ACO associated major payment reforms [The issue is not really about bundled vs. not. The real change is the sharing or shifting (or not) of risk regarding cost]

• The bundled payment system

Also known as Episode-of-Care payment or Global payment or Evidenced based case rate payment or Packaged pricing, it is a method that reimburses providers on the basis of expected cost for clinically defined episode of care (Cromil et all, 1997). This is the adopted system of payment associated with ACA in which CMS will reimburse contracted providers and so an integral part of contracts with associated ACO. The bundled payment is more advantageous [to whom?] than fee-for-service in which providers are paid per service of care which encourages unnecessary care [does it? How?]. Also, under this system of reimbursement, providers benefit from readmission of patients. The bundled payment system is also better than the Capitation system of pay in which providers are paid a “lump sum” per patient irrespective of the number of services provided to a single patient thereby penalizing providers that take care of sicker patients, and in a bid to cut cost provide poor quality of care to discharged patients that further results in readmission (American Hospital Association (AHA), 2010). In the definition of episode of care associated with bundled payment, it includes all services rendered to a patient pre, during and post admission to a particular hospital as well care given by other members of the ACO associated providers with a given episode of illness. It is expected that this inclusion will provide inpatients care providers incentive to complete effective care co-ordination and other identified best practices upon discharge from the inpatient settings (Minott, 2009). So for a hypothetical diabetic ‘Patient A’ with a poorly controlled sugar level who developed a stroke due to poor follow up and monitoring, this patient will probably require ambulatory clinical care in the hospital as well as home care and physiotherapy requiring a continuum of care across various providers in a particular ACO group. For the entire providers associated with the care of ‘Patient A’ and part of the Gotham ACO, a single bundled payment will have to be paid by the third party insurer (CMS or Private Insurer). As such, it is beneficial for the entire providers to coordinate and care for the patient in a way to reduce cost and be profitable. It will require coordination and integration of care between member specialist and preventive care providers within the ACO group such as PCP, FQHC, Social workers. They will have to work together to avoid patients developing complications from diabetes or from developing diabetes in the first place as any gains achieved from preventive services that will lead to minimal numbers of patients having overt diabetes will be shared between the whole members of the ACO and the third party insurer (Medicare and/or the private insurer in contractual legal agreement with the ACO).

• Shared savings

This is a payment strategy that offers incentives for providers to reduce health care costs for a defined patient population, by offering the providers a percentage of net savings gained as a result of their efforts. This payment model rewards providers that can manage health care services to come in below the planned budget. The budget represents anticipated costs related to a comprehensive set of covered services for a group of patients who receive their primary care from the provider organization. Shared savings models are attractive to employer purchasers and to insurers because they introduce an incentive to manage costs within a budget that simply does not exist in traditional volume-incenting payment arrangements (Bailit and Burns, 2012). This incentive in this case can make providers reconsider their test ordering patterns, their referral patterns, and steps they can take to prevent avoidable emergency visits and hospital admissions and to improve coordination of care. Again, shared savings models are attractive to providers who are currently only contracted with insurance companies under fee-for-service arrangements. Shared savings arrangements give an opportunity for the provider to share in any savings generated through the provider’s efforts, without the provider incurring any financial risk should expenditures exceed the budget (Bailit and Burn, 2012)