Harvard Business Review

GETTING BUNDLED PAYMENTS RIGHT IN HEALTHCARE

by Derek Haas, Robert S. Kaplan, Dereesa Reid, Jonathan Warsh and Michael E. West

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ARTICLE SUMMARY

”Bundled payments represent a significant opportunity to align the health care system around delivering high-quality care cost effectively.“

Bundled payments — single payments that cover all the care for a patient’s medical condition or treatment over a specified timeframe — are increasingly being deployed to motivate the delivery of better patient outcomes at lower costs. To date, bundled payments have been utilized on a voluntary basis in the United States. Examples include the Bundled Payments for Care Improvement (BPCI) initiative for Medicare patients, arrangements between commercial insurers and providers, and increasingly, in direct negotiated contracts between large employers such as Boeing, Lowes, and Wal- Mart and leading providers for complex medical conditions.

Building on the BPCI program, the Centers for Medicare and Medicaid Services (CMS) in July 2015 announced a proposal called the Comprehensive Care for Joint Replacements (CCJR) program to mandate the use of bundled payments for knee and hip replacements in 75 metropolitan areas beginning in 2016. Under the proposed rules, hospitals would be financially accountable for not only the cost of the surgery and subsequent hospital stay but also the payments to the physician performing the surgery and all subsequent medical costs in the 90 days after discharge.