Bundled Payment: Practice Savior or Killer?

Matthew Farber

The new “in” term among those looking to lower the cost of healthcare is “bundled payment” (BP). Although there is still disagreement about what it means, the bundling of payments revolves around oncologists being paid a set fee for managing their patients’ care.

Concerns about BP in cancer treatment

“Five or ten years ago, the oncology spend was not high on the payer’s priority list,” said Matthew Farber, director of Provider Economics and Public Policy at the Association of Community Cancer Centers in Rockville, Maryland. “As the number of patients goes up, the number of those who survive increases, and as the general demographic shifts, the cost of cancer care goes up. In addition, the recent run of new (and expensive) drug approvals has caused payer’s focus to turn toward oncology.”True bundled payments would give oncologists a set amount of money per patient to cover all costs from initial visit through to discharge from care or to hospice. There are concerns that a BP system would not work in cancer treatment, and could cause disruptions in practices.

One reason is that cancers are a very individualized and diverse group of diseases. To say that a payer will offer a set amount of money for two lines of treatment does not address who is responsible should a third be needed. There is enough variability in oncology that true BP is likely to be problematic.

Episode of care a better fit?

“Oncologists do not take care of large populations of patients, where you can mitigate the risk of outliers who utilize a lot of costs, time, and energy,” said Bruce J. Gould, MD, medical director of Northwest Georgia Oncology Centers in Marietta, Georgia. “Any payment system has to reflect this so that one or two expensive patients don’t break a practice.”The model that may be the best payment fit for oncologists is episode of care (EOC). As currently evolving, this model transfers a specific part of the risk to the oncologists, but one that is easier to manage.

Gould’s group is participating in an early pilot study in cooperation with United Healthcare. The participants defined 19 categories for lung, breast, and colon cancers.

“They have taken our margins for chemotherapy medications, added extra money for hospitalizations, and that is what we get when a patient is registered as an EOC fee,” said Gould. “We are still paid a fee for service when we see the patients in our offices and to administer the medications. The drugs are reimbursed at Average Sales Price.”

Bruce J. Gould, MD

Shifts in how practices make money

The insurance company knows what its medicine costs will be and the most it has to spend for physician services should its enrollees need hospital treatment. It hopes to save money by giving oncologists incentives to treat patients in the office (where they get paid) and not in the hospital. Hospital in-patient costs are still paid by the insurance company. The oncologists are only assuming the risk for their in-hospital services.How practices make their money is shifting, and getting the bulk of income from drug charges is past. Other responses by oncologists such as pay for administering medications and increasing in-office diagnostic radiology have come under greater scrutiny.

“This gradual reduction in payment is a long-term trend that practices have to recognize to stay afloat,” said Farber. “I think eventually fee for service for both Medicare and private insurers is going down. Instead they will pay for better, more efficient, and less duplicative care.”

What practices should consider

Because of this, it is important for practices to take a long and close look at their processes and find ways to streamline them. Physicians, according to both experts, should look to implement established clinical guidelines as a first step. But they will also need to update information-gathering abilities through use of electronic medical record (EMR) programs tracking both what they are doing well and where they need to improve.Compare current treatment modalities with guidelines from the National Comprehensive Cancer Network (NCCN) or other professional sources. Getting a physician to buy in is important, as just one physician opting out of the predetermined treatment regimens could harm the program for all. This also highlights the need for ways to monitor compliance.

Full commitment to EMR technology is another important part of this puzzle. Both BP and EOC require practices to have the ability to monitor, document, and report treatment regimens. These systems help analyze costs, an important part of the process when negotiating fees and managing costs.

Business management may play as big a role in a practice’s profitability as the medical management side. For example, the efficiency and accuracy of coding and billing staff will impact cash flow.

How long to get ready?

“The investment in a strong management team is not cheap, but will pay dividends and keep practices strong and independent,” said Gould. “Over the last few years, all of the fat has been removed from the system. If you don’t have a lean, mean practice that is collecting every penny due you on the first try, the chances the practice will fold increase.”There is some disagreement on how long practices have to get ready for whichever system wins out. Gould thinks the “ability to worry about tomorrow is gone,” with an immediate need to get the office in order.

On the other hand, Farber thinks there is still time for practices to watch the early adopters work out the kinks. Both agree that keeping track of the various models as they mature is important so that practices are “leaning” the right way when approached. They also concur that things like establishing EMRs and familiarizing physicians with guidelines should begin immediately.

Author Affiliation: From KVU Communication, Inc, Carmel, IN.

Funding Source: None.

Author Disclosure: Mr Ullman reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information