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An Industry Expert Shares Insights on the Challenges and Opportunities around Bundled Payments

January 24, 2018
by Mark Hagland
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Charlene Frizzera, a former senior CMS official, has been on the front lines in helping providers succeed in bundled-payment models

Bundled-payment contracting—whether between public payers or private payers—is an enormous subject of interest in hospitals, medical groups, and health systems these days—and for good reason. Not only have a lot of developments been evolving forward with regard to bundled payment models under the Medicare program—just two weeks ago, senior officials at the Centers for Medicare and Medicaid Services (CMS) announced the launch of a new voluntary bundled payment model called Bundled Payments for Care Improvement Advanced (BPCI Advanced)—bundled-payment contracting is taking off in a big way now, too, between private health insurers and providers.

Meanwhile, policy shifts at the highest levels of the Department of Health and Human Services (HHS) have left many provider leaders feeling uncertain as to where things are headed right now at the federal level. On the one hand, CMS at the end of November finalized a rule that will cancel mandatory hip fracture and cardiac bundled payment models (HHS had issued a proposed rule for that cancellation back in August of last year). On the other hand, earlier this month—in fact, just before the announcement of the BPCI Advanced model—Alex Azar said during a Senate Finance Committee hearing on his nomination as HHS Secretary, that he was open to mandatory bundled payment models, in principle. That stance appeared to be a reversal of the position of Tom Price, who, during his relatively brief tenure as HHS Secretary, from February through September 2017, had expressed very strong reservations about mandatory bundled-payment models.

Meanwhile, “BPCI Advanced” will qualify as an advanced alternative payment model (advanced APM) under the Quality Payment Program (QPP) under the MACRA (Medicare Access and CHIP Reauthorization Act of 2015) law; under the Advanced APM track in MACRA, providers take on financial risk to earn the Advanced APM incentive payment.

So things are moving forward, even if not evenly. But industry leaders and observers in the know agree: the bundled-payment phenomenon is moving ahead. Among those leaders is Charlene Frizzera, a former acting administrator of CMS, with over 30 years of experience in federal healthcare. Frizzera is currently president of the Washington, D.C.-based consulting firm CF Health Advisors, where she advises corporate, government and not-for-profit organizations about health care policies and reform like bundled payments and joint replacement. Frizzera spoke recently with Healthcare Informatics Editor-in-Chief Mark Hagland regarding the ongoing developments in this area. Below are excerpts from that interview.

Let’s start at a 40,000-foot level. How do you see the U.S. healthcare system’s journey into bundled-payment contracting right now?

Based on 30 years at CMS, it’s important to keep in mind that bundling is not a new concept; it’s been around forever. And at CMS, how did we come up with bundled payments? We looked at claims, and when we started looking at claims for ESRD (end-stage renal disease) patients—that was probably the first bundle. We found that the services were pretty consistent across providers. And so instead of paying separately, we felt it would be more effective to pay for a bundle, rather than for separate delivery of services. That’s the same concept even now. But the more CMS gets into patient-centric payment issues, the more they’ll be looking at specific disease states, both to save money, but even more importantly, to give the controller of the bundle the ability to more effectively manage care for that patient. Where the controversy comes in is around what gets bundled. How specific, how generic, should the bundle be? And CMS has published the 48 disease states they’d like to bundle. It’s on the website of the Innovation Center [the Center for Medicare and Medicaid Innovation, or CMMI].

Charlene Frizzera

The joint replacement bundle was made mandatory, of course.

Yes, but it had actually started out as a voluntary bundle. When it started to show success, they made it mandatory. And to date, the Innovation Center has the ability to write a regulation to change a payment system, without going through legislation, as the result of a successful demonstration. And that cuts a pretty big step out of the process. What CMS tried to do that some in healthcare didn’t like is making a demonstration mandatory from the beginning. The drug pricing demonstration was what created so much furor. That was back in 2016; it was one of the last regulations that the Obama administration tried to issue.

What’s interesting about the joint replacement bundle is that it was one of the most successful bundles they had ever put together. And when you think about what they bundle, they bundle things that have the least amount of risk to the beneficiary. Joint replacement—when you look at all those DRGs, it’s the one where there was the least amount of risk to the beneficiary, and the greatest potential reward, with the belief that a long hospital stay was not necessary. And the most successful orthopedic surgeons started doing pre-habilitation and post-habilitation with the patients. The pre-hab got the patients ready for the surgery, and because of the pre-habilitation, the post-habilitation was usually shorter, too. And that bundle was incredibly successful, when the surgeons found a way to rethink, how to make the beneficiary healthy when they come in, and get healthier more quickly afterwards. That was hugely successful.

What is your perspective on the politics of this going forward? As we all know, Secretary Price made numerous very strong statements disparaging mandatory bundles; he also changed the joint replacement bundle from mandatory to voluntary.

A couple of things. Secretary Price was very politically committed. I think he made a lot of promises to physicians when he became secretary, when he described “bad bundles”—though he didn’t use that phrase. But then they [at HHS and CMS] started looking into the bundles… And the bundles that saved money—if you stopped the bundle, you’d have to find some way to replace that savings—it’s called “pay-fors.” That was the first piece of this, per the budget. Further, they found out that there actually were a lot of people who did like the bundles. And taking away the bundle—that’s a big process, right? And so to de-bundle a set of payments is hard. What Price did do is that he stopped the mandatory bundle on joint replacement.

And again, the headlines were… but he just said, it’s not going to be mandatory. So in the end, he didn’t do much to change bundles, except make the joint replacement not mandatory. Interestingly enough, they’ve come out with a new bundle incorporating hospital and outpatient care together [the BPCI Advanced model] that they just announced, and put out the award for the new bundle and are looking for recipients. And they’re looking for people to apply by October 1.

Do you have broad overall thoughts about mandatory versus voluntary bundles?

The folks who didn’t like the mandatory bundle are just the folks who liked being paid a lot of fee-for-service money. You probably won’t make as much money under a bundled payment. But you can actually make just about as much money under the joint replacement bundle if you do the pre- and post-habilitation. CMS’s idea is that, mandatory or not, folks will stop going to those organizations that don’t do as well under the program. So what happens is word of mouth. And it’s not going to happen overnight. But there is going to be movement in the beneficiary space for practices that do the bundles that keep patients healthier. So I think it should be mandatory. It’s going to force surgeons to manage and coordinate care. And again, that’s just for joint replacements. They don’t have bundles for back surgery. And it’s so common these days.

Ultimately, how many potential areas might there be in which to develop bundles?

There could be hundreds of bundles, depending on where CMS wants to go. For this latest, they’ve identified 29 inpatient and 3 outpatient codes, to bundle together. And the idea is that they want the hospitals and outpatient clinics to work together—it’s for cardiac defibrillation; the second is back and neck except spinal fusion; and the third is percutaneous coronary intervention (PCI). So, that’s two heart procedures, and a back-and-spine procedure.

How quickly will providers get good at managing bundled payments?

Obviously, it depends on the physicians. I think that, for the surgeons and other physicians who are part of a bigger provider group or healthcare systems, this will be easier to do; for the others, for the smaller practices, it will be harder; it’s hard to just call someone up and say, “Hey, you wanna do a payment with me?”

Data, analytics and information-sharing will prove to be very important to success in this area, correct?

Absolutely. If you don’t know who you’re serving, what you’re paying, and what services you’re providing, you can’t manage a bundle. And sharing is important, but you have to have the data first. And part of the original joint replacement bundle concept was gathering the data together. And as you know, claims data is not great. That’s all CMS has, so that’s what they’ll use. But the clinical record with that is what makes it work.

And, as provider leaders are telling us, marrying the clinical and claims data remains a huge challenge, correct?

Yes, absolutely.

Do you have any advice for the CIOs and CMIOs of patient care organizations around this?

I say this at every conference I speak at: the only way to change the healthcare system is through data. You don’t really know what to change until you have data to show what’s happening. And part of what limits our data today is providers and payers collecting data based on what they’re paid on. If you get a capitated payment, you collect data for a capitated payment; if you get paid a bundle, you collect data on a bundle. And the successful providers of tomorrow will figure out today what kinds of data they’ll be paid on years down the road. What are the three or four possible types of payments I’ll be receiving? And the services provided.

Tell me a bit more about the “pre-habilitation” concept?

Certainly. I’ve been advising a start-up company called PeerWell, which has developed a patient-facing app. The thing is that, while physicians automatically factor post-acute care into how successful their patients might be post-surgery, many don’t realize how pre-habilitation activities can help patients’ processes. By participating in a pre-hab program, such as that offered by PeerWell, hip and knee replacement candidates can optimize their health before surgery, offering a way for hospitals to contain the cost of care per patient by focusing on improving patient health pre-procedure, therefore reducing the amount of time needed in a costly skilled nursing facility for post-op rehab. By doing so, more patients are in a better condition to be discharged directly home after surgery, cutting after-care costs dramatically—which has shown to be a large cost to providers.

Do you have any metrics to share around that?

Yes. A one-percent improvement in terms of the percentage of patients discharged to their homes, will result in $100,000 in cost savings. Meanwhile, if clinicians can reduce the cost of an episode by $1,215 through one to two hours of pre-hab care, that would represent a cost savings of $1.2 million in cost, for a hospital that performs 1,000 joint replacement cases a year.

What are the critical success factors involved in this pre-hab care management?

There are several. First, they connect very directly to patients. Patients connect pretty easily with the presentation. It’s simple. Patients can review with them what the plan is. It really does create the continuity between the beneficiary and the surgeon, and they guide them through the pre-hab process. So having a care manager do the pre-hab process. It needs that little bit of a personal touch. So that they pay attention to the pre-hab procedures, and patients stick with the program and prepare for the surgery; it’s really pretty impressive.

The reality is that bundles aren’t going away. So people who think bundles aren’t going to be a form of payment in the future, are kidding themselves.



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When Will Federal Healthcare Officials Liberate CMMI to Create Appealing Innovation?

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At a moment when the MSSP Program is particularly vulnerable, are officials at HHS and CMS preparing new offerings through CMMI that will appeal to provider leaders?

“What might be in the works over at the Centers for Medicare and Medicaid Innovation (CMMI)? Are there new pilot models actively in development that will be rolled out this year? Many industry stakeholders, including federal lawmakers, are eager to know what the relatively opaque agency has in store,” Associate Editor Heather Landi wrote here in an article on January 11.

“Created under the Obama administration, CMMI is charged with piloting, testing and evaluating alternative payment models (APMs)—such as bundled payment models, for example—with the intent of increasing quality and efficiency, while reducing program expenditures under Medicare, Medicaid and the Children’s Health Insurance Program (CHIP),” she noted. “However, CMMI has been notably quiet in the first two years of the Trump Administration with regards to new payment models. Last January, CMS did launch a new voluntary bundled payment model, Bundled Payments for Care Improvement Advanced, the Administration’s first Advanced APM.”

Landi added that, “In several speeches to industry groups this past fall, Health and Human Services (HHS) Secretary Alex Azar has indicated that the Trump Administration is exploring new voluntary bundled payments, and even revisiting mandatory bundled payments, which represents a strong about-face in the Trump Administration’s policy about bundled payment initiatives. Azar has even hinted that CMMI will get more involved in addressing social needs, such as food insecurity and housing.”

Indeed, in a September 6 speech to a meeting of the Physician-Focused Payment Model Technical Advisory Committee (PTAC) in Washington, D.C., Secretary Azar said, “Of the priorities I have picked for HHS, the most ambitious and furthest reaching is transforming our healthcare system into one that pays for health and wellness rather than sickness and procedures… The outcome we’re aiming for is pretty simple: better healthcare at a lower price. But the question of how we deliver this outcome is much more complicated.”

Azar went on to say that “There has been some progress on some of the tools we need to execute this transformation. We have more alternative payment models, more coordinated care, and more value-based compensation than ever before. But the results we hope for haven’t always materialized. As just one example, we saw in the analysis CMS released at the beginning of August that the burgeoning number of Accountable Care Organizations have not delivered significant savings when all costs and incentives are taken into account.”

Importantly, he added, “[T]he best results we’ve seen have been in ACOs that took on two-sided risk—where providers have real accountability for outcomes. We’ve also seen better results from physician-run ACOs, as opposed to hospitals. Without real accountability, we’re just offering bonuses on top of payments that may be too high already. That’s why we have now proposed to simplify the ACO system into two tracks, requiring them to take on risk sooner. As our CMMI director, Adam Boehler, put it last week, if this means somewhat fewer ACOs, that’s okay with us.”

Remember, PTAC was created by the MACRA law, to help HHS get input and feedback for innovative ideas. As the committee’s website notes, “PTAC was created by The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) which was enacted, in part, to improve how the federal Medicare program pays physicians for the care they provide to Medicare beneficiaries. MACRA authorized the creation of Medicare’s Merit-based Incentive Payment System (MIPS) and additional Medicare Alternative Payment Models (APMs). MACRA also created incentives for physicians to participate in APMs, and it specifically encouraged the development of certain types of APMs referred to as physician-focused payment models (PFPMs).” And, as part of all of that, Congress created PATC. Indeed, PTAC’s website notes, “The Secretary is required by MACRA to review PTAC’s comments and recommendations on submitted proposals and post a detailed response on the Centers for Medicare & Medicaid Services (CMS) website.” So it might well be at one of PTAC’s committee hearings that we’ll hear the inside scoop on what’s coming next.

As Landi noted in her Jan. 11 article, “Many healthcare industry stakeholders who support accelerating the transition to value-based care and payment models are eager for CMMI to develop and roll out new voluntary alternative payment models. And others want to see more transparency in the process. Just this week, two Congressional leaders, U.S. Representative Richard Neal (D-MA), chairman of the House Committee on Ways and Means, and Rep. Kevin Brady (R-Texas), ranking member of the committee, sent a letter to Verma calling for greater transparency from CMMI as it develops new delivery and payment models, noting that its process has ‘historically been opaque to Congress and to stakeholders.’”

Indeed, Reps. Neal and Brady wrote, "Significant policy changes made unilaterally by the executive branch without sufficient transparency could yield unintended negative consequences for beneficiaries and the health care community. We strongly urge the Agency to provide more sunshine in this process."

The challenge here is that even the APMs are heading through some very choppy waters right now. As I noted on January 11, The announcement on Wednesday, January 10 by senior officials at the federal Centers for Medicare & Medicaid Services (CMS) that the agency will require participants in the Medicare Shared Savings Program (MSSP) will be required to submit applications to the new Pathways to Success part of the Medicare Shared Savings Program (MSSP) by February 19, has roiled accountable care organization (ACO) leaders nationwide.”

And I quoted extensively a press release from the Washington, D.C.-based National Association of ACOs (NAACOS) that criticized CMS for the timeframe involved, following the issuance of the final rule on December 19. In its Wednesday press release, NAACOS stated that “The Centers for Medicare & Medicaid Services (CMS) late Wednesday announced applications to participate in the new Pathways to Success accountable care organization (ACO) program will be due February 19, two months after the agency published a nearly 267-page rule overhauling the Medicare Shared Savings Program. In response, the National Association of ACOs (NAACOS) is calling on CMS to give ACOs till later in March to understand the complex changes and determine participation options with affiliated doctors, hospitals, and other providers before committing to high-stakes decisions.” And the association quoted its president and CEO, Clif Gaus, Sc.D., as stating that “ACOs barely have time to understand the new rules, and organizing an application is very complicated and for some it is now a high-risk decision. There are too many difficult decisions to rush.”

So we have Secretary Azar stating on the record back in September that it’s OK with him if fewer patient care organizations participate in the MSSP program, and then on December 19, CMS announced that it was setting the deadline for the submission of applications to the new Pathways to Success program for February 19. Well, that move will almost certainly cause some ACO leaders to drop out of MSSP for now; indeed, in that same article, I quoted Jennifer Moore, a NAACOS board member and chief operating officer at MaineHealth ACO in Portland, Maine, as stating that her ACO would probably have to retreat to upside-only participation, simply because of the unreasonable deadline set for submission of applications for 2019 participation in two-sided risk.

So—does CMS have ideas for new voluntary APMs that are being developed now? And, very importantly, how appealing might those ideas be to providers? Here’s what’s clear: with MSSP participation already imperiled because of what providers see as unreasonable timelines in submitting applications for participation in two-sided risk, any new voluntary programs are absolutely going to have to be seen by provider leaders as having at least a moderate level of appeal—at the strategic level, programmatic level, and practical level—in order to attract any participation.

Because honestly, the rhetoric and mixed messages coming out of HHS and CMS right now are meeting with confusion, bewilderment, and frustration on the part of provider leaders nationwide. As I’ve noted in past commentaries, HHS and CMS leaders are caught in a complex policy web, in that they represent a Republican administration whose mantra has been that markets and consumers can help to drive change; yet the practical reality, as they know, is that, without using exceptionally focused, even pointed, strategies to gain participation, any voluntary programs that senior federal healthcare policy officials develop, will crash against a shoal of hard defeat in the face of provider reluctance to participate.

CMMI is a unique organization; created under the ACA to be the Medicare and Medicaid programs’ innovation test bed, it is now caught in a vise between free-market-tinged ideology coming from the White House, and the understanding, among senior HHS and CMS officials, that experimental APMs are going to be needed to be created and adopted, quickly, in order to begin to make a dent in the accelerating healthcare inflation trajectory that continues to bedevil the U.S. healthcare system. What’s more, CMMI Director Adam Boehler appears to be talented and thoughtful; now certainly would be a great time for him to be given the freedom and scope to create meaningful new programs that will appeal to the industry.

And, in the end, as political commentators are fond of saying, in a variety of different contexts, hope is not a strategy. Let’s hope we see CMMI developing appealing APMs that provider leaders can really be enthusiastic about participating in. It’s definitely time.



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Should Physicians and HIT Leaders Worry about the Implications of the Walgreens/Microsoft Deal?

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As architect Daniel Burnham once said, “Make no little plans”; the leaders of the Walgreens/Microsoft alliance, like so many others, certainly are thinking big these days
architect Daniel Burnham

Nearly every day, it seems, new business combinations are announced that are threatening to alter the landscape of U.S. healthcare forever. CVS’s acquisition of Aetna, completed last November; the announcement a year ago now that the executives of Amazon, Berkshire Hathaway, and JPMorgan Chase & Co. were launching a broad (if not well defined) initiative to improve consumer satisfaction and reduce costs for their employees; Cigna’s acquisition just last month of pharmacy benefit management (PBM) company Express Scripts; and Amazon’s acquisition last summer of online pharmacy company PillPack.

Every one of those business deals represents a disruptive move in U.S. healthcare, with unalike “species” of organizations combining with one another. And now, the retail drugstore giant  Walgreens Boots Alliance Inc. and Microsoft Corp. are coming together in yet another disruptive venture. As Managing Editor Rajiv Leventhal wrote in an article on Tuesday, the corporations “are joining forces on a major seven-year healthcare partnership that will aim to ‘deliver innovative platforms that enable next-generation health networks, integrated digital-physical experiences and care management solutions.’” As he wrote, “The companies announced today that they will combine the power of Microsoft Azure, Microsoft’s cloud and AI (artificial intelligence) platform, healthcare investments, and new retail solutions with WBA’s customer reach, volume of locations, and outpatient healthcare services to accomplish their goals: to make healthcare delivery more personal, affordable and accessible.”

As Leventhal noted in his report, “While innovation in healthcare has occurred in pockets, officials of the two companies believe that ‘there is both a need and an opportunity to fully integrate the system, ultimately making healthcare more convenient to people through data-driven insights.’” Further, he noted, “As part of the strategic partnership, the companies have committed to a multiyear research and development (R&D) investment to build healthcare solutions, improve health outcomes and lower the cost of care. This investment will include funding, subject-matter experts, technology and tools, officials noted in the announcement. The companies will also explore the potential to establish joint innovation centers in key markets. Additionally, this year, WBA will pilot up to 12 store-in-store ‘digital health corners” aimed at the merchandising and sale of select healthcare-related hardware and devices.

“This gap creates an opportunity for the pharmacist to help monitor the patients’ health and prompt the patient to receive preventative care in the retail clinic or through a virtual care visit. Using an enterprise health cloud, like Azure, you create a more connected ecosystem so that we can share that data with the patient’s additional providers, track outcomes, and intervene earlier when an issue arises,” Microsoft CEO Satya Nadella said in a statement Tuesday.

And, Leventhal wrote, “Notably, the companies will also work on building an ecosystem of participating organizations to better connect consumers, providers—including Walgreens and Boots pharmacists—so that major healthcare delivery network participation will provide the opportunity for people to seamlessly engage in WBA healthcare solutions and acute care providers all within a single platform.”

Speaking to the difference between retail pharmacies and traditional care providers, Forrester analyst Arielle Trzcinski said in a statement emailed to the press that “[R]etail pharmacies offer an opportunity to engage with the patient much more frequently than at an office visit, giving an example of how chronic care patients see their pharmacist frequently, while some figures indicate that the average diabetic patient sees his or her provider once every six months.”

The implications of all of this are, of course, huge. For one thing, if one were to ask the average patient/healthcare consumer with whom they interacted more, doubtless, the vast majority would cite their retail pharmacists, rather than their primary care physicians. What’s more, what happens if Walgreens is able to follow through, as CVS also intends to do, in creating minute clinics in retail pharmacy locations? The impact could be revolutionary.

Indeed, it’s no secret that many patients are dissatisfied with the cumbersome, challenging processes around accessing primary and specialty care in the U.S. healthcare system. Simply accessing a timely appointment often proves to be a major hassle; and encounters around needed follow-ups and around questions to doctors and nurses often turn out to be such a hassle that many patients simply give up, with the result of medication non-compliance and other issues.

So what will happen if Walgreens, like CVS, manages to achieve success with one or more elements of this initiative? Those could include enhanced continuum of care for patients, especially those with chronic diseases; improved communication among all care delivery stakeholders; and enhanced patient/consumer satisfaction.

A few stakeholder groups should be paying particular attention here, including practicing physicians and healthcare IT leaders. For practicing physicians, could anyone deny that this business initiative, along with the others mentioned above, should be disconcerting at the very least? Already, patients needing relatively immediate medical attention, are turning en masse to urgent care centers, as both health systems and health insurers are working to cut down on the volume of emergency department visits, which are tremendously expensive, and which burden the healthcare delivery system in ways that are not sustainable. But now, with both Walgreens/Microsoft and CVS/Aetna, is anyone denying that the era of pretty-close-to-immediate medical attention is on the horizon?

The reality is that, while most patients like their primary care physicians and are satisfied with their care overall, strong majorities, in polls, continue to complain about poor service, bad communication, and delays accessing care and accessing follow-up support. What happens when most decent-sized Walgreens and CVS drugstores are staffed up with PCPs or advanced practice nurses, to handle the colds, coughs, flus, strep throats, and minor skin and digestive issues that could easily be handled by such service offerings?

One of the core policy issues here is that the U.S. healthcare payment system remains largely predicated on primary care physicians physically touching patients in order to get paid. Yes, telehealth services are expanding daily; but in most situations, patients still need to go through the awkward, inconvenient, sometimes even-arduous process of scheduling an appointment, using some form of transportation to get to that appointment, and waiting in a crowded physician office, in order to access primary care.  But in 2019, when GrubHub can deliver one’s banh mi Vietnamese sandwich to one’s home, and Amazon is sending everything from books to clothing to furniture to God-knows what, directly to people’s doors, how much longer will healthcare consumers continue to be patient with the glacial pace of care delivery change in U.S. healthcare?

Meanwhile, healthcare IT leaders will inevitably find themselves somewhat behind a proverbial eight-ball on all this, caught between the intensifying demands on the part of practicing physicians, especially primary care physicians, for full clinical IT support for their practices, and constant business changes, including merger-and-acquisition activity in their own organizations that is continuously scrambling their long-term planning.

So we’re seeing both business and technology changing, and changing quickly, with numerous examples already of industry-disruptive business combinations, and technology advancing to the point where previously unimagined breakthroughs are now imaginable. For example, Walgreens and Microsoft noted that, “Through this agreement, Microsoft becomes WBA’s strategic cloud provider, and WBA plans to migrate the majority of the company’s IT infrastructure onto Microsoft Azure,” as corporate officials put it. And “Microsoft also plans to roll out Microsoft 365 to more than 380,000 Walgreens employees and stores globally.” And, to make things just that more intriguing, the announcement quoted Stefano Pessina, executive vice chairman and CEO of the Walgreens corporation, as stating that “WBA will work with Microsoft to harness the information that exists between payors and healthcare providers to leverage, in the interest of patients and with their consent, our extraordinary network of accessible and convenient locations to deliver new innovations, greater value and better health outcomes in health care systems across the world.”

As renowned Chicago architect Daniel Burnham so famously said, “Make no little plans; they have no magic to stir men's blood and probably themselves will not be realized.” There’s no question that the senior leaders of all of these business alliances, combinations, and initiatives are going to be “no little plans.” It would behoove clinicians, clinician leaders, healthcare IT leaders, and all c-suite leaders in provider organizations to think Burnham-sized thoughts; these businesspeople from outside traditional healthcare delivery are certainly doing so.






Related Insights For: Value-Based Care


Blue Cross NC, Five Health Systems Announce Major Shift to Value-Based Care

January 16, 2019
by Heather Landi, Associate Editor
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The insurer aims to have half of its 3.89M customers covered by VBC contracts by next year; all customers in VBC arrangements in five years
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Blue Cross and Blue Shield of North Carolina (Blue Cross NC), one of the state’s largest insurers, and five of the state’s major health systems in North Carolina have announced a new value-based care program that encompasses hundreds of thousands of healthcare customers throughout the state.

The five health systems—Cone Health, Duke University Health System, UNC Health Care, Wake Forest Baptist Health and WakeMed Health & Hospitals—and their accountable care organizations (ACOs) have committed to participating in Blue Premier, a new value-based model of care in which Blue Cross NC and the health systems will be jointly responsible for better health outcomes, exceptional patient experience and lower costs, according to a Blue Cross NC press release.

“With agreements from five of the state’s major health systems and their ACOs, Blue Premier is one of the most rapid and comprehensive shifts to value-based payments in the nation,” Blue Cross NC officials stated. Patrick Conway, M.D., serves as president and CEO of the Durham-based health insurer and previously served as the Chief Medical Officer, Deputy Administrator, and Director of the Center for Medicare and Medicaid Innovation (CMMI), a division of the Centers for Medicare and Medicaid Services (CMS).

Within five years, Blue Cross NC has committed to having all 3.89 million customers covered under Blue Premier’s value-based care contracts. By early 2020, fifty percent or more of all Blue Cross NC members will have a provider who is jointly responsible for the quality and total cost of their care, the health insurer stated.

“As a practicing physician, I have experienced first-hand the challenges plaguing our health care system,” Conway said in a statement. “Historically, our health care system pays for services that may or may not improve a patient’s health, and our customers simply cannot afford this approach. Moving forward, insurers, doctors and hospitals must work together, and hold each other accountable for improving care and reducing costs. We applaud the leadership and commitment of these five leaders in health care to help transform health care delivery in North Carolina.”

During the HLTH Conference, held at the Aria Resort in Las Vegas last May, Conway discussed the payer-provided landscape in North Carolina and alluded to opportunities accelerate the move to value-based care and payment models, according to reporting from Editor-in-Chief Mark Hagland. “We’re looking at a new model, where patient care organizations can partner more fully with Blue Cross North Carolina,” Conway said, per Hagland’s report. And Conway continued, “We’re saying, you can take this alternative pathway with us. And we’ll jointly be accountable for the total quality and cost of care. And we want you to go into two-sided risk. And we’re wondering, should we turn off all prior authorization? And documentation other than for risk coding and STARS measures, we won’t worry about how you document. And for people in the audience, those kinds of partnerships are very exciting, because you’ve now got a provider and payer that are no longer locked into rigid rules, but where you can innovate on quality and customer experience.”

According to the insurer, Blue Premier ties payments to doctors and hospitals over time to the value of services that improve patient health. This means that total payments to the health systems under Blue Premier will be based on the health systems’ ability to manage the total cost of care and their overall performance, measured by industry quality standards. Through a “shared risk” financial model, the health systems will share in cost savings if they meet industry-standard goals to improve the health of patients – and share in the losses if they fall short. “The unprecedented commitment from these five large health systems makes Blue Premier one of the most advanced and comprehensive value-based care programs in North Carolina and the nation,” Blue Cross NC officials stated.

“This unprecedented step by Blue Cross NC and many of the state’s leading health care organizations will make a big difference in advancing high-quality, innovative care in North Carolina,” Mark McClellan, M.D., Ph.D., director of the Duke-Margolis Center for Health Policy said in a statement in the press release. “At Duke-Margolis, we remain committed to supporting state government and private-sector initiatives to reform payment and improve care – providing needed examples for the nation.” 

In a statement, Donald Gintzig, president and CEO, WakeMed Health & Hospitals, said, “This collaboration represents an important step forward in our efforts to provide patients in our area and across the state with high quality, coordinated services for the best value. Our health systems are bringing together valuable resources in a more integrated way that will ultimately lead to better health and more affordable health care.”

The news of the value-based care collaboration comes a month after the health insurer announced a partnership with Aledade, a Bethesda, Md.-based company focused on physician-led ACO development, to launch a value-based care initiative to support primary care physicians across the state. Through the initiative, the two companies will support physician-led ACOs tailored specifically for primary care physicians and the communities they serve. Through these ACO arrangements, Blue Cross NC will collaborate with Aledade to provide physicians with technology and data analytics tools to better manage patient care and costs. After joining these ACOs, practices gain a more comprehensive view of their patients’ total cost of care, gaps in quality of care, and experiences throughout the entire health care system, the companies said.


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