How One Hospital Has Succeeded in a World of Bundled Payments

As the U.S. shifts from fee-for-service to value-based payment for health care, it is becoming increasingly important for providers to learn how to succeed with bundled payments. Bundled payments make providers more financially accountable than they are with the fee-for-service system for the total cost of a patient’s treatment and recovery, and they can be used for acute, chronic, or primary care. Today bundled payments are most commonly used to cost-effectively manage a patient’s care in the hospital and over the following 90 days post-discharge. The adoption of this approach has grown significantly over the last decade. In 2020 over 1,000 hospitals and over 700 physician groups participated in the voluntary Medicare bundled payment program. Last September, the Centers for Medicare and Medicaid Services (CMS) announced that it anticipates making bundled payments mandatory in a few years.

The game plan of CHA Hollywood Presbyterian Medical Center (HPMC) in Los Angeles, which has been successfully participating in the CMS Bundled Payments for Care Improvement Advanced (BPCIA) model since the program began in October 2018, can help other provider organizations perform well in this environment. Since BPCIA started, the medical care for HPMC’s patients has cost 15% less than the targets set by CMS. In the three cardiac and four medical & critical care bundles that it has participated in from the start of BPCIA, HPMC has also substantially improved its care quality compared with the year before it began preparing for BPCIA. For instance, HPMC has reduced its 90-day post-discharge mortality rate for patients in those seven bundles by nine percentage points and its 90-day readmission rate for them by five percentage points. These results were achieved despite a slight increase in average patient acuity (the severity of illness of its patients) during BPCIA compared with the period prior.

In BPCIA, hospitals and physician groups select from a wide range of medical and procedural care clinical areas (e.g., cardiac care, medical and critical care, and orthopedic surgery) in which they will be accountable for the total Medicare spending from a patient’s initial hospitalization through 90 days after discharge (the episode of care). The exhibit “Participation in Federal Bundled Payments Program” shows the bundles Hollywood participated in each year. If the participating hospital (or physician group) lowers total Medicare spending below a CMS target, the hospital or physician group keeps the savings; if the spending exceeds the target, the hospital or physician group owes the difference to CMS.

Despite the risk of losing money, HPMC chose to participate in BPCIA, due to its leaders’ conviction that payers such as Medicare would eventually require hospitals to be paid through bundled payments and HPMC needed to be prepared. HPMC had no operations in place to manage bundled payments or population health before it enrolled in BPCIA. HPMC followed a six-part game plan:

1. Form the Right Teams and Governance

HPMC organized the following teams to manage its participation in BPCIA:

A new continuing care team (CCT) dedicated to the program helped to oversee and manage care for qualified patients. The CCT consisted of a director who was dedicated to BPCIA and who oversaw in-hospital patient navigators and post-discharge care coordinators. The CCT anticipated which patients would likely be in the BPCIA program early on during their hospitalization based on their medical condition. Medicare would later determine which patients were in the BPCIA program based on how HPMC ultimately billed for the care and if the patients did not meet any of the program’s exclusion criteria. After it identified likely BPCIA patients, the CCT then followed them through 90 days after discharge from HPMC.

The CCT worked with case management to inform the appropriate level of care for the patient post-discharge. The CCT also helped with decisions such as determining the appropriate time to transition a nursing home patient from skilled to custodial care. It provided a 24/7 nurse advice line to help triage patient questions and avoid patients going to the emergency department (ED). HPMC could afford this additional investment in care since, under BPCIA, Medicare would pay HPMC for the savings it achieved relative to the spending targets that Medicare set.

A set of multidisciplinary stakeholders met weekly and consisted of the dedicated CCT plus case management, clinical documentation specialists, physical therapy, pharmacy, palliative care, and the ED team. The multidisciplinary team reviewed the list of patients still at the hospital that Medicare would probably ultimately classify into the BPCIA program. It also reviewed each patient’s goals given their prognosis and their course of care and developed action plans for each patient, as appropriate, for providing advance care planning and inpatient hospice for end-of-life care.

The hospital management team met monthly to review program performance, assess the impact of current improvement initiatives (e.g., reducing the number of days a patient would need to be in a skilled nursing facility post-discharge), and discuss and prioritize future opportunities to further improve cost and outcomes post-discharge (e.g., to continue to reduce hospital readmissions).

The HPMC board of directors reviewed performance quarterly, assessed the ongoing financial risk, and approved contracts with vendors.

2. Roll Out Rigorous and Insightful Analytics

HPMC began partnering with Avant-garde Health in the spring of 2018 for help in selecting the care areas for which it would adopt bundled payments and in preparing to succeed in BPCIA. Avant-garde Health, which one of us (Derek Haas) heads, provides software and expert insights to help hospitals and physicians understand and improve their care, costs, and operations across the care continuum.

Once HPMC began in BPCIA, Avant-garde provided analytics that enabled HPMC to understand its performance by predicting the bundle cost for each patient and comparing predicted patient costs with the target prices set by CMS after adjusting for the acuity of the patients at HPMC. Avant-garde also analyzed the performance of the post-acute providers that patients utilized, benchmarked against other peer hospitals, and identified and prioritized opportunities for improvement. It helped HPMC engage its physicians by calculating the distributions to physicians under a gainsharing system (discussed below), and by providing physician-level scorecards that showed their patients in the program, their cost of care compared with the risk-adjusted target prices, and quality metrics such as readmission rates.

3. Focus on Managing Post-Acute Care Spending

Before participating in BPCIA, HPMC had no program to manage patients’ post-discharge care. At the outset of BPCIA, HPMC set up an on-campus post-discharge clinic for patients; however, HPMC found that patients did not sufficiently utilize this service, even after offering Uber Health to make it easier for patients to travel to the clinic. After the first year, HPMC closed the clinic and transitioned to a home-based care model that utilized a team of nurses and patient navigators.

For instance, if a patient felt unwell, the patient could call the nurse advice line to triage the issue, and if necessary, a nurse could be deployed to visit the patient to assess the situation and provide necessary care (e.g., IV fluids, medications), thereby avoiding the patient having to go to the ED. By bringing services to patients at their homes, HPMC increased patients’ medication compliance and the number of patients who would reach out to their care team instead of going straight to a hospital ED if they were not feeling well.

HPMC paid a vendor to provide these services in order to reduce the need for costly services. HPMC found that these post-acute support services worked best when they were coordinated with a patient’s existing primary care team so both that team and the CCT had a complete picture of the patient’s care.

HPMC also contracted with a health information exchange company to alert HPMC when one of its BPCIA patients registered for care in an ED at any hospital that the company worked with. This was valuable since without it HPMC would not have known if a patient was going to another hospital or even back to HPMC and was still part of the BPCIA program. HPMC was able to provide customized instructions to the ED staff at HPMC and other hospitals taking care of one of its BPCIA patients so that the care could be coordinated with the patient’s CCT navigators.

HPMC also held regular joint operating meetings with skilled nursing facilities it collaborated with to improve care. In these meetings, HPMC and the skilled nursing facility would review the level of care patients received in the latter (based on patients’ diagnoses and the patients readmitted to a hospital from the skilled nursing facility) with the goal of reducing the number of days that patients had to be in skilled nursing facilities and avoiding hospital readmissions.

4. Improve End-of-Life Care

HPMC started an inpatient hospice program and proactively educated patients and their families about the benefits of hospice. It found that offering advance care-planning discussions (asking how patients would want to be cared for if they are no longer able to make medical decisions for themselves) helped to ensure access to end-of-life care options such as hospice. In addition to educating patients and their families, HPMC also educated physicians about end-of-life care.

5. Financially Align Physicians

HPMC has an independent (non-employed) medical staff, which made it critical to align their incentives with the hospital’s success in the program. To generate physicians’ buy-in, HPMC offered them gainsharing agreements: The physicians shared in money HPMC earned in the program but had no downside risks — i.e., if the hospital failed to meet the CMS spending targets, the physicians would not lose money. The combination of meaningful payments plus the actionable data mentioned above led many physicians to collaborate more fully with HPMC to drive improvements in care.

6. Ensure Timely Coding

Before its involvement in BPCIA, the HPMC coding team would review documentation after the patient’s discharge, which meant that the patient’s DRG, the code used to determine if a patient would be part of the BPCIA program, might not be assigned until one to two weeks after discharge. HPMC transitioned to reviewing documentation for every patient daily to ensure that a working DRG was identified right away. This change enabled the CCT to proactively identify patients that would likely be in BPCIA, engage with them early during their hospital stay, help the patient and their care team select the appropriate level of care post-discharge care (e.g., to his or her home or to a skilled nursing facility), and then work with that post-acute provider (e.g., the skilled nursing facility) to ensure a smooth transition.

While the six-part plan was applied to all the bundles that HPMC participated in, the focus of the interventions varied across bundle types. For instance, for the cardiac patients, HPMC placed greater focus on preventing readmissions, and for the medical patients, on ensuring the appropriate level of care post-discharge. In total the three largest sources of savings were: (1) reduced readmissions, (2) reduced spending on skilled nursing and inpatient rehab care, and (3) reduced physician billing (which is in part a product of lower readmissions and fewer post-discharge facility days).

Based on its early success in the program, HPMC added two neurologic care bundles in 2020, and in 2021 HPMC expanded to participate in all the bundles for which it is eligible. (Given the breadth of changes and investments needed to succeed, it is important to participate in enough bundles to make it worthwhile.) As HPMC shows, with engagement from all stakeholders — patients, physicians, hospital staff, and post-acute facilities — it is possible to drive meaningful improvements in care quality and costs in a relatively short amount of time.