Healthcare Technology Featured Article

August 08, 2016

Bundled Payments 101: How to Build a Network

The CMS mandate of bundled payments for Comprehensive Joint Replacements (CJR) was implemented earlier this year. Ready or not, hospitals and their provider networks across the board are being nudged toward this new system of reimbursement that promises to improve quality and lower the cost of healthcare. While some are forging ahead to gain first-mover advantage, others are still hesitant, held back by the daunting data sharing, quality metrics and network management requirements a bundled payment network demands.

Bundled participation can have significant financial advantages for participants in the network, including the opportunity to increase market share and earn bonuses for high-quality care delivered at lower cost. And, while the CMS rules might seem complex, the work required to create and manage a network is applicable to any value-based reimbursement model. Here, we’ll break down the players and the process involved.

The Players

The Convener—the hub of the network and organizer. Typically a hospital, the Convener has ultimate responsibility for both quality and economic outcomes, and is the entity that receives a bonus (or makes up the deficit) depending upon the performance of the network. CJR requires the Convener to be a hospital, but in other scenarios, the Convener may be a physician group, ACO, payer, post-acute care provider, technology company, device/implant manufacturer or even a private equity firm.

The Initiator—the entity that kicks off a care episode. Most often this is a physician, as most episodes begin with an elective hospital stay or procedure. The Initiator has significant influence over which hospitals and post-acute providers are involved in the patient’s care, based on referrals. In the case of CJR, surgeons can earn up to 50 percent more than the standard rate when savings are realized from the bundled payment episodes, creating a strong financial incentive to refer cases to hospitals and other providers proven to deliver high-quality, low-cost care.

The Provider—the entity that performs the work, which could be a physician, post-acute care provider, lab facility or other care provider. As a condition of network participation, Providers may be required to accept downside risk in return for the opportunity to participate and to qualify for bonuses. Even Providers that are not eligible for bonuses, may still benefit from participation in Bundle networks through higher referral volumes and lower marketing costs. The arrangement for sharing both risk and reward with Providers is left up to the Convener, as long as negotiated terms fall within established guidelines.

The Process

The creation of bundled payment networks requires effective, secure and efficient data sharing among participants to 1) effectively track patients as they transition across care settings; 2) measure performance metrics and quality outcomes; and 3) use analytics to proactively match patients with the best care setting and provider.

Implementing data sharing across network participants will require flexible technology that can span multiple care settings.  It’s highly likely that each player will have different systems, and therefore, any data sharing solution will need to accommodate a wide variety of data sources.

Conveners will need to negotiate risk and gain sharing arrangements to align incentives across the network. They will likely find they need to narrow their provider networks to concentrate referral volume on high-quality providers and eliminate poor performers.

Network participants should be active collaborators in a transparent learning loop to optimize performance across the network. By benchmarking performance, sharing data and evaluating outcomes, the network can make adjustments to proactively improve performance across the care continuum.

While the design and implementation of a bundled payments network involves hard work, there are myriad tools, technologies and partners available to help. With appropriate data sharing and an effective technology platform to coordinate across care settings, the bundled payments have the potential of lowering costs for payers, improving profits for providers and producing better outcomes for patients.

About the Author

Neil  Smiley,  a  serial  entrepreneur  with  a  passion  for  transforming  industries  with  data-driven solutions,  founded  Loopback  Analytics  in  2009  to  deliver  an  advanced  Software-as-a-Service platform  healthcare providers  can  use  to  prevent costly readmissions.  The  Loopback Analytics team  currently  works with  the  largest  pharmacy,  hospitalist  group,  health  system,  payer  and senior  housing  provider  in  the  nation,  providing  proven  intervention  solutions  that  improve clinical outcomes and reduce the total cost of care. Prior to founding Loopback Analytics, Smiley launched Phytel, a population health solutions company that was successfully sold to a VC firm. Smiley  began  his  career  as  an  Accenture  consultant  and  later  as  a  partner  with  EY,  working with Fortune 1000 clients. Smiley holds a computer science degree from Dartmouth College.

Edited by Alicia Young
By Special Guest
Neil Smiley, Founder, Loopback Analytics ,

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