Bundled Payments: Are You Ready for Change?

brainstormsBy Joanne Conroy, MD

No one really loves change. When the change has an unclear impact, we often resist because of the fear of the unknown. Our resistance runs the emotional gamut from “Life is complex enough; why change what is already working?” to feeling actively threatened from a personal security or financial perspective. We can manage the anxiety by educating ourselves and developing a change strategy to embrace the emotional and operational impact of the change. We do this all the time in our personal lives, yet, in our professional lives, we often adopt an “ostrich mentality.” Choosing not to prepare for change leads to greater uncertainty and fear.

For teaching hospitals, the case in point is the shift in payment models from fee-for-service to alternative or bundled payments.

A bundled payment is an episode-based payment, which is defined as the reimbursement of providers on the basis of expected costs for clinically defined episodes of care. It has been described as a middle ground between fee-for-service reimbursement, in which providers are paid for each service rendered to a patient, and capitation, in which providers are paid a lump sum per patient, regardless of how many services the patient receives.

Over the past year, some payers and providers in the public and commercial sectors have been experimenting with bundled payments. Yet few have dedicated sufficient time and energy to educating themselves and developing a change strategy to truly embrace bundled payments.

There are things you can do.

1. See where you are.

Take the Readiness Assessment. This is a quick (15-question), free tool to help organizations determine how ready they are to transition from fee-for-service to risk-based payments. You’ll be able to see where you are on the continuum, and the tool provides direction on key focus areas for moving forward. You’ll get a report showing your score and directing you to additional resources to support the transition, including modules of an online course.

2. Educate yourself and your organization.

No matter where your organization is on the continuum towards risk-based payments, you must efficiently educate a broad internal audience about bundled payments and how to manage care under risk contracts. There are educational products to meet your needs. Two online resources are now available under “Maximizing Value: Payment Models and Care Redesign,”

“Essentials” is a suite of interactive online learning modules and webinars that can be viewed individually or as an integrated course. It provides instruction on the basics of bundled payments through to design, execution, and implementation strategies. “Advanced” includes all of the content in “Essentials,” along with additional resources, such as an online platform to organize, document, share, and publish care redesign projects, and access to evidence-based clinical guidelines, quality improvement tools, and key research articles.

Your cycle time for educating leadership, clinical teams, and staff can be drastically reduced through this synthesis of the critical elements for understanding and implementing bundled payments.

3. Develop a change strategy.

Your leadership must articulate a picture of what the future looks like in a way that informs stakeholders why they should let go of the past, work hard in the present, and follow leadership into the future. Your change strategy clarifies how you will make those changes happen.

Successful change strategies usually take a “systems thinking” approach. Appreciate that success will depend on the ability to diagnose and mitigate complex changes from three perspectives: a system perspective that focuses on the components that must fit well together to work optimally; a social perspective that encompasses diverse, and sometimes contradictory, interests and goals; and a cultural perspective, in which our meanings, values, routines, norms, and traditions exert a strong influence on behavior.

Thus, change strategies address content, people, and process. When we think about this as a complicated project management challenge, it helps us articulate, coordinate, resource, and sequence the interventions needed. Content refers specifically to what needs to change: structure, systems, technology, business processes, products, services, or culture. People refers to the work to diagnose and address the emotional, behavioral and cultural changes that your future state will require. Process refers to the roadmap or work plan that moves you from concept to concrete implementation.

I loved Dr. Catherine Reinis Lucey’s recent article in JAMA Internal Medicine, in which she urges the transformation of the physician role to one in which “knowledge and skills in patient-centered, data-driven, collaborative, continuous improvement of clinical microsystems are integrated with and are of equal importance to traditional basic science and clinical skills.” The new clinical science includes skills relevant to the patient encounter, as well as systems of care. Understanding new alternative payment methodologies is just one of the new important skills for physicians of the future. It is not to be feared or avoided, but mastered.

Dr  Joanne Conroy MD—Joanne Conroy, MD, is chief health care officer for the Association of American Medical Colleges. Her Brainstorms column appears monthly on Wing of Zock. She can be reached at jconroy@aamc.org. Follow her on Twitter @joanneconroymd.

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