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Guidelines for Benefits Operations in Episode of Care Contracting

Keywords: Bundled Payment, Episode of Care, Evidence-informed Case Rates (ECRs), PROMETHEUS Payment,

As PROMETHEUS pilot sites have expanded, and in particular, with the recent Center for Medicare and Medicaid Innovation (CMMI) push into bundled or episode payment, questions about how benefits should be operated have come to the fore. It is easy to say that with value-based payment, the need for value-based insurance benefits is equally important. But in a complex and transitional environment, finding workable solutions is easier said than done. The HCI3 team, along with its pilot partners, has been giving this some thought. Our goal is to continuously share best practices and lessons learned in order to inform fieldwork. This document is an attempt to assemble guidelines around a difficult subject. Please note that these are preliminary thoughts and are not based on actual current experimentation.

To begin, we first want to point out that in a mature episode of care payment world, where payers and providers have achieved sufficient levels of system integration, benefits operations are fairly straightforward, especially with acute care episodes such as inpatient surgery. Because integrated providers are fully at risk for a contracted bundle and paid prospectively, the benefit structure can be as simple as a predetermined copay or coinsurance amount. In fact, that’s the whole point of episode contracting, to make health care costs transparent and out-of-pocket exposure fixed to a predictable dollar amount before care is rendered. As the eminent health care economist, Uwe Reinhardt, once said, “How can you have consumerism in health care if no one knows what anything costs?”

Conceptually, therefore, episode payment and benefits radically simplify value perception and health system interaction for patients over and above fee-for-service (FFS) payment. Unfortunately, the real world of American health care is dominated by FFS infrastructure, and so what should be simple becomes problematic in a transitional environment. This issue is an important one whenever there isn't a fixed price, prenegotiated episode that doesn't include any form of reconciliation. A very clean prospective episode payment with no payment to non contracted providers will always be easy to adjudicate for the payer -- including self-insured employers and plan members. However, status quo system fragmentation means that starting out, most episode of care payer / provider dyads will have to formulate bundled payment over a FFS chassis. To accomplish this, a negotiated bundle requires a “virtual” budget against which FFS billings are adjudicated, and then retrospectively reconciled to determine whether providers performed over or under the budget. It is this reconciliation process that leads to questions we will endeavor to answer.

So let’s begin with some examples and then proceed to potential solutions.

Guidelines for Benefits Operations in Episode of Care Contracting.pdf205.49 KB