Bundled Payment: A Gateway to Accountable Care?

By Gregg A. Masters, MPH

Advisory Board senior consultant and talented speaker (I might add), recently penned a blog post titled: ‘Bundled Payment: A Stepping Stone for ACO’s? I Don’t Buy It.’ I read this well constructed piece, but came to a rather different conclusion.

In his set up Rob posits:

As I have previously written, hospitals can realize a range of strategic benefits by developing carefully crafted bundled payment programs. And for many leaders who want to begin experimenting with new payment models, bundling presents an attractive entrance into the accountable care landscape, enabling innovation without fundamentally disrupting the current hospital business model. As they think about longer-term accountable care strategy, many of these leaders also assume that bundling offers a helpful foundation for ultimately becoming ACOs.

Then pivots to:

Unfortunately, I do not buy the argument that bundling provides a stepping-stone for ACO development. I certainly understand the genesis of the argument: line up all of the emerging payment models by degree of financial risk and assume a linear evolution from pay-for-performance to bundled payment to shared savings or capitated models. I even admit there are some areas of overlap across models, such as focus on readmission reduction, but closer comparison reveals that bundled payment and the shared savings model have fundamental differences. There are still plenty of valid reasons to explore bundling—but preparing to become an ACO is not on my list.

Using the same math plus decades in the managed healthcare industry contracting for hospitals, health systems, medical groups, physician networks and health plans including setting up IPAs, PHOs, and MSO infrastructure leads me to the opposite conclusion.

The point is not to contrast and compare indicia of bundled payment to probable elements of ACO compensation arrangements from ‘risk lite’ to global capitation, but rather to understand the compelling case for engagement of stakeholder physicians in the consideration process. To say this journey is a rather complex and high risk transformation to enable let alone discuss is an understatement. Yet, the opportunity to grasp and develop a complete understanding of the dynamics of bundled payment, and its impact on traditional practice arrangements is unquestionably a critical path in the journey to accountable care or an ACO.

Without a doubt, the ability to understand and process how bundled payment (as a proxy for the volume to value shift) will impact medical and surgical specialties especially hospital based physicians (under any ACO scenario) are high impact opportunities to co-create the culture and values essential to birth a successful enterprise.

The likely impact on hospital based physicians will be dramatic. Bundled payment will drive consolidation of minimally the traditional hospital based ‘franchises’ of radiology, pathology, anesthesiology and emergency medicine. Historical silos with little incentive to collaborate will likely be pulled into conversations as to equity of allocation of payment, let alone the ability to receive and distribute. How will that go over? When physician peers are put in the position of deciding the value of certain services in relation to the level of effort contributed we will witness a whole new ball game in the ‘input’ (pricing) domain.

Bottom-line, bundled payment is an essential part of the accountable care if not ACO conversation. It is an opportunity not to be avoided. Bridge the divide!