Solutions for Bundled Payments

October 5, 2011

With Centers for Medicare and Medicaid Service’s continued interest in the creation of bundled payment system, providers will be at increasing risk of unanticipated impact.  The Bundled Payments for Care Improvement initiative is an attempt to improve quality and reduce cost by providing a single payment for multiple providers within one episode of care.  The goal of improved coordination between hospitals and physicians is expected to be realized by aligning the financial outcome for the two groups.

Providers interested in such initiatives may also wish to create a pricing strategy to take advantage of the new reimbursement terms.  Although this may be a wise course, providers should consider the potential impact on all payers’ reimbursements.  As long as the hospital fee structure ties to one price for each service, changes in strategy will impact all payers.  The ability to model and develop strategies around all payers is critical to the success of such initiatives.  At Applied Revenue Analytics,  we are able to model such strategies with unparalleled accuracy.

Historically, a hospital’s success has had little to do with the ability to develop a pricing strategy.  With the introduction of episode-based reimbursement, there is an opportunity to design a pricing strategy around such episodes.  Hospitals have spent much time understanding what they will “accept “ in managed care agreements, but little time on what pricing can do to the competitive landscape.  What if a hospital could develop one set of prices, to all payers including self pay, for endoscopy procedures?   Would that change the marketing process for that hospital?  The ability to accurately calculate the change in net and gross revenue for various strategies becomes paramount to the deployment of those strategies.  Factors such as volume of the current mix of services by payer and their associated payment terms must be considered.  Our hypothetical endoscopy usually involves services from at least five different clinical departments.  Professional services could also be put in the mix.

Bundling of services offers providers and payers an opportunity to transform healthcare, service by service, from a customized product built one by one to a uniform quality service with predicable financial and quality outcomes.

Written by: Seth Avery, Chief Executive Officer

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