Blog Post March 13, 2019 Bundled Payments in the Commercial Market: Four Trends for 2019 Authors Jordan Brozyna Purvi Bhatt Ken Steele As the healthcare industry continues to embrace alternative payment models, bundled payments are rising to the top. In fact, in a recent study by Change Healthcare, commercial payers reported that 20% of their total business is currently aligned with a bundled payment. That number is expected to rise to 23% by 2021 as more payers and providers build out the infrastructure needed to successfully implement a bundled payment.In November of last year, CMS announced its commitment to bundled payments as an effective value-based payment model as well as its plans to launch new mandatory and voluntary programs in the near future. Commercial insurers—who have historically followed CMS’s lead—also continue to embrace bundled payments at an accelerated pace. Payers and providers are engaging in activities to determine the best way to bring this “episode of care” model to market. Based on these activities, we have highlighted four key national trends you will see in the bundled payment commercial market in 2019. Four Trends in the Commercial Bundled Payment Market1. Payers and large employers are partnering with market-leading “brand name” providers.In the past year, bundled payment programs have been announced by household-name providers such as the Cleveland Clinic and Rothman Orthopaedic Institute. Like other Centers of Excellence, these providers have the resources and capabilities to support the development and implementation of this type of payment model. Payers and providers can learn from their peers’ experiences when developing and implementing their own programs. In the past year, the following payer-provider partnerships have emerged to launch bundled payments: Cleveland Clinic and Kroger (administered by Anthem): Heart SurgeryRothman Orthopaedic Institute and Independence Blue Cross: Hip/Knee/Shoulder Replacement, Knee Arthroscopy, Lumbar Laminectomy, and Spinal FusionHenry Ford Health System and Blue Cross Blue Shield of Michigan: Hip/Knee ReplacementOur Take for 2019: Expect more of these partnership announcements.2. Surgical and procedural episodes continue to be the most popular; however, medical episodes are gaining traction.Surgical and procedural episodes of care continue to be the most popular selection for bundled payment implementation due to the relative ease of patient identification, procedure coding, and service predictability. Additionally, surgeries are often elective and planned well in advance. However, opportunities exist for payment bundling with medical episodes of care, as patients in this category are often high utilizers of services. If providers can develop a strong program that efficiently manages medical episodes, they will be rewarded with larger cost savings, so investments in care management resources will be crucial. Further, when CMS released the episode participation list for BPCI Advanced, three of the top four episode selections by volume were medical bundles (i.e., congestive heart failure, sepsis, and arrhythmia). It is likely that commercial payers and providers will follow in CMS’s footsteps to embrace medical bundled payments. Our Take for 2019: The popularity of surgical/procedural bundled payments will continue to grow; however, expect some progressive programs to include medical bundled payments.3. Providers are recognizing bundled payments as a vehicle to drive volume and increase market share.Although commercial payers have historically developed pay-for-performance-based models focused on three or four key metrics and other value-based care initiatives, providers are beginning to develop, price, and launch proprietary bundled payment programs. Specifically, health systems, hospitals, and physician groups are designing and pricing their own bundless to take to the payer and employer market. Providers that develop strong payer and employer relationships may drive increased volume, resulting in greater market share. Emerging provider negotiation strategies include: Obtaining exclusivity for services in certain counties or regions. Discounting rates from fee-for-service payments for additional volume.Taking risk for the cost of readmissions within the post-acute component of the bundle.Contracting with other providers and paying for services that are provided as part of the bundle.Our Take for 2019: Expect hospitals and health systems to take a larger role in the design and development of bundled payments.4. Payers and providers are acknowledging that investment in technical infrastructure and data analytics is key. CMS bundled payment programs provide claims data and analytics support; however, payers and providers planning to enter the commercial market must develop these tools for themselves, which can be a significant hurdle. Furthermore, providers will need to work with others in the community to align and manage patient services across the care continuum (e.g., post-acute care). The right analytics software or other data management resources are critical to designing, pricing, and implementing a successful bundled payment program. Specifically, there has been an emerging interest in “episode grouper” software, a program that groups claims data into logical episodes of care. Episode grouper software is even more valuable if it can (1) be customized to different patient populations and (2) manage cost attribution. Our Take for 2019 : Investment in data capabilities and analytics resources will continue to grow, and those providers with a well-defined technology strategy will have a higher likelihood of success. As bundled payments continue to gain popularity, health systems, hospitals, and physician groups looking to enter the commercial market should keep these trends top of mind. Bundled payment considerations such as episode selection, data analytics investment, and payer partnerships may dictate future success in the transition to value-based care.