EXECUTIVE SUMMARY

Bundled payments are a small part of the business for most ambulatory surgery centers (ASCs), but the model is catching on and could be a major future trend in surgery reimbursement strategies.

  • Bundled payments work best when there is a beginning and end to an episode, and these are defined easily.
  • One bundled payment model involves The Zero Card, a company that connects providers with self-insured employers to offer covered workers their surgeries and other healthcare services with bundled payment options. ASCs can increase their business through accepting bundled payment patients.
  • Retrospective bundled payment models direct insurers to pay all the claims to cover care provided for a plan’s members, just as they do with fee-for-service payments. The amount paid to the bundled payment target price is compared with target price and then reconciled.

While bundled payment models are not yet a significant portion of most ambulatory surgery center (ASC) payment arrangements, they are gaining ground. Across the health care industry, 30% of Medicare payments are tied to alternative payment models, including bundling.1

In 2016 and 2017, a number of health care forecasters said bundled payments are the ASC trend to watch over the next year.

“From a nationwide perspective, bundled payments still are an extremely small component of anyone’s business,” says Marian Lowe, MBA, senior vice president of strategy for United Surgical Partners International (USPI) in Addison, TX. “I do think you’ll see bundled payments be part of the future of surgery reimbursement strategies across hospital and ASC settings, but there is a limited universe of services where they will be extremely valuable because bundled payments work best for services where the beginning and end of an episode is easily defined.”

Bundled payments might not work with some chronic conditions, such as pain management or congestive heart failure, in which patients might not recover or suffer from multiple chronic conditions, and an episode’s endpoint is nebulous. But these can work in cases of surgical procedures.

“The patient has an acute condition that the surgeon repairs, and the individual can return to their daily activities. In these cases, it’s easier to define what is done and who is accountable for the outcome,” Lowe explains.

Bundled payment models could be a good fit for ASCs, but the industry’s predominant payment model continues to be fee-for-service.

“The vast majority of people are not doing full-blown bundled payment arrangements, but we have seen some of it take off,” Lowe adds. “People call what they’re doing ‘bundled’ in the self-pay market to describe something that is more of a case rate for a day of surgery when someone is paying 100% out of pocket.”

That’s not the same bundle risk as the Medicare demonstrations, where providers are accountable for downstream costs after the person is discharged, Lowe explains.

“What you’re not seeing yet is widespread penetration in the commercial payer market of bundles for services because they’re running on legacy IT systems that are not set up to administer bundled payments,” Lowe says. “Payers have not cracked the code on providing a bundled payment up front to a provider and having them administer the cost and payment of everyone providing service to the patient.”

Industry movement toward shared savings, shared risk, and shared responsibility will help transform payment structures for ASCs and other healthcare entities, and bundled payments will be a model that grows with the transformation. (See story in this issue on how to get ready for bundled payments.)

“We’re going to see more movement to providers being held accountable for cost and quality,” Lowe predicts. “Whether or not that’s with more bundles or more performance measures that increase or decrease contracted fee-for-service rates, the trend toward value-based payments will grow.”

Bundled payments will be part of ASCs’ future, says Steven A. Gunderson, DO, chief executive officer and medical director of Rockford Ambulatory Surgery Center in Rockford, IL.

“I do think it will continue to grow,” Gunderson adds. “But we’re still in the infancy.”

Rockford ASC has handled about 30 cases that use a bundled payment model in the past year. The ASC works with The Zero Card, a company that connects providers with self-insured employers to offer covered workers their surgeries and other healthcare services with bundled payment options. Employers save significant money on paying claims. ASCs can increase their business, and employees benefit because there are no out-of-pocket copays or costs, Gunderson explains. Employees could choose to pay for their surgery under the typical fee-for-service system, but it would cost them money out of pocket.

“This is something that probably will be great for the future,” Gunderson says. “I would be surprised if insurance companies didn’t latch on and say, ‘If you can do bundled payments with The Zero Card, why can’t we do a bundled payment with you, too?’”

ASCs are well-situated to handle alternative payment models, such as bundled payments, because they have better control over costs, and they know their costs well, Gunderson notes.

“Hospitals have to take all patients, those who pay and those who can’t pay, so they have a much more difficult job keeping track on their costs than we do,” he says.

In hospitals, most bundled payment structures are retrospective bundles, which is the model Medicare uses, Lowe says.

Retrospective bundled payment models direct insurers to pay all the claims to cover care provided for a plan’s members, just as they do with fee-for-service payments. Then, they compare the amount paid to the bundled payment target price and reconcile the difference, paying anything additional to the provider or recouping anything paid in excess of the agreed target price, Lowe explains.

“We’ll keep seeing value-based payments,” she says. “Some will take the form of bundles; some will be adjustments to base rates to reflect performance on cost and quality metrics.”

Medicare and other payers are focusing on high-cost, high-volume, and high-variation services in hospitals, which helps move some of these high-cost services, such as total joint replacement and complex spine procedures, to the ASC setting, Lowe says.

“The payment policies and bundles applied to those procedures on the inpatient setting will follow those procedures as they go into the outpatient setting,” she adds.

For example, bundled payments can work well with total joint replacement and colonoscopies, Lowe says.

In these procedures, consumers and payers will value the bundled payment’s predictability of pricing for the component costs, including facility, surgeon, anesthesiologist, and pathology services, Lowe says.

“If you look to Medicare’s bundles as a guide, there is interest in spine and cardiology,” She adds. “Surgery centers likely will have a growing interest in many of those same procedures.”

Generally, bundled payment plans include case-rate, limited duration, and warranty plans. In a warranty-type model, if patients show up in the emergency room with post-op bleeding or another complication, the ASC would forgo its fee for the surgery because something went wrong, Lowe says.

Examples of bundled payment plans include case-rate, limited duration, and warranty plans. Under a warranty model, if patients arrive at the ED with post-op bleeding or another complication, the ASC would forgo its fee for the surgery because something went wrong, Lowe says.

“You are not at risk for the ER visit costs, but you’re saying, ‘I’m going to refund the payment if something happens to the patient afterward,’” she explains.

Another type is the all-inclusive, limited duration with warranty risk, bundled payment model. In this case, a surgical benefit management company might negotiate a price for certain surgeries and post-op physical therapy for a week, while assuming partial risk for any adverse events during that period.

“If you accepted that bundled payment, you take responsibility for the patient for that postoperative week,” Lowe says. “But once the week is over, you’re off the hook.”

This model works well for travel surgeries in which people travel from another state or country to undergo surgery at an ASC and then arrange to leave after a week of recovery in a hotel.

A third option is an all-inclusive, episodic, full-risk bundled payment model under which the facility takes full responsibility for the patient for 30/60/90 days after the procedure. This is the model Medicare is experimenting with for joint replacements in hospitals.

“You’re fully at risk for what happens to the patient,” Lowe says.

The benefit of this model is that substantial savings can be generated by providing care more efficiently throughout the duration of the episode, but the extra savings might not offset the cost of an occasional patient with a bad outcome, she notes.

“With ASCs, you’re largely looking at the first two models: case rate and bundles with warranty-type guarantees,” Lowe says. “It’s hard to get to that full-risk piece without substantial volume of expensive procedures that have extensive post-discharge costs.”

REFERENCE

  1. Malinak J, Press MJ, Rajkumar R, Conway PH. Principles for provider incentives in CMS’ alternative payment models. Healthcare 2017;5:9-11.