The Michigan Value Collaborative

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

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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.


Pay-for-performance programs and low quality hospitals: lessons learned

Edward Norton

Edward C. Norton, PhD, is an Economist and Professor in the School of Public Health at the University of Michigan.

Pay-for-performance programs aim to reward hospitals that achieve high quality at low cost.  Yet designing the incentives to meet those goals is challenging.

Consider the dilemma that the Centers for Medicare and Medicaid Services (CMS) faced when they added a performance metric for episode payment to a program that previously had included only quality metrics.  Instead of rewarding only hospitals with both high quality and low cost, they gave bonus payments to some hospitals whose low quality was outweighed by low costs.

In short, CMS paid a bonus to some low-quality hospitals after the addition of a spending metric to Medicare’s Hospital Value-Based Purchasing (HVBP) program.  Several MVC Team Members just published a new study showing this unintended consequence.

Here are the main results of that national study.  In fiscal year 2015, CMS expanded its Hospital Value-Based Purchasing program by rewarding or penalizing hospitals for their performance on both spending and quality.  This represented a sharp departure from the program’s original efforts to incentivize hospitals for quality alone. How this change redistributed hospital bonuses and penalties was unknown.  Using data from 2,679 US hospitals that participated in the program in fiscal years 2014 and 2015, we found that the new emphasis on spending rewarded not only low-spending hospitals but some low-quality hospitals as well. Thirty-eight percent of low-spending hospitals received bonuses in fiscal year 2014, compared to 100 percent in fiscal year 2015. However, low-quality hospitals also began to receive bonuses (0 percent in fiscal year 2014 compared to 17 percent in 2015).  All high-quality hospitals received bonuses in both years.

What does this mean for MVC and the BCBSM pay-for-performance program?  The simple answer is that BCBSM only measures episode payments, not other quality measures.  Obviously BCBSM also cares deeply about quality of care, but this P4P program is focused on only one measure, thus avoiding the problem that CMS found.  CMS is now considering a minimum quality threshold to avoid rewarding low-quality, low-spending hospitals.

The MVC team hopes to use its experience studying the national P4P programs to design and improve similar P4P programs in Michigan.

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

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