The experiments with different payment models that have taken place over the last several years as part of the Bundled Payments for Care Improvement program, an initiative of the Centers for Medicare and Medicaid Services, have brought attention to the many potential benefits of bundled payments. Instead of receiving separate payments for each individual service over the course of a single illness or period of treatment, under a bundled payment method providers are paid for overall episodes of care . By tying together payments for related care as part of a broader, or more holistic, payment bundle, the hope is that providers will be better motivated to coordinate care more effectively, avoid unnecessary services, and deliver higher quality care, thus allowing money to be saved through reduced spending on physician services during a patient’s hospital stay and post-acute care.
Whether this hope will become a reality remains to be seen, as most bundled payment programs have not been in operation long enough to give health care organizations a truly accurate idea of how they will impact care costs and quality. However, a few long-standing bundled payment programs do exist, which can give a detailed, if unsupported, picture of long-term bundled payment effects.
One such program is the UCLA kidney transplant bundle (KTB). More than 30 years ago, UCLA negotiated an agreement with Kaiser Permanente that would see all kidney transplantation services paid for through a lump sum case-rate; prior to this, all kidney transplant costs, including organ acquisition costs, physician services, and outpatient medication, were reimbursed in the traditional fee-for-service manner.
Today, participants in the UCLA KTB include large commercial payors like United Healthcare, Anthem, and, of course, Kaiser. With an episode duration fixed at 90 days, case-rates for the KTB are determined through analysis of historical inpatient and physician services costs. At present, under the KTB, 80 percent of the lump sum payment goes to the hospital, and 20 percent goes to the physicians. Equal reimbursement is provided to kidney transplant surgeons and nephrologists from a fixed per-patient, per-episode pool; deductions are also made from this pool for other physician services like radiology, anesthesia, and pathology. To address the possibility of extreme cost outliers, the KTB also includes a “stop-loss coverage” mechanism under which the contracting payor shares a portion of the ensuing cost after specific length of stay or dollar amount thresholds have been exceeded.
As more alternative payment models, including bundled payments, begin to emerge, the UCLA KTB can serve as a useful case study that provides valuable lessons about what we may be able to expect from bundled payments in years to come. Here are some key benefits so far:
Better care coordination and multi-disciplinary care
In an interview about the KTB, a former director of UCLA’s kidney transplant program stated that the bundled pricing actually encouraged physicians to work more closely and supportively together. Under the KTB model, physicians are stakeholders who share the risk of reduced reimbursement if care is not properly coordinated, which, consequently, incentivizes greater multi-specialty clinical integration. In addition, daily communication about patients becomes more prevalent, and doctors prioritize patient and family education and careful follow-up of each case.
More efficient utilization of services
A key part of the process of setting up the KTB was a comprehensive redesign of care pathways. Physicians and administrators used a technique called “process mapping” to look, step-by-step, at the entire workflow of an episode of care, and implement protocols to streamline inefficient pathways, decrease variation in care, and eliminate waste. As a result, just three years after the KTB was launched, the time from organ harvest to completed kidney transplant dropped from 28 hours to 17; length of stay was one week, a decrease of 10 days; and per-case costs dropped by 12 percent.
Incentivized quality improvement
Mechanisms linking reimbursement to quality are a key element of most bundled payment programs. The KTB contract is up for renewal every three years, and during the renegotiation process cost and quality data come under intense scrutiny. Consequently, the incentives for fostering a culture of continuous quality improvement are strong.
Less apprehension around episode definitions
In the early days of the KTB, there was great concern about determining episode duration for the bundle, and negotiations, which ultimately set the duration of a KTB episode at 90 days, were complex. However, extensive retrospective reviews have shown that unrelated service readmissions associated with higher complication rates and, consequently, higher costs are extremely rare; rare enough, it was decided, that there was little point in adding to and complicating the administrative burden by creating multiple different exceptions (indeed, certain exceptions included in the original KTB model arose so infrequently that they were eventually abandoned). Rather than trying to create policy for every possible contingency, the best method for protecting providers seems to be a solid stop-loss provision with comprehensive, data-driven analysis post-bundle implementation.