Aligning Reimbursement with Value - Institute For Strategy And Competitiveness - Harvard Business School 2/5/22, 09:43

Aligning Reimbursement with Value

Value-based health care delivery motivates and rewards providers who deliver the best outcomes at the lowest costs, and penalizes those who fail to effectively
improve patient health. Episode-based or bundled payments for complete cycles of care do the best job of aligning providers’ incentives to deliver the
maximum value to their patients. A bundled reimbursement payment covers all the treatments and interventions performed over a full care cycle for an acute
medical condition. Such bundled payments create benefits for all the principal players.

Bundled payment in health care is the simplest and most effective way to pay for the best results. Most clinicians WHO BENEFITS FROM BUNDLED
agree that a value-based payment that rewards good outcomes is far preferable to our current fee-for-service PAYMENTS?
reimbursement that rewards the volume of services instead of value, and has been a major contributor to the Patients receive proven and
relentless rise of health care costs. Fee-for-service also reinforces fragmented care through linking payment to effective care for their medical
specialties and specific interventions. Global provider budgets and capitation, are also poorly aligned with value for conditions.
patients by decoupling payment from patients’ particular condition and care process. The two emerging models for
value-based payment are capitation, used in ACOs and provide a single payment for overall care of a patient, and Providers earn a positive margin
bundled payment that represent a risk adjusted payment for a full set of services over the cycle of care for a condition. for efficiently treating patients and
producing good outcomes; over
We believe that bundled payments by condition are directly aligned with value for patients, and are the best way to time, they attract more patients in
pay for care. Bundled payments are risk adjusted single payments covering the full cycle of care for a condition from their area of expertise, enabling
diagnosis through rehabilitation. The payment is contingent on achieving good outcomes, and allow providers to their total margins to increase.
directly benefit by improving efficiency. Early evidence suggests that bundled payments lead to both outcomes and
cost improvement. In addition to CMS bundles, pilot programs with insurers such as UnitedHealthcare and with Suppliers of drugs, devices, and
employers such as Walmart, are creating opportunities for both providers and payers to create appropriate pricing and diagnostic tests that improve
incentivizes prior to enabling broader rollout. Proper costing is integral to reaping cost savings, and outcome measures outcomes and/or lower total costs
are also integral to aligning reimbursement and value. IT systems that capture both costs and outcomes over the care will find their products
cycle are essential to modeling bundled payments and estimating costs for purpose of price setting. incorporated into the treatments
used by effective and efficient
IT solutions are needed to manage the billing and claims management cycles involved in bundled payments, for both providers.
providers and payers. Current billing systems require bundled payments claims to be manually separated from fee-for-
service claims and submitted in a separate process, leading to inefficiency and lengthier times to payment. Once IT Payers (private insurers,
systems can support bundled reimbursement, sending a single bill and processing a single claim will dramatically corporations, governments, or self-
reduce the administrative costs of fee-for-service billing. pay individuals) will reduce their
spending for treating medical
Billing systems of the future will identify patients that are covered by a bundle versus fee-for-service claims or conditions and providing primary
capitation. Bundled payments claims, involving a single price and a small number of contingencies, will be submitted and preventive care for population
separately by provider to the payer together with accompanying information specified in the contract. For payers, IT segments.
solutions for bundled payment claims processing will enable the far lower administrative costs, and ensure
transparency and immediate payment once care is completed.

Finally, additional benefit of bundled reimbursement is simplification of the documentation burden facing clinicians.
Currently, much documentation is designed to insure maximum fee-for- service reimbursement. With bundled
reimbursement, physician documentation will focus on conveying the critical information about a patient’s care for the
condition needed by other providers for care continuity.

READ MORE IN PUBLICATIONS ON VALUE BASED PAYMENT

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