“Episodes of care” are an increasingly common form of value-based reimbursement.
The most widely known episode of care or bundled payment model is the Centers for Medicare & Medicaid Services (CMS) bundled rate initiative for Medicare, which pays for acute care hospital stays and related post-acute services through episodic payment mechanisms. Depending on the payment model, bundles include designated episode lengths of 30, 60, or 90 days related to a hospital stay (see Bundled Payments for Care Improvement (BPCI) Initiative: General Information).
Humana recently expanded the availability of its Medicare Advantage value-based care bundled payment model for joint replacement to a total of 13 states. The model provides a bundled payment to provider organizations to cover services from diagnosis to post-surgery recovery for consumers undergoing total hip or knee joint replacement surgery. The goal of the program is to reduce post-surgery hosptial admissions and complications by increasing care coordination at the provider organization-level (see Humana’s Total Joint Bundled Payment Model Doubles To 13 States). Just last month Humana also announced the launch of a maternity bundled payment program within their commercial plans. Initially, Humana will partner with five provider organizations to serve consumers with low-to-moderate risk pregnancies, with the episode of care covering prenatal services; labor and delivery; and post-delivery care (see Humana launches maternity bundled payment model with analytics and care coordination capabilities).
Last summer, the Tennessee Health Care Innovation Initiative implemented new cross-payer episodes of care reimbursement for anxiety and non-emergency depression. An episode of care includes health care services delivered in association with a “trigger” diagnosis, or acute health care events such as a surgical procedure or an inpatient hospitalization. The model is retrospective, in that the procedures and services included in the episode have already occurred. The “episode window” is the entire duration of the episode (see TennCare Implements Episodes Of Care Reimbursement For Anxiety & Depression On July 1).
And, Optum is utilizing a bundled payments for medication assisted treatment (MAT) models for addiction treatment provider organizations – paying them for a group of services associated with an episode of care. For example, Optum and MAT provider organization CleanSlate developed a monthly bundled rate that includes a single payment for all services associated with MAT (lab costs, psychosocial supports, care coordination, and medication management) exclusive of pharmacy (see Developing A Value-Based Partnership: The Optum Case Study and Hidden Behavioral Health Opportunities In Value-Based Reimbursement).
I think we can expect reimbursement for “episodes of care” to increase thanks to growing successes using this approach. The Medicare Comprehensive Care for Joint Replacement bundled payment model, which holds hospitals responsible for the costs from the time of the surgery through 90 days after hospital discharge, resulted in a 20% reduction in the total costs of care per episode (see Cost of Joint Replacement Using Bundled Payment Models). The Tennessee Health Care Innovation Initiative has shown promising results – reducing costs 3.4% for perinatal services, 8.8% for asthma exacerbation, and 6.7% for total joint replacement (see TennCare’s New Approach to Payment Shows Savings). And Horizon Blue Cross reported that its bundled joint replacement program has resulted in 100% fewer hospital readmissions for knee arthroscopy, 37% fewer hospital readmissions for hip replacement and 22% fewer hospital readmissions for knee replacement (see NJ’s Horizon BCBS Pays $3M in Shared Savings for Episodes of Care; Readmissions, C-Sections Reduced).
And, before you think that episode-based reimbursement might not be something you’ll see in your specialty, it’s important to note that episode-based reimbursement is relevant to almost 75% of health care costs. Episodic reimbursement is being applied to procedures, to acute care episodes, and chronic medical and specialty care. And, episode-based payment is being deployed within accountable care organizations or primary care capitation and shared savings arrangements—where specific groups (such as specialists) are rewarded for managing an episode of care effectively. For this reason, health and human service executives should consider including analytics about episodes of care in your standard performance measures.
The ability to track the cost per consumer for specific issues and conditions is the basis of episode-based reporting. In the example of a program with a $6,000 payment for a six-month episode of community-based medication assisted treatment, a management team would want a report that outlines for each consumer in that program all service utilization and associated costs during that six-month period. And, the management team would want to see those metrics across the entire group of consumers enrolled. Episode-based reporting often requires interoperability. If a provider organization is part of a larger bundle of services (like those I outlined in Hidden Behavioral Health Opportunities In Value-Based Reimbursement) and performance payments are based on the performance (and utilization and costs) across all service provider organizations, having a reporting tool that aggregates that utilization/cost data for the specific consumer across a number of provider organizations is essential.
In addition to tracking costs for specific consumers against specific contracts, episode-based reporting has the opportunity to improve other areas of performance. Episode-based reporting can be used to determine which particular professionals and/or programs are “best” in treating particular types of consumer conditions. And, the data can also be used to select the best “partners” for specific contracts. That same data can be used in professional education, by highlighting variations in treatment patterns and understanding that variance. Episode-based reporting data also allows organizations to target case management, care coordination, and utilization management resources on the most critical and actionable consumers and professionals (see The Thousand Right Things). For an example of the proactive use of episode analytics, McKinsey analyzed Medicaid fee-for-service data (see Extending The Use Of Episode Analytics Beyond Alternative Payment Models: A Scalable Architecture For Improving Payer Performance), and found that for consumers receiving a spinal fusion procedure, of the 70% of the consumers at high risk for an opioid overdose were concentrated among 10% of primary providers. The perfect example of where episode analytics can direct the use of utilization review and case management resources.
The ability to report on (and manage) clinical utilization, cost, and performance by consumer and by episode will continue to grow in importance. Whether your organization is participating in value-based reimbursement arrangements that pay by episode, or not, the ability to report consumer costs in this way is an important element in population health management sophistication and in demonstrating value to payers.
For more, check out these web briefings: Must-Have Technology Solutions For Competitive Population Health Management: Optimizing Behavioral Health For Better Plan Performance & Patient Health (Executive Web Briefing Recording) and How To Optimize Complex Consumer Care Using Next Generation Population Risk Management Tools (Executive Web Briefing Recording).
And join us at The 2018 OPEN MINDS Executive Leadership Retreat Executive Seminar on September 17 in Gettysburg, Pennsylvania for the seminar, “How To Build Value-Based Payer Partnerships: An OPEN MINDS Executive Seminar On Best Practices In Marketing, Negotiating, & Contracting With Health Plans,” featuring OPEN MINDS Advisory Board Member Richard Louis, III.