Think Bundled Care Won’t Work? Check out what’s happening in Arkansas.

There have been serious, but somewhat quiet experiments going on for years around using bundled care to improve patient outcomes and cut costs. Prepare for some noise as states like Arkansas start figuring out the formula for making it work. The spotlight on bundled care as a potential successor to the Fee-for-Service (FFS) model is getting brighter driven by the Affordable Care Act (ACA) and the search for new payment models that can support the high costs of offering health care benefits to an expanding (and aging) population.

Four years ago, the Centers for Medicaid and Medicare Services (CMS), working with the Center for Medicare and Medicaid Innovation outlined four bundled care models that would provide a single payment for an episode of care from first contact, through procedures, to follow-up care. The first three models involve a “retrospective” bundled payment arrangement, while Model 4 is premised on a “prospective” bundled payment arrangement. In retrospective arrangements, traditional Medicare fee-for-service payment is discounted through negotiation, followed by a reconciliation of the total payment for a particular episode of care against a predetermined target price. In a prospective arrangement, a single negotiated payment is paid as a lump sum in lieu of traditional FFS payment.

How Arkansas is figuring out how to make bundled care feasible

#1 Buy-in from key leaders 

In 2011, then-governor Mike Beebe made bundled care one of his administration’s key priorities. Arkansas is the only example of a state-initiated wide scale adoption of bundled payment, but similar efforts may follow.

#2 Shared risk 

Earlier “episode payment” programs have had a difficult time getting traction in the provider community due to challenges that inevitably arise in execution of the program. For example, the risk of being left alone as a payer is great if the bundled payment is not properly deployed. So most “episode payment” programs never reach the “tipping point” necessary for providers to change the in practice patterns. In order to be successful, the risk needs to be shared between providers and public and private payers. And that is exactly what Arkansas did. 

In the Arkansas Health Care Payment Improvement Initiative (AHCPII), Arkansas Medicaid partnered with two insurers, Arkansas Blue Cross and Blue Shield and QualChoice. They agreed on common bundle definitions and quality measures, with AHCPII’s first payment performance period beginning in October 2012. Initially, AHCPII offered six bundles: attention deficit hyperactivity disorder (ADHD), congestive heart failure (CHF)(hospitalization only), joint replacement (total hip and knee), perinatal care; upper respiratory infection and developmental disorder.

#3 Manage bandwidth  

Currently, not all insurance carriers are participating in all five bundles. For example, initially, Medicaid did not participate in the total hips/knees or CHF bundles and Arkansas Blue Cross Blue Shield did not participate in the ADHD bundle. Although AHCPII has been a community effort and all parties have participated to some degree in establishing all of the bundles, some insurance carriers have predominantly led some of the bundles (e.g., Arkansas Blue Cross Blue Shield lead the total hips/knees bundle and Medicaid lead the ADHD bundle). The rationale is that carriers only have so much bandwidth, so each one established the bundles which had the most dollars at risk for each carrier respectively.

#4 Don’t boil the ocean. Choose the right episodes of care to bundle. 

Another reason that “episode payment” programs have incurred difficulties is that overly heterogeneous episode definitions were very burdensome. Too many services in some episodes of care do not allow for the focus necessary to affect change in culture or treatment pattern behavior. On the other hand, insufficient volume in the bundles does not allow the products to gain traction. Critical mass is a component that must be present in order to have successful innovation in payment strategies. The Arkansas initiative started with episodes of care that most lend themselves to bundling. 

Bundles are an attempt to bend the cost curve so that there is shared risk and ownership of episodes of care. The bundled care concept recognizes that high costs do not always equal high quality and it incentivizes providers and payers to produce better patient outcomes. In fact, bundled care is the only Medicare program where gain sharing is allowed to incentivize provider practice patterns.

We want to hear what you think! What do you consider the key stumbling blocks to an outcomes/population management?