How the bundling model could change how urologists are paid

October 3, 2013

The bundled payment model for episodes of care is a major player in what could be sweeping changes to the physician payment system that will likely see traditional fee for service taper off. Bundling has already made inroads in some surgical specialties, and it may very well apply to inpatient urologic procedures as well.

National Report-The bundled payment model for episodes of care is a major player in what could be sweeping changes to the physician payment system that will likely see traditional fee for service taper off. Bundling has already made inroads in some surgical specialties, and it may very well apply to inpatient urologic procedures as well.

It’s critical that physicians across all specialties, including urologists, better understand and get involved in how bundling and other payment models may take shape, says Christian Shalgian, director of the division of advocacy and health policy at the American College of Surgeons.

“Medicare has begun to do demonstration projects around bundling. Congress is writing legislation to change the Medicare physician payment system, [and] bundling will be one of those options that can be done,” Shalgian told Urology Times. “If physicians aren’t leading in the way that the system needs to be changed, then it will be done for them, which is exactly what we don’t want to see happen.”

“The way we were paid in the past-by unit of service-is really probably going away or at least diminishing in importance,” said Charles D. Mabry, MD, a health policy leader in the area of surgery who is associate professor of surgery at the University of Arkansas for Medical Sciences, Little Rock, and a general surgeon in Pine Bluff, AR. “In some areas of America, such as the East and West Coast and some of the mid-central states, it’s going away very fast. In other parts of the country where there’s much less competition and there’s a much greater scarcity of providers, we will see a transition at a much slower pace.”

Accountable care organizations (ACOs) will be more likely to be established in those high-population, competitive areas, and those ACOs will likely combine bundling and episode grouping strategies into their overall payment scheme, Dr. Mabry says.

Bundling defined

The term “bundled payments” is generally used to describe a payment model in which disparate providers are paid out of the same budget, according to Alice G. Gosfield, JD, of Alice G. Gosfield and Associates, P.C., of Philadelphia.

“Sometimes, the requirement is that the money be paid to one party, which disburses it to others. In other models, there is a budget that applies to all participants, but they are actually paid separately,” Gosfield said. “The expectation is that by putting providers at risk together for their performance, quality and value will improve.”

America’s Health Insurance Plans (AHIP), which represents the nation’s health insurance industry, views bundled payments as one of the many emerging payment models focused on strengthening care management, care coordination, and improving health outcomes, according to Clare Krusing, AHIP’s deputy press secretary.

“Health plans are partnering with providers to change payment models to move away from the outdated fee-for-service system to one that rewards value, quality, and better health outcomes,” Krusing said. “Bundled payments represent one of these emerging payment models, particularly with defined episodes of care.

“By bundling payments or including associated health care services under a single fee or payment, insurers and providers can provide more coordinated care, eliminate the use of unnecessary and costly tests and procedures, and ultimately provide better value and outcomes for patients.”

A seat at the table

Policymakers are already looking into how this type of payment reform might be leveraged to encourage providers to achieve those results. Bundling models for episodes of care are among the reimbursement options in legislation created to replace the highly controversial sustainable growth rate (SGR) formula. One such bill, the Medicare Patient Access and Quality Improvement Act of 2013 (H.R. 2810), supports fee-for-service medicine while encouraging the formation of new delivery models. These new delivery options include alternative care organization payment models, patient-centered medical homes, bundled or episodic payments for certain conditions and services, and gainsharing arrangements.

The legislation, introduced in July, was referred to the House Subcommittee on the Constitution and Civil Justice on Sept. 13. (Also see, “The clock is ticking for passing SGR reform")

"Fee for service will definitely remain at some level, but bundling will be one of these options that we need to know about. And physicians need to know what will be included in that bundling. Physicians are the ones who know it best, and we need to make sure those bundles are done correctly,” Shalgian said.

Urologists need to have a clear understanding of who will be eligible for what money out of the budget, according to Gosfield.

“Most bundled payments are based on episodes of care, which take into account pre-admission testing, the admission, and some period of time post-discharge, with a budget to cover all of that. Again, there is one budget for all the parties,” she said.

The concept of bundled payments is not a new one, according to Matthew J. Resnick, MD, assistant professor of urologic surgery at Vanderbilt University Medical Center, Nashville, TN.

“The Medicare Prospective Payment System instituted the Diagnosis Related Group (DRG)-based payment system to hospitals in the mid-1980s. Notably, payments to physicians continued in a fee-for-service model,” Dr. Res­nick said.

The principal difference between the bundled payment system in place for nearly 30 years and the episode-based bundled payments proposed by many as integral to controlling the costs of care and improving care coordination and financial responsibility is this, Dr. Resnick explained: “Instead of including only hospital-based care in the bundle, the episode-based bundles would include the services provided across a specified time period, inclusive of physician payments.”

Predicting impact on urology

The bundling model tends to apply to conditions and procedures that are homogenous and uniform, such as tonsillectomy or appendectomy, Dr. Mabry points out. In urology, transurethral resection of the prostate and treatment of kidney stones are examples of potential targets.

“They’re pretty straightforward procedures, they’re pretty standard across the country, and there’s not much variation in how the patient presents,” he said. “There are going to be outliers, but they’re going to be pretty rare. Those procedures that are uniform across the country are the ones most likely to be bundled or put into an episode.”

The degree to which bundled payments might affect urologists is contingent on the comprehensiveness of the proposed system with respect to the conditions treated by urologists, Dr. Resnick says.

Envisioning just how bundled payments would affect urologists is challenging, he adds, given the wide range of organizational structures within which urologists practice.

“Certainly, there is concern surrounding how reimbursement will be distributed among the multitude of providers involved in a particular episode. This may pose considerable challenges to urologists in community practice and may further incentivize alignment with hospital systems,” Dr. Resnick said.

Because of their complexity, bundled care models might be better suited for integrated or closed delivery systems, where formal financial and other relationships exist among different specialties and providers, according to David C. Miller MD, MPH, associate professor of urology at the University of Michigan, Ann Arbor. It might be more difficult for solo or group urology practices to be involved in episodes of care, where these formal relationships don’t exist.

“If there are not already some natural alignments between specialists or urologists and the hospitals within which they work, then the actual implementation of who receives the bundle, how the bundle is then distributed, and what the implications are of costs of care above the bundle will certainly be [challenging],” Dr. Miller said.

The evidence of savings

Dr. Miller, who has published studies related to payment reform, says there is evidence that a lump-sum or bundled payment approach should achieve cost savings, often through changes in prescribing patterns.

In June, researchers drove home that point when they reported on the impact of using a bundling approach for kidney dialysis (Am J Kidney Dis June 12, 2013; doi: 10.1053/j.ajkd.2013.03.044). Bundling dialysis under Medicare’s prospective payment system provided incentives for the use of lower-cost therapies, they wrote. “These incentives seem to have motivated dialysis providers to move toward lower cost methods of care in both their use of drugs and choice of modalities,” the authors concluded.

There have been a number of experiments performed with bundled payment systems, most notably PROMETHEUS (Provider Payment Reform for Outcomes, Margins, Evidence, Transparency, Hassle Reduction, Excellence, Understandability, and Sustainability), managed and implemented by the nonprofit Health Care Incentives Improvement Institute; the Medicare Acute Care Episode (ACE) Demonstration from the Centers for Medicare & Medicaid Services; and Geisenger Health System’s ProvenCare initiative.

Results from these pilots are limited, but there are indications that the model saves money. Preliminary results showed one ACE pilot achieved a 10% reduction in cost for the average hip/knee replacement episode.

But one of the big concerns with bundled payments is that care might be omitted in an effort to save money, according to Dr. Miller. The challenge, he says, is to maintain quality while reducing costs.

“The thought is that is achieved through better coordination of care-perhaps fewer duplicative or repeated services. But, again, much of this is still conceptual, rather than being demonstrated empirically,” he said.

It’s not that leaders in medicine are opposed to bundling payment models; in many cases, it’s that there are too many unanswered questions about how they’ll apply in the real world.

Repeal and replacement of the SGR is a key legislative priority of the AUA, but the association supports a 5-year transition period to any new payment model, including bundling, according to an article in the AUA’s Health Policy Brief (June 18, 2013).

David F. Penson, MD, MPH, the AUA’s health policy chair, called for more testing of the model when responding to whether episodic care should be the replacement payment model to SGR. Dr. Penson wrote his response on behalf of the AUA in a July 9, 2013 comment to the House Energy and Commerce Committee on Sustainable Growth Rate repeal and reform legislation.

“The plusses of the episode or bundled payment model include its potential to improve coordination among multiple caregivers, its ability to support flexibility in how and where some care is delivered, its incentive to efficiently manage an episode (reduce treatment/manage costs), its simplicity from a billing perspective (one bill instead of many), and its clear accountability for care for a defined episode,” Dr. Penson wrote.

“However, there are many challenges associated with this model, which need to be more thoroughly tested and evaluated prior to widespread implementation. These include the difficulty of defining the boundaries of an episode (what care falls within and outside of the episode), its potential to increase barriers to patients’ choice of provider and/or geographic preferences for care if adoption is not widespread, the lack of incentive to reduce unnecessary episodes, and the potential for providers to avoid high-risk patients or cases that may exceed the average episode payment.”

Gosfield agrees that the real-world application of this collaborative budgeting process will be a challenge.
“The real problem that will arise in these models is how the budgets are created,” she said. “Most payers have almost no experience with these models, so the potential for disputes is very high. Having very clear dispute resolution mechanisms between providers and [payers] is important, but, just as important is being clear on the governance of the money and dispute resolution among the providers who are participating.”

Given that bundling involves capitation, there is concern over potential reductions in access to care for highly comorbid patients or those with complex conditions because of the possibility of financial loss that comes with high-intensity care, Dr. Resnick says.

“From a patient perspective, the hope is that bundled payments will result in finding the ‘sweet spot’ between too little care and too much care,” he said. “It is the hope that reducing overutilization will reduce both cost and morbidity from unnecessary health care services.”

Dr. Mabry says that fair reimbursement under the bundled payment model-or any new reimbursement model-is essential to encourage young physicians to go into certain specialties, especially those like that urology that are in short supply.

“What we don’t want to do is make a miscalculation and underpay, by whatever method, different specialties that are already in shortage, and then run out of that specialty. If they try to cut corners and try to shift more dollars away from the urologists, then the good students will likely go into some other specialty-and the patients will be the ones to bear the ultimate brunt of that bad health care policy,” he said.

Moving forward

It’s vital that physicians have clarity of the rules of engagement, according to Gosfield.

“What does the contract with the [payer] say? What is the governance over the provider monies? What happens if there are disputes? Is it clear what the budget incorporated when it was established? You can’t respond to incentives that are unclear and contracts in this arena are all over the ballpark,” she said.

Urologists, like all physicians, should become familiar with the fundamentals of health care reform, including some of the basic elements of bundled payments, according to Dr. Mabry and Dr. Resnick.

Under health care reform, urologists and other surgeons can expect increased transparency, in which surgeons will be required to report their outcomes through a registry; and greater emphasis on what Dr. Mabry calls “the value equation.”

“Value equals quality divided by cost, and quality is measured by your readmission rate, your complication rate, your cost of complications, or survival of an operation,” Dr. Mabry said. “Focusing in on improving quality is perhaps the most important action that all surgeons can take at this point in time.”

“Reimbursement remains one of the fundamental challenges to specialist physicians with respect to bundled payments,” Dr. Resnick said. “The current organizational structure of most urology practices operates in parallel with other physician groups that will likely share payment for a particular bundle.

“It would be wise for all of us to begin thinking about creative ways to organize our practices to facilitate equitable and efficient payment for the services that we will continue to provide under a bundled payment system. Additionally, we must think about how to best leverage information technology to promote care coordination and information exchange in order to facilitate high-quality, low- (or lower-) cost care.”UT

New payment models at a glance(source: Alice G. Gosfield, JD)

Patient-Centered Medical Homes
While it is a care delivery model designed to increase greater engagement by practices and patients and improve the coordination of care among specialists, most programs sponsored by commercial payers make an enhanced per-member, per-month payment to primary care physicians. Some also pay a care management fee per patient.
Issues to watch: Monitor closely qualifying conditions for payment. Make certain it does not impact participation with plans without PCMH ­payments.

Bundled payments
This model puts multiple providers together in a shared risk pool. A budgeted amount is paid for the care of the patient. Typically one entity, traditionally a hospital, allocates the money among the participants. Bundled payments also include episode rates, which are budgets designed around a continuum of care.
Issues to watch: Look closely at what services are bundled, what triggers a bundle, and when do bundled payments end.

Accountable care organizations
The term is really about organizational structure and includes a wide array of payment arrangements. Most commercial ACOs use some form of bundled payments; others use a form of retrospective payment reconciliation. Payment measures typically include quality of performance, efficiency, and patient satisfaction.
Issues to watch: Closely evaluate language around bundled contracts, governance of the ACO, payment appeal rights, and dispute resolution.

Capitation
An actuarially assigned payment to provider per covered person regardless of whether or not that person actually uses health care services.
Issues to watch: If the actuarial predictions for health care coverage are too conservative, physicians are at risk for inadequate funding.

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