Bundled Payment: The Next Step in Improving Quality and Reducing Cost
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- Carol O’Neal’
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1 Bundled Payment: The Next Step in Improving Quality and Reducing Cost Rita E. Numerof, Ph.D. President Overview The U.S. healthcare industry is currently undergoing what will ultimately be a radical transformation, driven by unsustainable cost increases, increased regulation, and shifting power relationships among payers, providers, physicians, and patients. While virtually all stakeholders agree with the overall objective of healthcare reform -- achieving better health outcomes at lower cost -- there are many different views on how best to achieve it. Bundled pricing is an innovation being implemented by market leaders that promises to address this dilemma. Deceptively simple sounding, this radically different approach to pricing and risk brings its own unique challenges. Organizations considering a bundled pricing approach will need to understand the requirements for successful implementation. As important, they'll need to start planning now to avoid the "stealth" downside risk of bundled pricing -- commoditization. 2 Copyright 2011, St. Louis, MO
2 Roadmap for Today s Discussion Context for Bundled Payment: An Industry in Transition Requirements for Success 1) Defining the Bundle 2) Developing Predictive Care Paths 3) Managing Variability in Cost and Quality 4) Defining Economic and Clinical Value 5) Collaborating with Payers Common Challenges/Pitfalls 3 Copyright 2011, St. Louis, MO Introduction to is a strategy consulting firm with over 25 years experience serving Fortune 500 companies, with a focus on industries in transition Our work across the industry with healthcare delivery, payers, and manufacturers is focused on redesigning and implementing new business models that sustain profitable growth under changing market conditions. We have made the evolving requirements of better care at lower cost a core part of our healthcare consulting practice. has been a pioneer in helping clients incorporate economic and clinical value (ECV) as the basis for competitive differentiation and growth. 4 Copyright 2011, St. Louis, MO
3 Roadmap for Today s Discussion Context for Bundled Payment: An Industry in Transition 5 Copyright 2011, St. Louis, MO Characteristics of Transition Changes in the Competitive Landscape Regulatory Shifts Technological Change Changing Market Expectations 6 Copyright 2011, St. Louis, MO
4 Characteristics of Transition (cont.) Times of transition are extraordinarily difficult requires challenging fundamental business assumptions associated with enormous resistance Changing the business model in flight... Building the new and protecting the old Most organizations focus on incremental product/service improvement within the current paradigm... 7 Copyright 2011, St. Louis, MO Healthcare Reform in the U.S. There are 3 parts to Healthcare Reform: Insurance Reform (access) Delivery Reform Payment Reform Objective: Better health outcomes at lower cost What this means depends on the viewer... it will require a fundamentally different way of thinking about your business 8 Copyright 2011, St. Louis, MO
5 Healthcare is BIG Business. Clinical Societies CME Providers Consumers... and everyone is to blame! Community Healthcare Delivery Academic Medical Centers Practitioners Employers Large & Small Increased Cost Increased Utilization Questionable Value Payers Government Policy Government Regulatory Agencies Pharma Med Device Diagnostics 9 Other Manuf s Copyright 2011, St. Louis, MO Industry Drivers of Bundled Pricing Spiraling Healthcare Cost Inflation 10 Copyright 2011, St. Louis, MO
6 Industry Drivers of Bundled Pricing Spiraling Healthcare Cost Inflation Consumer/Employer Pushback on Rising Insurance Premiums 11 Copyright 2011, St. Louis, MO Industry Drivers of Bundled Pricing Spiraling Healthcare Cost Inflation Consumer/Employer Pushback on Rising Insurance Premiums Lagging Quality Indicators 12 Copyright 2011, St. Louis, MO
7 Industry Drivers of Bundled Pricing Spiraling Healthcare Cost Inflation Consumer/Employer Pushback on Rising Insurance Premiums Lagging Quality Indicators Increasing Demand for Transparency and the Role of Social Media Bottom Line: Better Quality at Lower Cost 13 Copyright 2011, St. Louis, MO Roadmap for Today s Discussion Context for Bundled Payment: An Industry in Transition Requirements for Success 1) Defining the Bundle 2) Developing Predictive Care Paths 3) Managing Variability in Cost and Quality 4) Defining Economic and Clinical Value 5) Collaborating with Payers 14 Copyright 2011, St. Louis, MO
8 Defining Bundled Pricing A defined set of services with a specified quality outcome delivered at a fixed price. 15 Copyright 2011, St. Louis, MO Requirements for Success Bundled Pricing = Standard Set of Services + Fixed Price + Specific Metrics/Quality Guarantees ECV Providers Aligned to Manage Cost and Quality 16 Copyright 2011, St. Louis, MO
9 Requirements for Success -- ECV Drive to Commoditization 17 Copyright 2011, St. Louis, MO Requirements for Success -- ECV How do you create meaningful difference in the services you provide? Why should anyone come to your facility? ECV as a source of competitive differentiation ECV represents a core competency that needs to be embedded throughout the business! 18 Copyright 2011, St. Louis, MO
10 Requirements for Success -- Payer Collaboration Developing the infrastructure first Defining the risk, ECV proposition Managing a strategic relationship to demonstrate value Moving from CPT codes to real value 19 Copyright 2011, St. Louis, MO Roadmap for Today s Discussion Context for Bundled Payment: An Industry in Transition Requirements for Success 1) Defining the Bundle 2) Developing Predictive Care Paths 3) Managing Variability in Cost and Quality 4) Defining Economic and Clinical Value 5) Collaborating with Payers Common Challenges/Pitfalls 20 Copyright 2011, St. Louis, MO
11 Common Challenges and Pitfalls 1) Underestimating organizational resistance 2) Gaining consensus on predictive care paths 3) Managing comorbid conditions 4) Expanding the boundaries of the bundled price episode beyond acute care 5) Modeling costs, revenues, and margins based on a bundled price offering 6) Creating a conceptual framework for the ECV case that differentiates your offering from the one down the street (or across the country) 21 Copyright 2011, St. Louis, MO Solutions come from seeing opportunity... what s not there... and coming to grips with serious business challenges 22 Copyright 2011, St. Louis, MO
12 Breakthrough results through people, process, and planning (314) Copyright 2011, St. Louis, MO
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