Preparing for Commercial Bundled Payment Contracts

When it comes to bundled payments, we talk a lot about programs run by The Centers for Medicare & Medicaid Services (CMS), including Bundled Payments for Care Improvement (BPCI) Advanced. But, bundled payment programs are on the rise in commercial settings as direct contracting increases.

Commercial bundles mimicking Medicare bundles 

In March, Humana announced that it would partner with orthopedic and neurology practices to launch spinal fusion bundles and expand its existing total joint replacement bundled payment program. These two clinical episodes have proven to be successful bundles in CMS programs, like the original BPCI model and BPCI Advanced, and it is logical that commercial insurance plans would mirror successful CMS plans, rather than starting from scratch. 

Humana is one of many insurance companies launching bundled payment programs. News headlines covering large systems teaming up directly with insurers on bundles often include joint replacement and cardiac procedures that have a positive track record among providers. Large payers are learning from CMS and mirroring their programs as such. 

Commercial downside is on the way  

Among most commercial bundled payment contracts, there is no downside risk associated with providers’ performance, meaning payers may give practices one price, but providers aren’t on the hook for extra costs if they exceed that price. There’s only upside to gain. 

CMS started this way too, with some models like the Oncology Care Model (OCM). Now, with a new update to the OCM model, providers are being asked to take on downside risk and be responsible for overspending. 

With insurers modeling their bundles after CMS, we can expect that they’ll be modeling pricing too, meaning downside commercial models may be on the way. 

Beyond CMS, across the healthcare industry, a risk transference is underway with payers shifting more risk to providers to create incentives to lower the cost of care, while improving care delivery and quality. 

So, providers thinking about direct contracting models should be prepared to be on the hook for downside within the next few years.  

What commercial bundles are missing 

In most commercial programs, insurers and payers have the same aims of keeping costs low and improving the health of patient populations. But, the key thing necessary for success for providers in commercial contracts is often missing: data. 

In CMS bundled payment programs, Medicare shares longitudinal performance and claims data of all providers involved in the care of a patient, enabling the provider accepting the downside risk inherent in the program to truly understand how their pricing was developed, and what their risks and opportunities are. With these data, physicians quarterbacking an episode can better understand what levers to pull that affect their bundle, including the ones not entirely in their control, like skilled nursing utilization or home healthcare. By looking at trends and patterns, providers can begin to redesign care in a manner that is best for their organization. Without this data, providers in commercial contracts are flying blind. 

Data is not only important for improving performance, but also for negotiating. Right now, payers usually set the target prices for the bundles, and they also hold all the cards with their wealth of claims data. 

Providers negotiating and entering direct contracts with payers need to get a fair price and better performance. We can help. 

Leveraging the combination of our deep data, experience in bundles, and powerful analytics, we’re able to guide organizations of all shapes and sizes – providers and payers alike – as to how to design, implement, and measure bundled payment programs that are equitable and effective. 

To learn how to set your organization up for success in direct contracting, contact Ben Gardner or another member of our value-based care team.