The Michigan Value Collaborative

Helping Michigan hospitals achieve their best possible patient outcomes at the lowest reasonable cost

Author: Chad Ellimoottil

Top 10 Takeaways from the National Bundled Payment Summit

Chad Ellimoottil

Dr. Chad Ellimoottil is a Clinical Lecturer and Postdoctoral Fellow at the University of Michigan.

Vinay Guduguntla

Vinay Guduguntla is a medical student at the University of Michigan and a Research Assistant with the MVC.

MVC had the opportunity to attend the 2016 National Bundled Payment Summit in Washington, DC. The annual Summit brings together individuals from academia, health systems, payers and industry to discuss the future of episode-based payment measures and bundled payments.  


Takeaway 1:  There are many unknowns. There are so many models out there, each with different guidelines and metrics. After listening to the Q&A sessions from CMS and large private payers, it is clear that bundling is a far from perfect science.

Takeaway 2: Addressing knowledge gaps in bundled payments is a priority. While we are in our second iteration of bundled payments, there is still much to consider regarding program development. A common topic was the level and appropriateness of data granularity (e.g. cancer staging). Specifically, the inclusion of patient-reported outcomes for quality measurement, incorporation of drug costs, and condition vs. procedure specific bundling were discussed. 

Takeaway 3: Start slowly. If you are a health system, do not be too disruptive when initiating a bundled payment program – one-sided risk is not that bad. It is nice to have initially as you work out the kinks of the model.   

Takeaway 4: Invest resources into care transformation that can scale. Future bundles are coming from both CMS and private payers, so it is important to have processes that are not tied to a specific reimbursement program (e.g., Comprehensive Care for Joint Replacement, Bundled Payments for Care Improvement). Many health systems and physician groups are planning for future bundles by developing bundles that are multi-state and multi-payer.

Takeaway 5: Care standardization is necessary for success. Consulting companies will spend hours with physicians understanding their practice patterns to reduce variation (e.g., who do physicians send to a SNF and why?).  In addition, health systems like Mount Sinai create clinical pathways that reflect best practices.

Takeaway 6: Physician engagement is key.  This message was echoed throughout the conference. When implementing a new bundle, make sure to start with a clinical department that is engaged.  Then, focus on building new workflows into current practice (i.e., use Epic). Change is not easy, though, and framing the situation is vital. At the Summit, Mount Sinai discussed using principles of behavioral economics to adjust physician behavior.  For example, people have “loss aversion”, or the strong tendency to prefer avoiding losses than acquiring gains, so it is better to highlight incentives as “lost money”. Unblinding data is also effective because it increases transparency and accountability.

Takeaway 7: Employer-led bundled payments is a rapidly growing area. Employers need to reduce healthcare costs, and are attracted to bundled payments. However, many employers lack the expertise to develop and implement bundled payments. For this reason, physician organizations (e.g., North Carolina Orthopedics) and institutions (e.g., Northwestern) rely on the payer or broker (e.g. Pacific Business Group on Health) to create a bundled payment programs. These programs have greater focus on consistent high quality service instead of dramatically lower costs. Overall, employers are taking a cautious “test the waters” strategy by trialing pilots of narrow networks rather than going all-in from the start. Walmart is arguably the best example of employer-led bundled payments.

Takeaway 8: Providers are approaching insurance companies with bundles.  CIGNA now has over 50 bundled payment arrangements in various states for various conditions. Blue Cross Blue Shield New Jersey (BCBSNJ) has reported the same.  These payers work closely with providers and other payers in the state to discuss the construction of the episode.

Takeaway 9: Pay attention to Arkansas state-wide bundled payment programs and Blue Cross Blue Shield New Jersey (BCBSNJ)[1].  Arkansas has state-wide, multi-payer mandatory bundled payments for multiple conditions.  As a result, Blue Cross of Arkansas has seen millions in savings. They have bundles for joint replacement, c-section, heart failure, and other conditions. BCBSNJ has showed similar success in this area, and has lots of experience with bundles. More information here on AR and NJ.

Takeaway 10: There are many companies in the bundled payment and episode cost analytic space. Venders are very willing to talk to hospitals about how their products can help administrators improve data collection.


10 facts about Medicare’s Hospital Readmissions Reduction Program (HRRP) that may surprise you

Michelle Hou

Michelle Hou is a statistician working with MVC.

Chad Ellimoottil

Dr. Chad Ellimoottil is a research fellow working with MVC.

Many hospital administrators and clinicians are under increasing pressure to reduce readmissions. At least part of this pressure comes from Medicare’s Hospital Readmissions Reduction Program (HRRP). This program imposes a penalty on hospitals that have an excess number of readmissions. All hospital readmissions as well as readmissions for specific conditions (e.g., congestive heart failure, heart attack, pneumonia, chronic obstructive pulmonary disease, or joint replacement) are measured by Medicare. We scoured the literature and performed our own analysis of Michigan Medicare data to bring you 10 surprising facts about the HRRP program.

  1. In 2015, almost 80% of hospitals received a penalty under HRRP. While the average hospital penalty was less than a percent of total income, Medicare collected more than $400 million in penalties.
  2. In 2015, ten percent of hospitals accounted for nearly 50 percent of the penalties. Because socioeconomic factors play such a big role in readmissions, it is understandable that the impact of the penalties are concentrated.
  3. A readmission from three years ago may impact your hospital’s score today. Because the program incorporates three years of data in its calculation of condition-specific readmission rates, some patients may impact readmission performance for years to come.
  4. While readmission measures may be “condition-specific”, readmissions from “all-causes” count against your hospital. For example, if the patient is admitted for joint replacement, and then is readmitted for stomach pain, the readmission counts against the hospital.
  5. Small hospitals may not be unfairly penalized for a few extra readmissions. There are sophisticated statistical adjustments made to account for hospitals that may have a small number of yearly admissions.
  6. Readmissions caused by patients who leave “against medical advice” do not count against the hospital. Because providers were not given the full opportunity to provide care and discharge planning for these patients, they are excluded from the readmission measure.
  7. Over 50 different comorbidities are considered to make sure hospitals are compared on an equal playing field. In other words, Medicare’s readmission measures are “risk-adjusted”.
  8. About 21% readmissions in the state of Michigan occur at hospitals other than one where the patient was initially hospitalized. These findings were based on an internal MVC analysis of readmissions and speak to the importance of using claims-based data to track readmissions.
  9. Approximately 85% of patients who are readmitted within 30-days come in through the emergency room.
  10.  About 8% of readmissions are considered “planned”. Planned readmissions are not counted against the hospital. They can occur for planned procedures or diagnoses that are not associated with an acute condition.

Questions or comments?  We’d love to hear from you.  You can comment on this article, or use the form at the bottom of this page.