Bundled Payment or Capitation? Care Coordination is Essential to Both

Posted by Gary Winzenread

August 8, 2016 at 11:33 AM



A recent set of articles in Harvard Business Review, How to Pay for Healthcare, has attracted a lot of attention in the industry lately. One of the articles, by Michael E. Porter and Robert S. Kaplan, makes a strong case that bundled payments are the answer for reducing costs and improving quality; the other piece, by Brent C. James, MD, and Gregory P. Poulsen, argues that capitated models are the better option.

The debate is a well-balanced one. Bundles work best in the context of well-defined procedures (e.g., surgeries) or when the goal is to cure a disease through a treatment regimen (e.g., chemotherapy). Capitation, on the other hand, seems better suited to preventive and/or proactive care settings, where the goal is to keep patients healthy before they need high-cost treatments. Our industry is so large that we’ll likely need elements of both models to lower costs and improve outcomes.

But for all the disagreement among bundle proponents and capitation fans, there is widespread consensus that payment models need to change, the debate about the best approach is healthy among healthcare thought leaders. Another point of agreement is the essential role played by care coordination:

“Most people agree on the need to better coordinate care delivery in the United States. The current system is deplorably fragmented, forcing patients to navigate a confusing maze of independent primary, specialty, and hospital care.”

That’s what struck me as I read both pieces: proponents of both bundled payments and capitation models rely on care coordination to solve the fragmentation problem. Consider the following points. 

1. Care coordination connects the small, personal and huge, business dimensions of healthcare.

Large-scale outcomes matter to healthcare systems, but individual patients are focused on smaller, more personal concerns. Care coordination pays off at both levels, and the upside is huge.

“Patients don’t care about population outcomes such as overall infection rates; they care about the treatments they receive to address their particular needs…appropriate care depends heavily on each patient’s circumstances – health status, comorbidities, disability, and so on.”

“Recent studies … reveal that inadequate, unnecessary, uncoordinated, and inefficient care and suboptimal business processes eat up at least 35%—and maybe over 50%—of the more than $3 trillion that the country spends annually on health care. That suggests more than $1 trillion is being squandered.”

2. Better communication leads to better outcomes.

Many aspects of treatment that can significantly influence outcomes, including taking medication and visiting primary care physicians, are left up to the patient. Currently, hospitals, health systems and physician practices are challenged to confirm that patients comply – much less encourage them to do so. It’s a costly and dangerous communications gap, that care coordination can help bridge through timely, automated and personalized communications.

“Bundled payments are triggering a whole new level of care innovation. For example, hospital-based physicians are remaining involved in care after patients are discharged. ... Nurses make sure patients fill their prescriptions, take medications correctly, and actually see their primary care physician. (A recent study showed that 50% of readmitted patients did not see their primary care doctor in the first 30 days after discharge.) And navigators accompany patients through all phases of their care and act as first responders in quickly resolving problems.”

 3. Care coordination promotes integration – both within integrated networks and across non-integrated networks.

With increasing recognition of the challenges presented by fragmentation, care coordination can be particularly effectively where all providers are part of the same integrated network. It may be even more important for a care continuum where some providers are outside a single health system. In fact, across for non-integrated medical networks, care coordination can serve as the glue to bond diverse specialists to specific cases and patients. In terms of bundled payments, we have seen care coordination helping to facilitate partnerships and more effective relationships among independent PCP groups, outpatient surgery centers and hospitals, which own the risk associated with the bundled payment.

“[Care coordination] works most effectively and efficiently when embedded within an integrated care delivery organization—a network of providers that have agreed to offer a continuum of care to a defined population and to be accountable for clinical and financial outcomes.”

Specialty silos have historically led to fragmented, uncoordinated, and inefficient care. With bundled payments, providers with overall responsibility for the full care cycle for a condition will be empowered and motivated to coordinate and integrate all the specialists and facilities involved in care …  Bundled payments also encourage … even separate practices and organizations [to] actively collaborate across inpatient and outpatient settings to coordinate and integrate care—something that rarely happens today.”

 4. Care coordination pays off for many different conditions.

Complex and chronic conditions are a significant driver of rising costs, and that’s the sweet spot for care coordination, in terms of value delivery and performance improvements. But it also pays off in primary care settings, under either bundled or capitated models.

“Bundled payments work well for chronic conditions because of the huge benefits that result from coordinated longitudinal care by a multidisciplinary team... Each primary care segment—such as healthy children, healthy adults, adults at risk for developing chronic disease, and the elderly—will need a very different mix of clinical, educational, and administrative services, and the appropriate outcomes will differ as well. Bundled payments reward integrated and efficient delivery of the right mix of primary and preventive services for each patient group.”

“Any care delivery group has to treat the whole person, not just the disease; it must supply comprehensive care for all of a patient’s conditions, either by providing it directly or coordinating with other groups …"

 5. Care coordination is already paying off in initial pilots. 

Where care coordination has been implemented as part of pilots or studies involving bundled payments or capitation, it has already delivered positive results.

 “The Medicare Shared Savings Program, under which a care delivery group is paid via traditional fee for service and per case DRGs but receives a portion of any savings it achieves through care coordination and waste reduction.”

“A whole host of waste reduction innovations … now make financial contributions to [Intermountain Health] …  including primary care clinics that coordinate all aspects of medical and social services.”

Topics: ROI, Navigation & Care Coordination, Value-Based Care

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