Bundled Payments: A Rising Tide for Clinical Pathways

Abstract: As a value-based payment model, bundled payments represent a key component of the ongoing nationwide shift toward value-based care. The Centers for Medicare & Medicaid Services (CMS) has led the development of bundled payment programs over the last several decades, scaling up the payment model nationwide via voluntary and mandatory programs. Early evidence suggests that, under episode-based incentives, clinicians and organizations can improve the value of care for certain episodes. The collective influence of this evidence and the continued emergence of bundled payments as a cornerstone payment model poses several implications for pathway initiatives. First, a bundled payment perspective can reduce confusion and increase consistency of pathway initiatives within and across institutions. Second, because bundled payments and pathways share an episode focus, spread of bundled payments can create the analogous potential and imperative to rapidly scale clinical pathway work. Third, organizations can use clinical pathways as tools to help identify factors that can explain when and how bundled payments impact care in different settings. Collectively, these efforts can further solidify clinical pathways as a foundational element of value-based care.

As an episode-based, value-based payment model, bundled payments hold clinicians and organizations accountable for episode-specific quality and costs and provide financial incentives for those that maintain episode costs below predefined benchmarks. Increasingly, bundled payments represent a key component of the ongoing nationwide shift toward value-based care. 

This article provides an overview of recent nationwide bundled payment programs and describes how growing emphasis on the payment model poses 3 implications for organizations developing and implementing clinical pathways. In particular, bundled payments can (1) increase pathway consistency within and across institutions; (2) possess an episode focus that can align naturally with and increase emphasis on pathway development; and (3) provide organizations with added incentives to use pathways and identify factors that explain when and how bundled payments impact care in different situations. 

While more evaluations and examples are needed to fully elucidate the relationship between pathways and bundled payments as a new payment arrangement, the concepts and early examples described in this article provide a foundational overview for how these types of payments can potentially create incentives and opportunities for driving improvement through pathways.

Medicare Bundled Payment Programs

The Centers for Medicare & Medicaid Services (CMS) has led the development of bundled payment programs over the last several decades. The agency first began testing the payment arrangement in the 1990s and also in 2009 through several small demonstration projects. Based on success in those programs, CMS scaled up bundled payments nationwide in 2013 through the Bundled Payments for Care Improvement (BPCI) initiative.¹

The largest existing voluntary bundled payment program until its recent conclusion in September 2018, BPCI engaged physician groups, hospitals, and post-acute care providers around the country in bundling up to 48 inpatient clinical episodes, each of which consisted of discrete triggers (ie, initiating events) and predefined durations. By far the most influential and policy salient of 4 participation models in BPCI was Model 2, in which episodes were triggered by inpatient hospitalization and spanned 90 days of post-acute care. 

While more definitive program evaluation is needed, early evidence suggests that BPCI has improved the value of care for certain episodes. For example, hospital participation in medical episodes such as heart failure and chronic obstructive pulmonary disease was not associated with changes in episode payments or other outcomes.² However, participation in BPCI Model 2 for joint replacement bundles was associated with stable-to-improved quality and reduced episode costs,³ with high performers achieving up to 21% reductions in episode spending.⁴

CMS used positive results from BPCI Model 2 to design several additional bundled payment programs. First, in 2016, the agency used it to implement an ongoing mandatory orthopedic joint replacement bundled payment program, the Comprehensive Care for Joint Replacement (CJR) model.⁵ In the first year of CJR, nearly half of participating hospitals achieved episode savings by containing costs below target amounts while maintaining quality.⁶ Second, CMS extended many key features of BPCI Model 2 into the Bundled Payments for Care Improvement-Advanced (BPCI-A) model, a new voluntary program that began recently in October 2018 and offers physician groups and hospitals the opportunity to bundle up to 29 inpatient and 3 outpatient episodes.⁷ 

Implications for Clinical Pathways

The continued emphasis of bundled payments as a cornerstone Medicare value-based payment model poses several implications for organizations internally developing and implementing pathway initiatives. First, a bundled payment perspective can increase consistency of such pathways within and across institutions—a requisite for both implementing pathways consisting across clinical areas as well as empirically evaluating their impacts on care.⁸ Despite the fact that pathways are defined by the goals of reducing variation and improving care, experience and existing evidence suggest that there can be substantial confusion across institutions and settings about what constitutes a pathway, particularly when internally developed, and/or disagreement about how pathways affect patient care. For example, while some approaches have defined pathways based on their ability to guide care management for well-defined patient populations over well-defined periods of time, others have not.^8-11 Additionally, the “pathway” concept has been used variably to describe algorithms, guidelines, audit tools, or other inventories of action steps. 

Because they utilize specific triggers, define certain services, and span defined time periods, bundles provide clear incentives and avenues to achieve greater clarity and prompt more consistent approaches to pathway development. For example, the design of existing bundles—which spans hospitalization and up to 90 days post-discharge—creates an imperative to standardize care in both the acute and post-acute periods, compelling organizations to define and design pathways in ways that include a focus on processes that may have otherwise been overlooked or excluded without bundled payment policy incentives (eg, communication during transitions of care communication, engagement between inpatient physicians and outpatient physical therapists). Moreover, while pathways for specific clinical focus areas may differ, bundled payment incentives help “shine a light” on any inappropriate variation in how pathways are used to denote efforts such as audit tools vs guidelines or algorithms. Alongside separate activities related to externally developed, commercial pathways, consistency in internally developed pathways within and across organizations can further elevate pathways as a foundational element of value-based care. 

Second, in comparison to the global payment models such as accountable care organizations, bundled payments possess an episode focus that can align naturally with and increase emphasis on clinical pathway development. Because care standardization has been anecdotally identified as a core strategy for succeeding in bundles,¹² particularly among higher performers,¹³ pathways represent a promising vehicle for standardizing processes and driving performance in bundled payments. Formal evidence corroborating the relationship between care standardization has been limited to date, and bundled payments continue to spread nationwide; the potential and imperative to scale clinical pathway work and evaluate their impact on quality and costs will only increase.  

Third, bundled payments can provide organizations with added incentives to use pathways and identify factors that explain when and how bundled payments impact care in different situations. Variation in clinical pathway definitions and outcomes have traditionally limited the ability for organizations to fully test the impact of pathways in different care settings.⁸ As pathways become more uniform and policy-oriented under bundled payment incentives, evidence from pathways can help answer important questions related to bundled payments. 

For example, why do surgical but not medical bundles appear to be associated with positive early results? One reason may be that, as currently designed, episodes are more amenable to the variation in surgical rather than medical episodes.¹⁴ Spending patterns for surgical and medical care differ, and the potentially cyclical nature of the latter may not align as well with the prevailing episode design (hospital + 90 days of post-acute care) as the time-limited nature of the former. While this is an appealing explanation, evaluation of bundle-ready surgical and medical pathway initiatives can help substantiate or refute it compared to other possibilities. 

As another example, which processes supporting bundled payments are the most critical in which to achieve variation reduction? Despite the importance of care standardization, not all standardization activities must reduce variation in order for organizations to succeed in bundled payments.  For example, some organizations in orthopedic joint replacement bundles under BPCI managed to achieve high performance and substantial financial savings even though efforts to standardize discharge decisions led to changes in physician practice patterns without meaningful reductions in variation.¹⁵ What such examples suggest is that success in bundled payments may not require variation reduction in all processes. More work along these lines is needed, and robust implementation and evaluation of pathway initiatives deployed within bundled payment arrangements can help provide such insight.

Conclusion

Episode-based bundled payments have emerged as a cornerstone value-based payment model in the nationwide shift toward value-based care. As more of these arrangements are implemented across the country, policymakers and organizations alike should recognize the implications that these programs pose for clinical pathway initiatives. In particular, bundled payments can represent a proverbial incoming tide that can increase consistency in pathway definition and approach, as well as raise the urgency to deploy rigorous pathway initiatives as ways to help drive improvements and elucidate answers for when and how the payment model affects patient care in different settings. Collectively, these efforts can further solidify clinical pathways as a foundational element of value-based care.

References

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12. Beckmann S. Four lessons to help you prepare for mandatory bundled payment. Advisory Board. July 28, 2015. https://www.advisory.com/research/market-innovation-center/the-growth-channel/2015/07/four-lessons-to-help-you-prepare-for-mandatory-bundled-payment. Accessed on November 27, 2018. 

13. Liao JM, Holdofski A, Whittington GL, et al. Baptist Health System: Succeeding in bundled payments through behavioral principles. Healthcare. 2017;5(3):136-140. 

14. Navathe AS, Shan E, Liao JM. What have we learned about bundling medical conditions? [blog]. Health Affairs. August 28, 2018. https://www.healthaffairs.org/do/10.1377/hblog20180828.844613/full/. Accessed on November 27, 2018. 

15. Liao JM, Ezekiel EJ, Whittington GL, et al. Physician practice variation under orthopedic bundled payment. Am J Manag Care. 2018;24(6):287-293.