Designing and implementing bundled pricing isn’t easy, but it will be increasingly necessary as Medicare and private payers continue to move away from fee-for-service reimbursement and the payer marketplace continues to evolve. CFA’s senior consultants have been assisting clients with “packaging” bundles of cardiac and vascular services to market to payers since the 1990’s for specialty contracting opportunities in certain markets. However, the market keeps changing and hospitals’ individual and collective capabilities and challenges have evolved significantly.
It is tempting to see bundling as focusing largely on pricing; however, developing successful and sustainable bundled pricing packages is much more involved. If not done properly, bundling can have significant financial and operational consequences beyond simply calculating a competitive price. Assuming that there will continue to be an active market for CV bundles, hospital and health system preparations need to focus on the following ten broad baseline capabilities:
Cardiovascular Bundled Pricing Baseline Capabilities
- Information – Information drives the process. Defining costs, setting prices, monitoring quality and managing these elements over time will make or break any bundle. Sophisticated hospital costing systems still lag other industries. Hospitals will need to analyze procedures for bundling potential, allowing for clinical and cost variances; match potential bundles with outcomes; and understand the circumstances that lead to variability in cost, length of stay, resource consumption and other factors including physician practice patterns in order to control the means of production.
- Standardization – The creation of best practice protocols, clinical pathways and guidelines of treatment are important underpinnings to bundles, as they define the standard of practice, coalesce clinical input and serve as the basis for costing analysis and pricing decisions. Driving out “unnecessary” variation leads to predictability, enhances quality, and solidifies physician and other practitioner commitment to the process required to produce a predictable “product.”
- Care Coordination – With clinical, outcome, financial and other performance standards in place, care coordination across the continuum (potentially involving multiple facilities and organizations) must be paramount. Many hospitals are now selecting home care and post-acute care partners they can work with and incentivize as part of a complete bundle. Coordination could include patient education, scheduling, transition planning, and other activities to insure smooth and faultless transitions.
- Physician Support – Physician support is critical. Standardization and care coordination processes are driven by physician and other practitioner leadership, planning and active participation. Physicians must provide necessary clinical leadership and actively support efforts to re-engineer care, streamline processes, boost quality outcomes and manage performance metrics, all under an appropriate hospital/physician alignment model that properly incentivizes participants.
- Administrative Support – Bundles cannot be designed or implemented without a commitment to the concept, the process required and the need to plan and augment existing resources to support the effort. Commitment may require new organizational structures, reporting relationships, care and business philosophies and specialized manpower, as well as technology and infrastructure (including EHR and CVIS).
- Supply or “Value-Chain” Management – Competing on price and other metrics will force hospitals to re-consider their supply (or “value-chain”) processes to continually tailor supply chain, procurement, and vendor and product selection, as well as refining value analysis processes to increase the cost-quality-value philosophy.
- Re-Engineered Business Systems – One oft-neglected capability involves the business systems necessary to produce and process appropriate billings for payers who bundle. This is not like generating a bill in the past – it is totally different and requires carefully re-engineering the whole process to reflect patient identification, guaranteed prices per admit, subcontracts to other providers, included physician compensation, etc. Careful planning and resource allocation is required to keep the revenue stream both current and accurate.
- Bundles vs. Episodes of Care – An episode of care historically stopped at the time of discharge. Now it may involve multiple organizations (think home care and skilled nursing) that will need to be coordinated, contracted, and managed into an overall care process. Relationships will need to be set in place and properly managed to optimize care coordination and patient transition.
- Constant Performance Improvement and Clinical Innovation – Bundles aren’t static, nor are the on-going feedback on performance against internal or external benchmarks and metrics. Processes need to be in place to constantly monitor all of the care processes and performance indicators and innovation applied when necessary to make periodic adjustments. Systems and personnel must be in place to both monitor and innovate when required.
- Marketing and Sales – While some market opportunities will come to the hospital, it is incumbent upon the Sales and Marketing team to continually monitor the payer marketplace and develop bundles that are appropriate and will be well received by payers. Based upon an ongoing positive relationship between hospital and payers, marketing efforts need to be continual and founded upon principles of the exchange relationship where each side must be seen to benefit from the other.
Some hospitals have significant current capability; however, others are just getting started. It is important to consider the basic prerequisites for creating and managing bundles before competitive and/or time pressures grow too great to ignore. Creating an ill-conceived bundle can result in poor outcomes and economic loss. There is considerable preparation to be done and little time to waste. We can help.