Reducing Costs to Excel in Bundled Payments

CMS is introducing bundled payments in cardiology, January 2018, in order to reduce variability and cost in healthcare. Through several studies conducted over the years, CMS and other insurance providers have recognized that the same procedures performed in different hospitals vary in cost dramatically nationwide. Some of the highest variations even come from hospitals within the same geographical regions. This leads us to believe that resource utilization, and risk mitigation strategies are rarely utilized. Under the new bundled payments, CMS will be setting target prices per procedure. If the organization spends more per procedure than the target price allowed, they will then have to repay CMS the difference. However, if the organization keeps procedure prices below the set target prices, CMS will, in turn, owe them a refund.

By balancing the value equation, and developing strategies to mitigate risk and reduce variability, hospitals will thrive in bundled payment environments.

“In order to excel in cardiac bundles, organizations will need to develop several strategies, and focus on an array of areas rather than trying to find one simple solution.”

Director of Cardiology

Academic Medical Center

Balancing the Value Equation Under Target Prices

It’s no secret healthcare reimbursement is shifting further and further away from volume in favor of value-based reimbursements. This significant change in how providers get paid will also cause changes in how care is being delivered. Value-based payments will require providers to better manage resources and supplies that they use at the individual patient level.

Healthcare Value Equation

Improving the Risk Treatment Paradox

The most common problem we see in healthcare as it relates to cost is the variation in care received. In one hospital a PCI procedure may cost roughly $25,000, while another in the same region may charge twice as much. CMS is attempting to level the playing field, and reduce outliers. In order to do this, organizations must build out protocols for physicians to follow, to give the most cost-effective yet high-quality care.

This graph demonstrates the use of bivalirudin, a drug used to decrease bleeding events in patients undergoing PCI procedures. To best utilize resources, this drug should only be administered to high risk, and moderate risk patients if necessary. Low-risk patients most likely would not need this drug.

Risk Treatment Paradox

Graph 1: Fee-for-service

This graph represents the majority of physician behavior in a fee-for-service environment. It demonstrates significant variation in the way that bleeding avoidance strategies are used by bleeding risk. It also clearly highlights the risk-treatment paradox, when some patients are over-treated and others are under-treated. When care pathways are determined in a fee-for-service environment, proper utilization of resources and per procedure costs and not a part of the decision-making process. Doctors already know how to treat patients appropriately, but the challenge they face is intuitively assessing a patient’s risk of a poor outcome.

Graph 2: Value-based Care

This graph depicts a client who virtually eliminated the risk-treatment paradox, when some patients are over-treated, and others are under-treated. By prospectively incorporating risk stratification into the workflow and supplying the clinicians with better information about their patient’s risks, clinicians are empowered to deliver precision medicine. Resource utilization became pertinent.  There is now preferential utilization of bleeding avoidance strategies. The higher risk patients receive the drugs they need, while the lower risk patients don’t get drugs that they don’t need.

Average Cot of PCI Procedure

Seidman, J. (2016, Aug. 11) New Cardiac Bundled Could Produce Some Big Winners and Losers Retrived from: