Hospital Impact: Benchmarks for episodes of care create opportunities for providers

Robin Gelburd headshot

For years, people have talked about defining medical treatments as comprehensive episodes of care as a way to base reimbursement on value rather than on volume. As long ago as the early 1990s, Medicare sponsored (PDF) a pilot program in which it paid a single, negotiated amount for an episode of coronary artery bypass graft surgery (CABG). Yet episodes of care remain somewhat underused by medical administrators and practice managers—despite the benefits they may offer.

Paying providers a single, negotiated fee for an episode of care—the beginning-to-end treatment path for a procedure or condition—arguably creates incentives to eliminate unnecessary services and helps improve the coordination of care. To be fair to providers and create an incentive for them to treat all patients, not just simple cases, the episode payment must be risk-adjusted so that providers who treat high-risk patients (e.g., an older patient with chronic comorbidities versus a younger, healthier patient) are compensated for taking on more risk. With that caveat, many embrace the idea of the episode of care.

Why, then, has it taken so long for the idea to catch on? One reason has been a lack of sufficiently robust benchmark data and sophisticated analytics to determine how much a typical episode of a given procedure or condition currently costs, and how much it could cost if it were optimized by eliminating duplicative services or preventing potentially avoidable complications. Such tools are now becoming available, and there are a number of reasons why they get added to the analytic toolkits for payers and providers, government officials, consultants and others in the healthcare ecosystem.

Benchmark data requirements

To provide a clear view of what the market is currently paying for episodes, benchmark data about per-episode healthcare costs require several characteristics. They must:

  • Include both billed charges and allowed amounts
  • Be available on a national scale or specific to a geographic area
  • Be adjusted for risk factors and comorbidities

Benchmark data with those characteristics are now reaching the market. Such data make it possible for payers contemplating a move toward value-based reimbursement and conducting related pricing studies to evaluate episodes. And such data also can inform negotiations between plans and providers, thereby helping to build and maintain networks.

How providers benefit

Any individual provider, whether a physician, facility or healthcare system, may only contribute part of a total episode, so that the per-episode total price may not seem to be of immediate significance to such a provider. But, when the data includes both the total episode pricing and separate line items for the individual procedures that make up the episode, such information can allow providers to compare their own performance and pricing at the procedure level to that of the market in their region. Thus, episodes can benefit providers, helping them to improve budgeting and achieve efficiencies, as well as better negotiate with payers.

Seeing how individual professionals and facilities fit into the episode as a whole may stimulate the formation of partnerships and better coordination of care. Benchmark data can also help consultants advise payers and healthcare systems. The data can provide business intelligence to inform acquisitions, expansion or contraction.

In addition to episode benchmark data, episode analytics are available that can enable payers to analyze their own episodes. Organizations can examine their episodes to see, for example, when and why actual episode costs exceeded expected costs, and which specific providers were associated with higher or lower levels of potentially avoidable complications. That information can aid in building networks, educating providers, improving the quality and efficiency of care and budgeting.

By using benchmark data together with episode analytics, organizations can compare their own episode results to those of the larger marketplace and identify areas of both improvement and opportunity.

Thus, the time may finally be right for episodes of care to become commonplace. Armed with this type of three-dimensional perspective, parties can gain critical insights that help them realize greater quality and efficiencies.

Robin Gelburd, JD, is the president of FAIR Health, a national, independent nonprofit with the mission of bringing transparency to healthcare costs and insurance reimbursement. FAIR Health oversees the nation’s largest repository of private healthcare claims data, comprising more than 23 billion billed medical and dental charges that reflect the claims experience of more than 150 million privately insured Americans.