Everything doctors need to know about bundled payments

Many independent primary care physicians already work hard to coordinate care effectively; but, are they ready to further strengthen these efforts and work even more collaboratively with hospitals to improve outcomes? Doing so could bring additional reimbursement and a path to satisfy Medicare reimbursement reform requirements-but at what cost? And can physicians take small steps toward bundled payments before diving in completely?

The decision requires an understanding of bundled payments and the opportunities they present for primary care physicians. This information, in turn, makes it easier to determine whether it makes financial sense to pursue a bundled payment arrangement with CMS in the future. 

Bundled payments 101

A bundled payment occurs when a payer provides a single payment to a risk-bearing entity-a hospital, physician group or other provider-for all services related to an episode of care. 

The payment may cover inpatient care as well as pertinent outpatient services rendered for a defined period post-discharge. Think of it as an umbrella payment for an entire episode beginning with the acute event (e.g., hospitalization) and ending at a defined point in the patient’s recovery.

CMS uses historical claims data to set a target price for each episode. When the total cost of care for the episode falls below that amount, the risk-bearing entity receives the difference and can share the savings with the providers who helped coordinate care and contain costs during the episode.

These providers, known as gainsharers, usually include independent physicians. When the cost of care exceeds the target amount, the risk-bearing entity alone repays the difference to CMS. 

Consider the example of a patient with congestive heart failure who is admitted to a hospital participating in a bundled payment arrangement with CMS. Upon discharge, an internal medicine physician sees the patient for three follow-up visits over a 90-day period.

If the physician is in a gainsharing arrangement with the hospital, he or she could realize an additional $162.20 for this episode when savings are generated. That’s 50% of the fee schedule amount for the CPT codes that are reported.

Gainsharing arrangements reward physicians for doing what they do best, which  is keeping patients healthy, says Win Whitcomb, MD, MHM, chief medical officer at Remedy Partners, a firm that assists physicians and hospitals participating in bundled payment programs. “This is what they do every day-prevention and management of chronic illness,” he notes.

HOW to Get experience with bundled payments

If a physician already has a relationship with one or more hospitals participating in a bundled payment program, then it makes sense to establish a formal gainsharing arrangement with those entities. This legally binding agreement sets forth payment stipulations, including the percentage of additional reimbursement that physicians can expect when savings are generated. 

Gainsharing is not permitted outside of CMS bundled payment programs unless contractual agreements comply with Stark laws, the Anti-Kickback Statute and other requirements, says Whitcomb. Also, the CMS programs require that measurable quality of care is maintained or improved at the individual episode level before savings can be shared. 

Aside from the financial advantages, there are additional benefits of becoming a gainsharer, says Chad Mulvany, MBA, director of healthcare finance policy, strategy and development at the Healthcare Financial Management Association. For example, he says, a gainsharing arrangement lets independent physicians explore bundled payments without having to absorb any direct financial risk associated with exceeding the target price.

This experience would also be useful if and when CMS adds more bundled payment options that provide a way for physicians to satisfy the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) while avoiding the reporting requirements of the Merit-based Incentive Payment System (MIPS). 

Becoming a gainsharer-and engaging with other physicians and hospitals to improve outcomes and reduce costs-also helps physicians prepare for whatever additional regulations may lie ahead, says Rob Lazerow, managing director at Advisory Board, a practice management consulting firm. “I don’t think you can ignore the context of what’s happening right now. [MACRA] is just the latest push toward more partnerships between hospitals and physicians,” he adds.

One challenge of gainsharing is that it usually takes at least 10 months from the date of an initial hospitalization for CMS to reconcile costs and issue payments, says Whitcomb. This is a long time to wait when a physician anticipates additional reimbursement that he or she can reinvest in the practice, use for staff bonuses, or earmark for another purpose, he adds.

Another challenge is that the episode might not generate any savings, in which case the physician would receive no additional reimbursement despite his or her greater care coordination efforts. 

Getting started with gainsharing

Mulvany suggests physicians consider three questions before deciding whether to participate in a gainsharing contract:

1. Are local employer groups or payers moving toward episode-based payments? If so, becoming a gainsharer helps to prepare physicians for this shift.

2. Might a gainsharing arrangement help strengthen the practice’s association with a hospital? Coordinating efforts to improve the quality of care and clinical outcomes benefits both the hospital and the practice.

3. What type of relationship does the physician ultimately want with the local health system? Is he or she hoping to work more closely with it? If so, collaboration could lead to this desired relationship.

If a physician decides to move forward with gainsharing, the first step is to identify local hospitals to which they frequently refer patients and that are participating in a bundled payment arrangement. Target those that are part of the Bundled Payments for Care Improvement Initiative (BPCI)-a program with a waiver allowing the use of gainsharing.

BPCI is most relevant to primary care providers because it includes 48 bundles representing nearly 200 diagnosis-related groups, many of which cover common medical conditions such as pneumonia, stroke, congestive heart failure, and acute myocardial infarction in addition to orthopedic, spinal, cardiovascular and general surgical procedures. 

(CMS provides a complete list of BPCI participants at http:// bit.ly/BPCI-episodes)

Next, physicians should contact each  hospital’s chief medical officer directly to indicate the practice’s interest in a gainsharing agreement. “Let them know that you’re a major influencer in what happens to patients during the post-discharge period,” Mulvany adds.

Hospitals are usually open to conversations with physicians about how to collaborate and reduce costs, says Jonathan W. Pearce, CPA, FHFMA, principal at Singletrack Analytics LLC, a financial consulting firm specializing in bundled payment arrangements. That’s because hospitals bearing risk in the current BPCI model need to reduce costs post-discharge. 

Physicians who know how they can contribute to bundled payments are more likely to receive a welcome from the hospital, says Pearce. “The best thing that physicians can bring to the table is knowledge of what happens to patients post-discharge and an ability to increase the quality and cost-effectiveness of that process,” he adds.

Whitcomb agrees. “If primary care physicians could provide timely access after the hospitalization or skilled nursing facility stay, it would make the performance of the bundle better by reducing readmissions and keeping people on the right trajectory as they recover from their hospitalization,” he says.

Primary care physicians play an important role in the success of bundled payments, says Pearce, adding, “Physician engagement is absolutely critical.”