The growing use of bundled payments in the US healthcare system will likely continue and is being seen as a key strategy improve quality and reduce costs. A bundled payment, also known as an episode based payment, is a single payment that covers care delivered by two or more providers during a single episode of care for a defined period of time. An episode of care can be defined as either a diagnosis or a specific medical procedure being performed on the patient. By sharing one fee for an episode of care, bundled payments offers providers an incentive to better coordinate their care as well as be more judicious in their use of resources. In effect, bundled payments encourage providers to be proactive in sharing results of imaging, diagnostic testing, patient history and other valuable resources. It also encourages them to act in concert when prescribing treatments and puts greater emphasis on the value of care being delivered.
With the growing implementation and potential impact of bundled payments on the health system, it is worthwhile to consider the various models of bundled payments. Below, we summarize three models of bundled payment initiatives that are currently being utilized and developed.
Model 1: Acute Care Providers
In this bundled payment model, payment to the hospital and physicians involved in the delivery of care to a patient is combined and spans during the entire inpatient acute-care stay. Fees are reimbursed based off of diagnosis related groups (DRGs) for each diagnosis and condition. Payment covers all hospital and physician services provided during the inpatient stay and within three days prior to admission. This differs significantly from the typical scenario where physicians and hospitals are reimbursed separately on a fee-for-service basis, even if actually working together to provide care for a patient. Reimbursement in this manner lacks an incentive to align efforts when providing care and often leads to the wasteful use of resources.
Model 2: Hospital, Physician and Post-Acute Care Providers
Another model of bundled payment involves the hospital, the physicians and post-acute care providers for an episode of care within a minimum of 30 days from hospital discharge. Post-acute care may include rehabilitation facilities, home health care, or skilled nursing facilities. This model aims to encourage providers to improve the way they manage care transitions and post-discharge care. Efficient care transitions lead to better outcomes care and a reduced rate of hospital readmissions.
Model 3: Post-Acute Care Providers
A bundled payment initiative for a post-acute care provider begins with the first service provided within 30 days of discharge from an acute care facility and covers an episode of care that is at least 30 days in length from the date of the first service. Reimbursement takes place as described above, except only post-acute providers are included in the payment. In this model, as well as in the others, various methods of risk adjustment must be considered to help mitigate extreme cases for patients who greatly exceed expected health costs.