A new way to pay for health care

You can purchase bundles from your Internet and cable providers. Is your hospital next?

Bundling. It happens every day: your child's Happy Meal from McDonald's; your cable, phone and Internet package; your home plus car insurance plan. These are all examples of the convenience, simplicity – and savings – you get from bundling goods and services.

Now, imagine you need a knee replacement. Now imagine the multiple bills, from multiple providers for countless services, from consultations to anesthesia to surgery to rehab. Imagine the financial uncertainty – because you have no idea what the total cost will be.

In the health care industry, that's called "fee-for-service." But momentum is building to replace the fee-for-service system with a bundled payment model. That would mean that everything related to your knee replacement, including any complications, would be covered for one set price.


Better health care at a lower price

Calling this model "bundled payment" is radically oversimplifying a complex system, but you get the idea. And you can easily see the advantages. For one, a set fee for an episode of medical care, including any complications that arise, adds a financial incentive for providers to deliver excellent care, greater value and better outcomes. In addition, it encourages health care providers to work together as a team with shared responsibility for a patient's health.

Another important reason for hospitals and health systems to pursue bundled payments is that the Centers for Medicare and Medicaid Services supports the approach, approving more than 500 organizations for its Bundled Payments for Care Improvement initiative in January.1

The challenges – and the solution

But to achieve a bundled payment model, health care providers and plans must manage staggering amounts of historical data on care for patients with similar medical situations as well as analytical data on what to pay individual clinicians.2

To help meet this challenge, SAS worked with the Health Care Incentives Improvement Institute (HCI3) to create a new software solution: SAS  Episode Analytics.

Once the episode of care is defined (i.e., the entire span of services involved in providing patient care for a condition or procedure, including pre- and post-care, regardless of clinical setting), SAS Episode Analytics then provides personalized, comparative costing for each episode, allowing health care plans and providers to project a budget for specific medical care within a defined time period. The episode of care includes all covered services across all providers that typically treat a given condition, adjusted for the severity and complexity of a patient's condition.

"The more data you have, and the better you analyze it, the less likely you are to set unrealistic targets for either quality or cost," says Graham Hughes, MD, Chief Medical Officer for the SAS Center for Health Analytics and Insights.

"Organizations adopting bundled payment models can use SAS Episode Analytics to clearly understand what's involved in an episode of care," says Hughes, "including costs, services, and how many entities will share in the care and reimbursement. Then they can confidently predict and manage the financial risks and rewards."

SAS Episode Analytics helps health care organizations:

  • Negotiate, understand and enter into shared risk contracts.
  • Better understand patient populations.
  • Analyze clinical care patterns to determine the best ways to modify practice to be more efficient and effective.
  • Understand patients to better manage care and costs in a meaningful way.
  • Reduce excess utilization and minimize potentially avoidable complications, such as errors, infections, readmissions, etc.

SAS Episode Analytics currently includes more than 30 episodes of care, from individual procedures such as joint replacements to treatment of chronic conditions such as diabetes and cardiovascular disease. SAS will add approximately 60 new episodes this year.

In partnership with HCI3

The new offering draws on the principles of the groundbreaking PROMETHEUS Payment® system from the nonprofit HCI3, a pioneer in episode-construction and bundled-payment methodology. The redesigned solution features a more comprehensive and holistic view of patient care. It streamlines the adoption of newly introduced value-based payment models that introduce greater levels of shared provider risk, including bundled payments and multiple types of capitated models such as those associated with most accountable care organizations (ACO). (Note: ACOs are groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated, high-quality care to their Medicare patients.)

Horizon Healthcare Services increases patient satisfaction, reduces costs

Horizon Healthcare Services, New Jersey's oldest and largest health insurer and an original PROMETHEUS Payment customer, uses SAS Episode Analytics. "SAS Episode Analytics helps us improve quality outcomes, increase patient satisfaction and reduce costs," says Michael Occhipinti, Director of Informatics at Horizon Healthcare Services. "The significant variations in provider costs and clinical patterns complicate contract negotiations and quality measurement. With SAS, we can fully integrate surgeons and other health care professionals into all levels of care, creating possibilities for cost containment and quality improvement."

1, 2 H&HN magazine. "Bundled payment," April 2013. www.hhnmag.com

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Lessons from Horizon Healthcare and Blue Cross Blue Shield of NC

Horizon Healthcare Services and BCBSNC have both been successful in implementing bundled payments as a permanent reimbursement strategy. Here's how they did it:

  • Strong leadership. Engaged and committed executive support for the initiative.
  • Start small. Begin with a few well-defined, high-volume procedures (like knee and hip replacements) that have opportunity for savings through care redesign.
  • Data analysis. Both Horizon and BCBSNC emphasized the importance of analytics to monitor internal programs and share data with providers.

Source: Issue Brief: Bundled Payments One Year Later. May 30, 2013. www.hci3.org.


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