Stephen Kinsley, vice president of payer engagement and strategy for Surgical Care Affiliates and Jim Reilly, senior principal at Sg2 weighed in on the risk factors involved with developing bundled payments, as well as the role data plays in the creation of bundled payments.
Note: Responses have been lightly edited for style and clarity.
Question: What are the risks involved when developing bundled payments? How can ASCs avoid these? Any tips for mitigating risk?
Stephen Kinsley: There are few inherent risks when developing a bundle and I think the following two are key risk factors: first, the proper alignment of risk, rate and reward for all involved in the bundle and second, data being paramount. To elaborate on the importance of data, it is extremely difficult to dissect the data with multiple providers. It is imperative that transparency prevail during the entire process and the process be memorialized through terms within the agreement.
Jim Reilly: A risk is the potential negative impact on existing business. Discounting existing business to increase volumes may only reduce overall margins. Instead, target incremental volume opportunities such as business that is currently performed in hospitals that can be safely and efficiently provided in ASCs.
Partnerships with surgeons and anesthesiologists allows for linking information together. Nonetheless, risk management requires an understanding of what reimbursement levels are by payer in order to arrive at an optimal pricing strategy. In addition, knowledge of how your cost and quality performance stacks up to competitors will be an advantage.
New payment models, which include taking risk, are often met with concern and skepticism if physicians aren’t sufficiently educated and engaged on the strategy of the model. Again, there also can be concern over who "owns" the bundle — the surgeons or the ASC. Developing a trusting partnership early is critical to success.
Q: Do you have any tips for ASCs negotiating with payers when developing bundles?
SK: There are a few points that come to mind: first, ensure that you are benchmarking to the correct price, which includes "apples-to-apples" services and timeline, as well as value created through the bundle. The second step is developing a detailed budget of what you assume your costs to be and stick to that budget when negotiating the price to ensure a reasonable margin is aligned with the risk. Then, consider starting with a smaller day of service bundle and migrating to a larger episode of care. Lastly, be realistic about the administrative burden of putting the bundle in place and its long-term value and growth opportunity. Don’t just race to secure a bundle.
JR: Engage and educate physicians early and often. Partner with the employer or payer in the design, data assessment and contractual term development. Consider long-term strategies for payer-hospital partnerships that offer full-population care management. Be sure to stress and demonstrate quality of care and exceptional patient service. Lastly, create outlier provisions to mitigate risks.
Q: Where do you see value-based care and bundled payments heading in the next five to 10 years?
SK: On the growth and refinement trajectory, as there is and will continue to be a focus on controlling and curbing the total cost of care. We as leaders in healthcare need to focus more on value-based care that promotes quality while decreasing cost.
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