What are bundles of care?
A ‘bundle’ is defined as the set of services or treatments provided to a patient for an episode of care. A bundle of care is intended to include all aspects of a patient’s care across providers and settings, over a fixed period of time.
An example of a bundle of care is knee replacement surgery. This bundle may be defined to include pre-hospital therapies, diagnostics and imaging, the hospital-based care, supplies and equipment, associated medical and surgical fees, and different modalities of rehabilitative therapies to restore function.
What are bundled payments?
Bundled payments are now being proposed as a possible remuneration method for episodes of care.
In bundled payments, a single amount is used to fund the entirety of care related to a condition or event for a fixed period of time. That is, various providers are linked through a single funding amount which spans the continuum of care, including pre-acute, acute, and post-acute care. Expenditures in excess of the funding amount are the responsibility of the various providers. Surpluses derived from expenditures below the funding amount are retained by the provider. This mechanism creates a financial incentive for providers to control costs below the bundled payment amount, and savings are often sought by reducing unplanned re-hospitalizations, reducing ineffective care and improving care transitions.
Bundles payments can be viewed as a generalization of DRG/CMG-type case mix systems. Whereas DRG funding systems are based on funding all elements of care that occur during the acute phase of an episode of care, bundles of care are intended to reflect all services related to a particular condition over time, including those services that occur outside of the hospital.
A proposed pilot for episode-based payment for cancer care for Medicare beneficiaries illustrates the concept of bundled payments (Bach et al 2011). The proposed bundle covers the costs of drugs associated with the treatment (chemotherapy) and their administration for a set period of time for a specific cancer, as well as the costs of supportive-care drugs and their administration. The proposed bundle defines the episode of treatment as one month; each subsequent month of necessary treatment would be considered an additional bundle, with an additional payment.
Advantages of bundled payments
Supporters of bundled payments advocate that bundled payments create financial incentives for coordination and integration of providers across different settings. Conventional payment methods, they contend, results in fragmented care that reduces the quality care (Spehar et al 2005), impairs discharges from hospitals (Béland et al 2006), and reduced access to services (Lavis and Anderson 1996).
By creating financial incentives to reduce costs across providers and settings, bundled payments holds linked providers accountable to their peers for the total cost of care that they provide during an episode of care.
The literature describes other potential advantages of bundled payments:
- Reduces the risk of cost shifting between sectors (Mor et al 2010).
- Provides a possible approach to develop comprehensive and longer-term measures of quality and outcomes (Birkmeyer et al 2010; Thomas et al 2009).
- Explicit incentives to reduce readmissions due to fragmented care (Mor et al 2010; Grabowski 2007).
- Holds providers responsible for the consequences of fragmented care, rather than to the system at large (Mor et al 2010; Jencks et al 2009).
Limitations of bundled payments
The conditions or procedures best suited for bundled payments are characterized by clear clinical pathways, such as inpatient surgery for coronary artery bypass (CABG), hip fracture repair, back surgery and colectomy (Birkmeyer et al 2012). Bundled payments may not be suitable for all types of conditions or procedures. This would include procedures with low volumes, few providers of care, or conditions that have a wide range of equally credible clinical pathways (and costs).
Mental health conditions, for example, may present a challenge for bundled payments model. For complex cases, there can be a vast array of legitimate treatment modalities.
As bundled payments are a fairly new mechanism for funding health care, they face methodological challenges, including:
- Complex care needs may require long follow-up periods (Struijs and Baan 2011).
- Measurement challenges may induce some providers to “skimp” on the care they provide (Struijs and Baan 2011).
- Among providers, which entities should act as the ‘paymaster.’
- Challenges to reduce opportunities for cost shifting between insured and uninsured services.
Considerations for health care funders
For bundled payments to create effective incentives, accurate, timely and linkable data needs to be collected across all health care setting, including hospitals, post-acute care settings and providers, physicians, and emergency departments. In this respect, policymakers need to be confident that their clinical, utilization and cost data can be reliably and consistently measured and reported.
Physicians play a critical role in bundled payments. Physician’s decisions influence hospital use and post-discharge setting; however, in Canada and the United States, physicians are generally funded separately from hospitals on a fee-for-service basis. Policymakers need to be cognizant that any change in the relationship between hospitals and physicians may have unanticipated consequences.
Conclusions
Bundled payments are currently being actively considered as a mechanism to fund health care. Bundled payments can be viewed as a move away from fee-for-service in each setting of care and towards an integrated model of remuneration that aligns financial incentives for different providers.
A bundled payment that rewards providers to reduce fragmentation, improve coordination and reduce ineffective care will be a powerful draw for many funders. Broad experimentation with bundled payments is occurring in the U.S. and, depending on the outcomes, may proceed elsewhere.
The Center for Medicare and Medicaid Innovation has a “Bundled Payments for Care Improvement Resource and Learning Area” with an extensive collection of information and resources to provide an in depth understanding of bundled payments.
