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A Bundle a Day Keeps FFS at Bay
About five years ago, my grandmother, Virginia, was leaving Sunday mass when a pickup truck backing out of its parking spot nudged her off her feet and onto the pavement. What resulted was a minor hip fracture and a very concerned congregation. In true Virginia fashion, her only displeasure was knowing she’d be confined to a bed and missing out on her weekly casino and bingo outings. And so begins the sequence of health care events that eventually lead to a costly recovery.

At that time, in a case like Virginia’s, physicians were reimbursed in a Fee For Service (FFS) model. In FFS, Medicare makes separate payments to each provider who treats a patient across an episode of care. So in my grandmother’s scenario, the ambulance, specialist, hospital, primary care physician, and physical therapist were all paid separately for the services rendered for her fractured hip. How was this a disadvantage to grandma? This type of payment model may have resulted in fragmented care, minimal care coordination across different health care settings, unnecessary tests, and it also seemingly rewarded quantity of service over quality of care. Individual payments may have reinforced individual effort and in turn, left grandma with a multitude of medical bills.

Bundled Payments for Care Improvement (BPCI)

The Center for Medicare and Medicaid Innovation is experimenting with new, innovative payment models that hope to offset the high cost and inefficiencies of the current FFS model. One of the more promising models is BPCI, or Bundled Payments for Care Improvement. The goal is to potentially reduce Medicare and Medicaid expenditures while enhancing quality of care.

Why BPCI?

The “bundle” in Bundled Payments for Care Improvement represents all health care services a patient receives over an entire episode of care. In grandma’s case, it’s all the services she receives during her road to recovery from a fractured hip. While there are various BPCI models currently being assessed, the general foundation of BPCI follows a format such that providers team up across the care continuum to treat a patient. These teams as a whole receive a single, fixed, predetermined payment amount designed to pay all the providers involved in that one episode of care based on historical costs. These teams essentially enter into a payment arrangement that includes financial and performance accountability. If the actual cost of care for that episode falls below the target bundled payment, then the team benefits from a gain sharing bonus. If actual costs exceed the target bundle costs, then teams are dinged financially. The goal of a bundled payment model is to incentivize teamwork and collaboration among providers to provide better care in a more efficient and coordinated manner.

Does it sound too good to be true?

While bundled payment models are intended to encourage the positive outcomes mentioned above, there may be some unintended consequences. For example, predicting the total cost of an episode of care can be difficult. If a provider finds that actual costs for an episode of care might exceed the target costs, there may be less incentive for a provider to provide necessary care in order to keep costs low. Similarly, a provider might feel encouraged to overstate a patient’s illness to negotiate a higher bundle payment. In addition, the many providers involved in a care team may not entirely agree on the distribution of the bundled payment.

One thing that everyone in the health care industry can agree on is that everyone benefits from an increase in the quality of patient care and financial transparency. Whether or not that comes with bundled payment models is an ongoing debate, but the hope is to continue to learn from these new reimbursement models and start moving in the right direction. For now, grandma Virginia is just thankful to be fully healed and able to attend bingo night free from her warp-speed senior scooter.
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