Bundled payments are here to stay: Are you ready?


Clay Ackerly, MD

Healthcare industry executive

Hospitals and health systems are increasingly being held financially accountable for the value of entire episodes of patient care, including care that is delivered outside of the four walls of a hospital.

Bundled payments — single payments that cover all care for a patient’s medical treatment over a specified timeframe — are becoming more prevalent and are designed to encourage better patient outcomes at lower costs.

One of the Centers for Medicare and Medicaid Services’ (CMS) recent rules, known as the Comprehensive Care for Joint Replacement (CJR) program

Here, Essential Insights talks with Dr. Clay Ackerly, chief clinical officer of naviHealth, a Cardinal Health company. Ackerly shares his insight about what hospital leaders can do to prepare for and successfully implement CJR and other bundled payment programs.

Q: We know you’ve written extensively on bundled payment trends and episodic care, in publications including the New England Journal of Medicine, JAMA and the Harvard Business Review. To start us off, can you share some background on the CJR program and what it means for hospitals and health systems?

A: Absolutely. Thanks for the chance to talk with you about such an important topic. The CJR program will hold hospitals financially accountable for the quality and cost of care provided to patients who receive knee and hip replacements over a 90-day period. The program is mandatory for the approximately 800 hospitals located in the 67 metropolitan statistical areas (MSAs) and is estimated by CMS to provide net savings of $343 million for Medicare over the 5 year period. 

The aim of the rule is to encourage hospitals, physicians and post-acute care providers to work together to encourage care coordination and improve the quality of the entire episode of care, from initial hospitalization through recovery. 

I see this rule as a further signal of Medicare and other payers moving toward bundled payments, making hospitals accountable for the value of entire episodes of care. While there is no financial downside for hospitals who don’t successfully implement CJR in the first year, that risk will compound quickly. To align with this kind of bundled payment, hospitals need to move with urgency to redesign the way they care for patients.

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Q: What are the biggest challenges hospitals will face when implementing CJR?

A: Being held financially accountable for post-acute care can seem foreign to many hospital leaders, because historically they have had little visibility into or control over post-acute spend. CJR will be a challenge for many hospitals, because post-acute care accounts for the vast majority of the time of an episode and about half the cost. For example, a patient spends only 3-5 days in the hospital, but receives more than 80 days of care post-operatively. So implementing CJR will require a great deal of preparation and an ongoing commitment to providing episodic value – which in turn leads to what I see as the biggest challenge – a change in mindset. 

Q: What steps should hospitals take to prepare for CJR?

A: Preparing for CJR is easier said than done, but hospitals should start by understanding the key value drivers for post-acute care. Making sure that patients have the right level and the right amount of high quality post-acute care upon discharge is key. So is having the right processes in place to understand the unique needs of each patient, so that individualized plans can be put in place to reduce complications and minimize avoidable readmissions.

Hospitals need to start by assessing their overall readiness to address these key value drivers. This includes a review of everything from the pre-op process to the hospital discharge planning process to the hospital’s network of partnerships with post-acute care providers.

This assessment can identify gaps, and then empower the hospital to create a plan and allocate resources to fill any holes, systematically.  It’s a process that will take time, so hospitals need to start immediately.

Q: What are some best practices that can help set health systems up for success when implementing CJR?

A: Once hospitals understand the key quality gaps and cost drivers across an entire episode of care, they can start by identifying and implementing best practices that align with those drivers. 

For example, one best practice is to start the discharge planning process prior to surgery. This step alone enables the hospital to get patient and family perspectives on their ‘ideal care path,’ from the beginning. It helps identify barriers that might prevent prompt hospital discharge, or compromise care quality after discharge. Sometimes, relatively simple barriers can stand in the way of an effective recovery – like lack of transportation to follow up medical appointments, or difficulty preparing meals. Some patients may need help when it comes to managing their medications, or adjustments in their home to reduce their risks of falling.  By identifying these obstacles as part of the pre-op process, the hospital can reduce risk by putting together a plan to address each patient’s medical, environmental and social needs after they leave the hospital.

Another best practice is to establish post-acute care quality metrics and a network of post-acute care providers. Successful programs also leverage technology to advance an effective care episode, including enterprise analytics, patient-centered decision-support tools, discharge planning work-flow tools, or cross-continuum care coordination tools to ensure a safe care transition.

These best practices, among others, all drive episode value and reduce unplanned hospital readmissions by helping ensure patients get the right level of care upon discharge, for the appropriate duration and at the right intensity.

Q: What investments are needed in order to successfully implement CJR and other bundled payment programs?

A: CJR marks an important shift – with hospitals being increasingly expected to serve as the nexus of “episode management.” It’s important yet challenging work to redesign care and create partnerships across the care continuum. Being prepared to successfully implement bundled payment programs like CJR will require new skills. 

Because finding talent that has experience in this area can be a challenge, many hospitals will need to invest in outside expertise to conduct the needed assessments, develop internal competencies, and implement the best practices that will set them up for success.

Hospitals will also need to invest in tools to support efficient and effective discharge planning, analytics to understand the quality of care provided to their patients across the care continuum and benchmarking tools to compare their own performance to that of other hospitals. Furthermore, investing in developing, managing and measuring the performance of post-acute partnerships with ACOs, primary care physicians, skilled nursing facilities and home health agencies will be crucial to ensuring the appropriate ongoing management of patients.

Q: Any final perspective to share with hospital leaders who are tackling CJR implementation?

A: Implementing CJR may seem like foreign territory. But it’s important to remember that succeeding in CJR not only leads to improved patient outcomes for patients requiring total joint replacement…it can also help hospitals position themselves as an orthopedic center of excellence, and can lead to immediate financial gains.

Succeeding in CJR will also provide hospitals important experience that can be applied across different clinical episodes, setting them up for long-term clinical and financial success as payers implement more bundled payment programs.

CMS has signaled that this is the path forward.  Private plans and Medicaid are following suit.  Now is the time for hospitals to understand their evolving roles and make the needed investments to provide high-quality episodes of care for their patients.