Bundled Payments Revisited

The Centers for Medicare & Medicaid Services (CMS) is no stranger to developing innovative payment initiatives, especially those with serious potential to reduce healthcare costs. One such initiative was 2016's2016's Bundled Payments for Care Improvement (BPCI) model, which sought to overhaul the current system by bundling healthcare services into a single, predetermined payment. 

The CMS hoped BPCI would better hold hospitals and health systems accountable for outcomes. Unfortunately, the effort failed to improve patient treatments, reduce healthcare costs, or create better communication between health care organizations. Despite years of trials and four tested models, the initiative lacked functionality even before the pandemic hit. However, bundled payments deserve to make a comeback on the condition that critical issues related to technology, billing, and payment are addressed.  

History of Bundled Payments

The American health care system was built on a fee-for-service model (FFS), meaning any services rendered are billed individually. But many problems come with a model that is wholly dependent on the quantity of services rather than the quality. You will have undoubtedly heard stories of doctors taking advantage of the system by running unnecessary tests. The result is wasted resources and sometimes even misguided care.

Enter bundled payments, which were to document a procedure and bill instead of an entire episode of care from start to finish. The bundled sum would then be awarded to the hospital (the initial provider who received the patient), which would then distribute relevant funds to other network members that provided services. In theory, this allows hospitals to move patients along to other health care partners as appropriate. However, there was little improvement in patient outcomes because the communication was so poor between organizations. 

Problem with Bundled Payments

Bundled payments should work. More robust communication and efficient coordination between healthcare providers are highly beneficial. But there are good reasons the initiative never moved beyond the beta stage. 

Here I have highlighted three of them: 

Problem #1 - Financial risk is a significant deterrent. Patients in exceptionally bad condition require additional care, which means health care providers have to bear the brunt of a larger financial burden than they did before.

Problem #2 - There are technological challenges for facilities that have not yet upgraded their electronic health record system. Health care providers still on paper or using antiquated software cannot always pass accurate patient records on to the next health care provider in the network, thus causing communication issues that impact treatment and care. 

Problem #3 - There is a distinct lack of coordination between health care providers during patient transitions, which leads to significant medical errors. It is estimated that up to 30% of hospital transfers result in adverse events due to poor communication and flawed methods of sharing data.

How Bundled Payments Could Work

The previous models were flawed because they lacked structure and allowed for an unfair distribution of power and money. They placed hospitals at the top of the hierarchy, which gave them the power to dictate which facilities joined what network and where patients were transferred, even when such moves went against the desires of the patients. 

Hospitals essentially controlled the patient flow, favoring facilities with which they had good relations. Smaller facilities, meanwhile, were often left out, even when they provided better services or were the patient’s location of choice.  

Health care organizations need a fairer system in place before agreeing to bundled payment networks. The improved communication and working relationships that were the wisdom behind this initiative will only be possible if all organizations are on an even playing field, with equal opportunities and say.

That means the government must enact more substantial and granular guidelines for health care organizations; hospitals need to relinquish a certain degree of power and allow patients to decide where they want to receive treatment. And all health care organizations must be given an opportunity to join bundled networks, regardless of size or connections.