Information Technology for Bundled Payment

August 2013
The purpose of Information Technology for Bundled Payment (BP) is to help organizations assess whether they possess certain IT capabilities associated with successful BP implementation.
Information Technology for Bundled Payment

This excerpt introduces Information Technology for Bundled Payment, which is one of a series of Centers for Medicare & Medicaid Services (CMS) -authorized documents on certain key topics that are important for BP arrangements.

The concurrent pursuit of reduced healthcare costs and improved healthcare quality in the United States has sparked a number of healthcare reform activities. Some involve delivery system reorganization, such as accountable care organizations (ACO) or patient-centered medical homes, to help coordinate health services or emphasize primary care services and prevention.

These models involve care redesign and are grounded in evidence based medicine or best practices. They all focus on some aspect of modifying payment systems to incentivize desired provider practices, such as pay for performance, or bundling healthcare services, which is our area of focus in this document.

The Advantages of Bundled Payments

A bundled payment provides a single, predetermined amount of money for treatment by one or more providers during an entire episode of care. An episode of care is the treatment of a specific medical condition during a set period of time. The concept of "episodes of medical care" is not new, and has been a topic in the literature at least as far back as 1967. BP offers many advantages over the current fee-for-service (FFS) payment model, which compensates providers for individual services. FFS rewards volume of services provided rather than quality of care, which can create provider incentives that are misaligned with those of both payers and patients.

A BP organization is distinct from an ACO: while the latter also employs a shared savings strategy, it generally targets care for a specific population rather than a set of diagnosis groups. When a BP's lump payment is linked appropriately to outcomes and other quality measures, it makes the entire treatment team more accountable for an episode's cost, quality, and outcome, and therefore, aligns financial incentives for hospitals and physicians, who currently operate under different financial pressures.

BP also provides incentives to reduce waste and care defects through better coordination and consideration of financial ramifications of individual care decisions. BP offers the opportunity for providers to share in the savings obtained from eliminating duplication of services and improving care coordination. It can drive care delivery changes and ensure commensurate rewards to successful organizations.

The Centers for Medicare & Medicaid Services has been exploring the use of BP in demonstrations for some time, including the Acute Care Episode (ACE) demonstrations currently under way in several locations. More recently, CMS proposed a new BP initiative—the Bundled Payments for Care Improvement (BPCI). Efforts like the BPCI and ACE encourage communication and collaboration among different providers to achieve better patient care, eliminate duplicative or unnecessary treatment, and achieve savings for the Medicare program, to the benefit of all parties involved. BPCI and ACE are just two examples of BP trials, which currently involve both private and governmental payers.

Weighing the Risks against the Opportunities

A transition to BP presents both opportunities and risks to care providers who previously generated revenue and income based on the volume of services provided. In order to capitalize on the opportunities and avoid the risks, an organization should carefully evaluate its core capabilities and strengths using markers for success in BP.

One set of markers relates to functions often supported by information technology. While not every IT solution is applicable to every organization or circumstance, careful attention to health information technology options can provide considerable leverage for organizations seeking to implement BP. Reporting and quality monitoring are important to ensure consistent quality of care. These activities support internal and external quality assurance, and drive internal quality improvement. Both reporting and quality monitoring activities benefit from robust, IT-supported analysis of data from many sources.

Download the full Information Technology for Bundled Payment paper.


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