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Bundled Payment: Practice Savior or Killer?


The new "in" term among those looking to lower the cost of health care is "bundled payment." However, it's harder to establish set payment schedules for some specialties that won't financially harm practices.

The new “in” term among those looking to lower the cost of health care is “bundled payment” (BP). Although there is still disagreement about what it means, the bundling of payments revolves around oncologists being paid a set fee for managing their patients’ care.

“Five or 10 years ago, the oncology spend was not high on the payer’s priority list,” said Matthew Farber, MA, director of Provider Economics and Public Policy, at the Association of Community Cancer Centers in Rockville, Md. “As the number of patients goes up, those who survive increases and general demographic shifts, the cost of cancer care goes up. In addition, the recent run of new (and expensive) drug approvals has caused payer’s focus to turn toward oncology.”

Concerns about BP in cancer treatment

True bundled payments would give the oncologists a single amount of money per patient to cover all costs from initial visit through to discharge from care or to hospice. There are concerns that a BP system would not work in cancer treatment, and could cause disruptions in practices.

One reason is that cancers are a very individualized and diverse group of diseases. To say that a payer will offer a set amount of money for two lines of treatment will have to address who is responsible should a third be needed. There is enough variability in oncology that true BP is likely to be problematic.

“Oncologists do not take care of large populations of patients where you can mitigate the risk of outliers utilize a lot of costs, time and energy,” noted Bruce Gould, MD, medical director of Northwest Georgia Oncology Centers in Marietta, Ga. “Any payment system has to reflect this so that one or two expensive patients don’t break a practice.”

Episode of care a better fit?

The model that may be the best payment fit for oncologists is episode of care (EOC). As currently evolving, this transfers a specific part of the risk to the oncologists, but one that is easier to manage.

Gould’s group is participating in an early pilot in cooperation with United Healthcare. The participants defined 19 categories for lung, breast, and colon cancers.

“They have taken our margins for chemotherapy medications, added extra money for hospitalizations and that is what we get when a patient is registered as an EOC fee,” said Gould. “We are still paid a fee-for-service when we see the patients in our offices and to administer the medications. The drugs are reimbursed at Average Sales Price.”

The insurance company knows what their medicine costs will be and the most they have to spend for physician services should their enrollees need hospital treatment. They hope to save money by giving oncologists incentives to treat patients in the office (where they get paid) and not in the hospital. Hospital in-patient costs are still paid by the insurance company. The oncologists are only assuming the risk for their in-hospital services.

Shifts in how practices make money

How practices make their money is shifting and getting the bulk of income from drug charges is past. Other responses by oncologists such as pay for administering medications and increasing in-office diagnostic radiology has come under greater scrutiny.

“This gradual reduction in payment is a long-term trend that practices have to recognize to stay afloat,” said Farber. “I think eventually fee-for-service for both Medicare and private insurers is going down. Instead they will pay for better, more efficient and less duplicative care.”

Because of this, it is important for practices to take a long and close look at their processes and find ways to streamline them. Physicians, according to both experts, should look to implementing established clinical guidelines as a first step. But they will also need to update information-gathering abilities through use of electronic medical records (EMR) programs tracking both what they are doing well and where they need to improve.

What practices should consider

Compare current treatment modalities with guidelines from the National Comprehensive Cancer Network (NCCN) or other professional sources. Getting a physician to buy-in is important as just one opting out of the pre-determined treatment regimens could harm the program for all. This also highlights the need for ways to monitor compliance.

Full commitment to EMR technology is another important part of this puzzle. Both BP and EOC require practices have the ability to monitor, document, and report treatment regimens. These systems help analyze costs, an important part of the process when negotiating your fee and managing your costs.

Practice business management may play as big a role in profitability as the medical management side. For example, the efficiency and accuracy of your coding and billing staff will impact on your cash flow.

“The investment in a strong management team is not cheap but will pay dividends and keep practices strong and independent,” said Gould. “Over the last few years all of the fat has been removed from the system. If you don’t have a lean, mean, practice that is collecting every penny due you on the first try, the chances the practice will fold increases.”

How long to get ready?

There is some disagreement on how long practices have to get themselves ready for whichever system wins out. Gould thinks the “ability to worry about tomorrow is gone”, with an immediate need to get the office in order.

On the other hand, Mr. Farber thinks there is still time for practices to watch the early adopters work out the kinks.

Both agree that keeping track of the various models as they mature is important so that you are “leaning” the right way when approached. They also concur that things like establishing EMRs and familiarizing physicians with guidelines should begin immediately.

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