Bundled Payments Help Physicians Generate Added Revenue

The University of Texas MD Anderson Cancer Center and UnitedHealthcare recently launched a 3-year pilot to explore a bundled payment model for head and neck cancers. While that collaboration is among the first involving a large, comprehensive cancer center, it’s just one part of a rapidly growing trend into health care bundled payments.

“The movement to bundled payments is already widespread,” says Deirdre Baggot, RN, MBA, PhD, vice president of The Camden Group. “What we’ve seen over the last 18 months has been significant thrust among commercial payers and employers as a result of what’s happening with the national Medicare pilots.”

The Medicare pilot, better known as the Bundled Payments for Care Improvement initiative, has more than 6,500 participants nationwide. Baggot, who served as an expert reviewer for BPCI Models 2 and 3, believes bundled payments is a game-changer for physicians.

“CMS intends to reimburse 75% of health care via the bundled payment construct over the next 5 years,” she says. “Commercial payers and large national employers are rapidly following suit.”

Low Entry Point

Baggot says that bundled payments have a low entry point into the care improvement and health care reimbursement marketplace compared with embarking on an accountable care organization strategy. The latter, she explains, can require a minimum $2 million investment for a single facility hospital.

“I think that’s why you see the momentum,” Baggot says. “Bundles are simple conceptually, the entry point is low, it makes a lot of sense, people can understand it, and people can get comfortable with the level of risk. It is episodic risk, typically no longer than 90 days as compared with the risk inherent in an ACO construct which is typically 12 months. You dial up your risk based on your comfort level or tolerance for risk.”

While research has shown that bundled payments can align incentives for providers, some of the criticism surrounding it is that it will stifle innovation. That’s an important consideration because, according to Baggot, as of 2014, the US ranked “dead last” among the wealthiest nations in the world for health care.

“I don’t expect bundled payments to stifle innovation,” she explains. Instead, she believes that providers will ask better questions when it comes to investments in innovation to ensure that new innovations equate to measurable value. “I can tell you from my own personal experience, you do think twice before you adopt a new innovation, or buy the newest technology. So, I hear the argument, I get their concern, and I think we will make more informed decisions when it comes to adopting new technologies.”

Lead, Don’t Follow

Baggot believes that bundled payments are an “enormous opportunity” for physicians, and that they “can’t move quickly enough” to take advantage of that opportunity. In fact, she says that the real risk is in doing nothing. Doctors who aren’t able to administer and practice within this new model will be at a competitive disadvantage, she says.

“[Bundled payments] is probably one of the few places where [physicians] can be paid more today in health care than they currently are,” she explains. “Physicians over the last several years have watched reimbursement ratchet down, and that will continue. We are not going to get paid more. So, by transitioning to bundled payments physicians incur more risk and have an opportunity to share in the upside.”

Part of that upside, Baggot says, is that by leading the conversations, physicians have a greater say in how bundles are constructed from a care delivery standpoint.

“And physicians like that,” she says. “Physicians are independent thinkers. They don’t want to lose the art of medicine. They want to influence decisions about what is in the bundle, and what is out of the bundle.”

Be First in Line

Baggot recently met with a large physician group and 8 payers in the Northwest to talk about bundled payments. She says if that physician group wasn’t having a conversation with the payers, somebody else would be.

“There’s a lot of variation with respect to commercial payer readiness for bundles,” she says. “Some payers are very progressive while others are a little slower to the table. However, when the physicians engage and initiate the conversation, payers do come to the table.”

Initiating the conversation with payers, Baggot says, puts physicians in the position of having much greater influence in how bundles are constructed rather than having bundles constructed for them and simply opting in or out.

“That means having maximum influence in how care is delivered,” she says. “And I think that matters to a lot of physicians.”