requested with the application. Clearly, if the BP sponsor does not lower the cost of care, the financial results can be a disaster.

3. Manage change
Bundled payments call for leadership competence in change management. Just as seemingly flexible teams can be found to resist change, well-performing hospitals can suffer from a build-up of silos, unquestioned routines and overly powerful individual groups. Effective leaders today will enable change to grow through accomplishment and even error, knowing that while most changes and reorganizations fail, those that work best are built around good decisions that are well implemented.

4. Know what real accountability looks like
Bundled payments are an evidence-based approach to health reform. Successful implementation of evidence-based best practice is contingent on a feedback mechanism that alerts individual clinicians when they fail to adhere to best practice standards and/or when optimal clinical performance is not achieved. The attributes that make healthcare professionals exceptional clinicians can be a handicap when it comes to holding one another accountable. Characteristics of caring and empathy are requisite to good "bedside manner" but often result in physician administrators confusing attentiveness with accountability. But in a bundled payment environment, adherence to best practice standards is an expectation and not an option. The fear that the physicians will take their business elsewhere must be replaced with a new conversation around the value we are creating on behalf of our patients.

Deirdre Baggot is a vice president with The Camden Group, a healthcare consulting firm in El Segundo, Calif.

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