Cheri Bankston


Bundled payments represent one of the biggest opportunities to reform the healthcare system. The results and studies that have been made public are promising, showing improvements in patient health and reductions in costs across the healthcare system.  

To date, much of the discussion around bundled payments has focused on hospitals. But large physician groups, post-acute care (PAC) facilities – including skilled nursing facilities (SNFs) – and health plans also have opportunities to gain in a value-based world. If you’re one of those groups, here’s what you need to know.

Bundled payments: A primer

It’s worth reviewing the basics of bundled payments before exploring what they mean for PAC facilities. Under bundled payment models, insurers offer a flat fee for each episode of care. These can include a stroke, a myocardial infarction, or a hip or knee replacement.

Imagine the target price for a total hip replacement is $30,000. Under the most common bundled payment models, the hospital that initially treats the patient, and all providers, including PAC, share that $30,000. The hospital is at risk for overages, including those stemming from readmissions, but it also stands to benefit from efficiencies.

Most of the experimentation in bundles has come through the Centers for Medicare & Medicaid Services (CMS), which runs the Bundled Payments for Care Improvement (BPCI) program. The scenario above, in which the hospital holds the bundle, falls under BPCI Model 2.

In BPCI Model 3, the episode of care is triggered when a patient is discharged from the hospital. The PAC facility holds the bundle, and while it doesn’t share in costs for the initial hospitalization, it could end up liable for subsequent readmissions.

Under Model 2, hospitals tend to build strong relationships with PAC facilities in a collaborative effort to reduce readmissions, one of the more expensive cost drivers. But they also target efficiency metrics, comparing health gains to inputs such as length of stay.   

Under Model 3, PAC facilities need the discipline to do that themselves, but they have a wider latitude on how to get there, and they may see more value in slightly increasing the length of stay to reduce the chance of readmissions. Other efficiencies – like beginning physical therapy immediately – could also yield gains and improve quality.

The current landscape of bundles

It’s worth noting that BPCI isn’t the only bundled payment program providers may have encountered. The mandatory Comprehensive Care for Joint Replacement (CJR) and Episode Payment Models (EPM) bundled payment programs made headlines last month when CMS proposed to scale back (CJR) or cancel (EPM) the mandatory participation components.

While providers who were planning for, or already participating in, mandatory models may be discouraged by this news, the preparation they put into CJR or EPM will serve them well in adapting to voluntary models, such as BPCI, which are still in effect. It will also help them dive more quickly into future models, such as Advanced BPCI, which is expected in the coming months. Like its predecessors, Advanced BPCI will affect SNFs and other PAC providers across the care continuum.

Success under BPCI

To embrace bundled payments SNFs should take a hard look at their data to determine where they excel, where they must improve, and how best to proceed. Some might see that their readmission rates for congestive heart failure are better than average, and decide to either build a relationship with referring hospitals under Model 2 or specialize in that treatment under Model 3.

For their part, hospitals are already preparing for Advanced BPCI, which will allow new entrants to join with new incentives to make it more attractive. Though the Advanced BPCI start date is unknown, providers are evaluating their strengths and looking for strategic advantages. Specifically, they’re looking to PAC as an opportunity for cost savings and working to build high-quality networks that deliver the best possible outcomes for patients. PAC facilities that provide data on patient outcomes can help secure a spot in these initiatives.

Hospitals are also utilizing tools, such as naviHealth’s BPCI calculator, that predict potential savings under bundled payments according to diagnoses and number of hospital beds. SNFs should familiarize themselves with the financial potential of their partners under Advanced BPCI to understand how they fit into the equation.

Acceleration ahead

While government payers, such as Medicare, are working hard to increase the share of their payments tied to value-based care, private payers are doing the same. The Health Care Transformation Task Force, whose members include some of the country’s largest payers and providers, is built around the pledge to put approximately 75 percent of payments in value-based arrangements by 2020.

Value-based care is growing. For SNFs and other PAC facilities, understanding your data and using it to develop strong partner relationships are the keys to success under bundled payments.

Cheri Bankston is the Senior Director of Clinical Advisory Services for naviHealth, a Cardinal Health company.