Bundled Payments Revisited: 10 New Critical Success Factors
Introducing bundled payments to a hospital, health system, or medical staff is a foundational first step in the integration pathway. Bundled payment provides a vehicle for balancing quality and efficiency. While bundled payment is technically a payment methodology, Acute Care Episode ("ACE") bundled payment demonstration participants have learned that with the expectations for high level reproducible outcomes in cost and quality, care delivery transformation ultimately results. New payment models, like ACE, offer an immediate win-win strategy by achieving improved quality, market share gains, and cost reduction with a single tactic. For organizations considering bundled payments, here are ten critical success factors based on our most recent experiences:
1. Board leadership on quality. The seminal work of the Institute of Medicine ("IOM") in 1999 provided a necessary wake-up call to healthcare leaders, resulting in a national movement to transparency. For hospitals and health system boards, "tinkering" at the edges will no longer suffice. Board members must make clinical quality and safety the organization's utmost priority to achieve the consistent results required of providers today.
2. Quality starts at the top. Research has demonstrated time and again that organizational performance improvement correlates with the degree of CEO support. CEOs considering bundled payment as an integration strategy must wholly commit to quality improvement and recognize that this commitment is the "selling point" to the payers and within the organization. Achieving consistently superior results necessitates change, which requires the steady leadership and commitment of the CEO.
3. Balance efficiency with quality. One of the greatest opportunities for hospitals is to use a bundled payment strategy to redesign care delivery from the point of first patient contact to 120 days post discharge. This can create the greatest efficiency and cost effectiveness because all patient interactions have been intentionally designed. This is the new efficiency methodology (i.e., high quality equals high efficiency).
4. Context. High-performing CEOs who intend to deliver strong results during a time of significant change realize and focus on setting the right context for the change that is forthcoming. Making bundled payment work is both challenging and radically different. Setting the right context and providing a compelling vision about what is to come builds a culture of trust even when the work ahead is challenging.
5. Service line leadership. Defining the depth of capabilities required and assigning the service line leader an appropriate breadth of responsibilities will ensure the effectiveness of the individual in this role. Maximizing the success of the leadership requires the redesign of the existing reporting structure to redistribute accountability across established organizational silos, which can be accomplished by formalizing a horizontal matrix throughout the organization. This collaboration is necessary in order to create the transformation required in a bundled payment structure.
6. Horizontal physician collaboration. Physician silos in the form of medical staff department structures can actually be a barrier to greater excellence in cost and quality. All too often, quality and performance improvement teams work in silos and are not integrated into care delivery teams. Similarly, physician silos result in needless competition and an uncoordinated and fragmented care process across an entire episode of care. Horizontal collaboration across specialties and providers is enabled by the efforts of a service line physician leader or medical director who can bring passion and vision to the process.
7. Cost and quality transparency at the provider level. The days of "blinding data" are over; itdoes not drive the accountability necessary to improve the quality of care that patients deserve and payers demand. Changing behavior does not happen until meaningful data is provided at an individual level compared to one's peer group. Leadership should benchmark providers internally as well asagainst national benchmarks and thencreate forums for physicians to share best practices in cost and quality.
8. Performance improvement. A Dartmouth Medical School study attributed extreme variation in U.S. healthcare to inaction in adopting standardized care protocols. Historically, hospitals have allowed an environment of tolerance for physician practice variation. This tolerance becomes a significant barrier to success in a bundled payment environment where having the right process is the difference between success and failure. Successfully implementing and executing bundled payments requires learning what actions do not create value and should be eliminated, as well as what actions add value and require accountability. Additionally, leadership should use process improvement strategies to build systems of care around such actions.
9. Information systems and analytics. Ease of real-time access to information and analytics related to quality is a gap for many hospitals and health systems. Protracted turnaround time in sharing outcome data renders the data meaningless to physicians. Hospitals and health systems must evaluate their clinical IT and analytics systems now to drive the prioritization of key infrastructure investments that will enable ease of access to the outcome measures needed to make informed decisions.
10. Managing change. Once all of this is in place, leaders must allow it to "storm, form, and norm." Just as seemingly flexible teams can be found to resist change, well performing hospitals can suffer from a buildup of silos, unquestioned routines, and overly powerful individual groups. Effective leaders today will enable change to grow through accomplishment and even error, knowing that while most changes and reorganizations fail, those that work best are built around good decisions and are well implemented.
With or without the Patient Protection and Accountable Care Act, few dispute that being accountable for the care provided is an obligation of healthcare leaders and clinicians. Hospitals and healthcare systems that are not performing clinically at least at the 90th percentile, have avoided making structural changes, and/or are seen by the marketplace as highly inefficient are at considerable risk. The methods required to succeed in bundled payment creates the mandatory re-alignment of incentives around the provision of higher quality at a lower cost. While the effort to get there represents a challenge to the current paradigm, the reward of being able to compete in the market on value is a key to continuing to meet an organization's mission.
For more information on bundled payments, please contact Ms. Baggot or Mr. Minkin at 310.320.3990 or dbaggot@thecamdengroup.com or rminkin@thecamdengroup.com.