Episode of Care Models Create Both Risk and Value for Practices

The value-based care initiative has driven public and private payers to redesign reimbursement models that focus on care quality and healthcare costs. Bundled payments represent one form of alternative payment models (APMs) that are designed to move toward value-based care.

Under a bundled payment model, providers and/or healthcare facilities are paid a single payment for all the services performed to treat a patient undergoing a specific episode of care. An “episode of care” is the care delivery process for a certain condition or care delivered within a defined period of time.

For example, if a patient undergoes a surgical procedure, payers would traditionally reimburse the hospital, surgeon, and anesthesiologist separately for their part in the treatment. Through a bundled payment model, the payer would collectively reimburse the providers involved, using a set price for the episode of care, which is usually based on historical costs.

There is financial risk involved with bundled payment models. If the cost of the episode is less than the bundled payment set price, then providers can keep the difference. However, if the cost is more, participating parties are financially responsible for the difference. This process encourages standardized, cost-effective care decisions.
Typically, CMS uses a convener to accept those payments. The convener can be an entity (physician groups, hospitals or commercial entities) that facilitates the coordination of care among all the providers and appropriates the financial risk and burden among the providers.

Many bundled payment models are retrospective with CMS reconciling the actual costs versus their target price which was calculated ahead of time. The bundles can also be “prospective” where the budget for each episode is created and the risk is placed on the providers. Some of these payment models can be mandatory.

In January 2018, CMS confirmed its commitment to bundles when it announced BPCI (Bundled Payments for Care Improvement) Advanced. This new CMS bundled payment model includes 29 inpatient and 3 outpatient episodes of care. Participation in the program is voluntary and involves a single retrospective bundled payment for a 90-day clinical episode duration.

Practices should prepare for participating in Episode of Care models by :
  • Ensuring capture of data metrics in a standardized manner;
  • Keeping patient information in an enterprise-wide EHR;
  • Creating processes for coordinating care and communication among different providers;
  • Tracking provider performance;
  • Establishing processes to prevent readmissions or exacerbations of conditions; and
  • Working with a committed network of providers to help manage the financial and clinical risks.