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Healthcare delivery organizations face growing demands for lower costs, improved quality, and greater transparency. As payers, consumers and policy makers grow increasingly frustrated, the
search is on for new models that offer meaningful improvement. Bundled pricing is an innovation already being implemented by market leaders that promises to address this need.
The essence of the bundled pricing concept is to provide all the facility and physician services needed to treat a specific condition for a predetermined, fixed price. Key features are simplification
and predictability. The term is used variously to include just the acute care episode, a defined treatment "bundle of care," and more broadly to include the entire care continuum.
The bundled pricing model has shown potential to realign incentives for healthcare providers and in the process, deliver better care at lower cost. Like many medical interventions, however,
it’s not without its challenges and risks.
Predictive Care Paths: The Starting Point for Managing Cost and Quality
Successful implementation of bundled pricing requires a clear definition of the services to be provided as part of the bundle, and a measurable, predictable health outcome for a set cost. To get
there, providers must have evidence-based predictive care paths in place. Predictive care paths represent a critical baseline for managing both cost and quality, and help
establish consensus among clinicians regarding the agreed upon treatments for patients with a specific condition.
Modeling and Managing Costs and Revenue
Using predictive care paths also enables providers to effectively model and manage costs and revenue. Since providers assume financial risk under bundled pricing
(i.e. the fixed price may be less than they would have received on a fee-for-service basis), it’s critical to understand cost and quality variability, and take steps to manage it. Providers must also
make careful decisions about what services are included, and how the boundaries of an episode of care will be defined.
ECV: The Antidote to Commoditization
Not only is there immediate financial risk in a bundled price if variations in cost and quality are not managed effectively, there is also long term strategic risk for providers -- namely,
commoditization. Over time, as demands for lower cost and increased transparency make comparing prices across providers much easier (and more important in payer and patient decisions),
competition will drive prices downward. In order to justify and defend their pricing to payers (and ultimately to patients), providers must demonstrate the economic and clinical value
case for their bundled price services.
An economic and clinical value (ECV) case is a narrative, backed by data, that explains how a provider delivers superior clinical value (demonstrated by various measures of clinical success)
and economic value (as measured by factors like recovery time, return to work, etc.). Development of a data-based ECV case is the only strategy for ensuring long term competitive
advantage and avoidance of commoditization.
NAI’s Comprehensive Bundled Pricing Services
NAI understands the range of financial, administrative, analytic and clinical challenges associated with the development of bundled pricing, and provides comprehensive consulting
support for organizations undertaking this approach to managing healthcare costs and improving quality. These services utilize our proprietary ecvHealthcareSM
methodology, and we can help you:
- Assess your readiness to compete under new payment models
- Enhance clinical integration to support this new model
- Develop evidence-based predictive care paths
- Identify and build the analytic, reporting, and modeling capabilities needed to support implementation and management
- Build or strengthen capabilities for managing variation in cost and quality
- Develop an economic and clinical value case to avoid commoditization
Given the complexity of bundled pricing and the level of collaboration required between management and clinicians, choosing the right partner to navigate this process is critical. NAI brings deep
experience across the care continuum in helping provider organizations plan for and implement bundled pricing. For more than 20 years, NAI has worked with leading healthcare delivery,
manufacturing, and insurance organizations on the strategic and operational issues that matter most to their business. Whether you’re ready to move toward bundled pricing, or simply want to
better understand what it will take to get ready, NAI can help.
For more information about our consulting services around bundled pricing or more broadly in healthcare
delivery, please email or call us at 314.997.1587.
Selected Articles
The following articles represent a sample of our perspectives on bundled pricing:
To read our featured bundled pricing article, Laying the Foundation for Success in Bundled Pricing, please click on the link below.
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