Understanding Bundled Payments
January 1, 2023 3 minutes read
By Jeni Miller
Bundled payments can be confusing for case managers to navigate.
“Through a bundled payment model, the payer collectively reimburses the providers involved, using a set price for the episode of care, which is usually based on historical costs,” says Toni Cesta, PhD, RN, FAAN, partner and consultant with Case Management Concepts, LLC.
The philosophy behind the bundled payment reimbursement model is that in managing the patient carefully across the continuum, transitions will be smoother and the care will improve, all while staying mindful of how the dollars are spent. It is meant to be a meeting of quality of care and cost-effectiveness.
But how did this model start?
“The federal government was looking for a way to incentivize hospitals to manage costs and length of stay,” Cesta explains. “This eventually resulted in a lot of different bundle combinations, starting with one for joint replacement. Some hospitals didn’t do as well because they didn’t have a robust enough case management program to manage it.”
The first bundled payment program — which began in April 2016 and was projected to save $343 million over a five-year period — was for comprehensive care for joint replacement.1 “[It was] mandatory for all acute care hospitals furnishing services in 67 selected mandatory serviced areas — approximately 800 hospitals in 33 states,” Cesta recalls. “[It] supported better and more efficient care for beneficiaries undergoing the most common hip and knee replacement inpatient surgeries.”
The services in this bundle included inpatient care, outpatient care, readmissions, physician care, post-acute care providers, and Part B medications.
Likewise, for certain other surgical procedures, the services are bundled as they apply to a particular diagnosis or procedure. All the payments for preoperative through postoperative services will be bundled. Then, payment is made to the hospital, and the hospital divvies up appropriate payment to each party.
“What case managers need to know is that they play an important part in this — in the reimbursement of these costs, quality of care, and transitions,” Cesta says. “They need to be aware that the charge is for the whole stay rather than for each individual service, and the more that is included, the higher the risk for the hospital and other providers along the continuum.”
The Benefits and Risks
CMS has said the main benefits of this model are in controlling costs and ensuring quality of care as well as better collaboration across the continuum. This way, the acute and post-acute care are part of one episode, rather than fragments or separate episodes.
With bundled payments, some risk is on the hospital, so administrators are understandably more concerned about where patients might go for their next level of care because the facility is responsible for distributing the payment. Case managers play a part in this process to link the patient with post-acute providers who supply both quality and cost-effective care.
There are no risks to the patient, who will be more likely to experience a smoother episode of care, assuming high-quality case management facilitates the process and assures seamless transitions. For this reason, “some hospitals use a transitions case manager to handle bundled payments, as you sometimes may need a dedicated person choreographing that care,” Cesta says.
REFERENCE
- Centers for Medicare & Medicaid Services. Comprehensive Care for Joint Replacement Model. Page last updated Oct. 4, 2022.
Bundled payments can be confusing for case managers to navigate. The philosophy behind the bundled payment reimbursement model is that in managing the patient carefully across the continuum, transitions will be smoother and the care will improve, all while staying mindful of how the dollars are spent. It is meant to be a meeting of quality of care and cost-effectiveness.
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