Rethinking Revenue Cycle Management Services in the Face of Bundled Payments

There has never been an era when the healthcare industry has seen such an upheaval quite like the past decade. With the passing of the landmark Affordable Care Act (ACA), millions of previously uninsured Americans now have a safety net to rely on should they fall ill.

However, the influx of new patients also means that there has been a renewed focus on providing quality care. On the flip side, providing quality care also often means higher costs of treatment. Now more than ever, healthcare providers are forced to juggle these two seemingly opposed aspects of the business.

Rethinking the Payment Model

In recent years, the pay-for-service model has been on the decline and is slowly being replaced by new payment modalities. One of the most recent is called the bundled healthcare payment system, as mandated by Medicare.

Bundled Payments Help Hold All Providers Accountable for Quality Care

In this model, medical facilities are paid a single payment for all the services performed during a single “episode of care.” What exactly does this mean?

Say, for example, that a patient requires surgery for a lower back injury. In the old model, payers would reimburse the hospital, surgeon, and anesthesiologist separately. In the bundled payment model, however, payers will collectively pay all these three providers, using a set price based on historical costs for a given condition.

If the providers’ medical services exceed that set price, they incur a loss; if they are able to efficiently and effectively render their service, they make a profit.

The idea is that such a model will encourage all healthcare providers to work closer with each other to identify not just the best treatment avenues, but also the most efficient ones. In short, all involved parties are held accountable with regards both the quality and cost of care because they are incentivized to do so.

Reinventing Billings

As one might expect, such a development will not only affect the way a hospital collects accounts receivables, but perhaps even the revenue cycle management services that they engage because payments are no longer made to just one entity.

In some cases, the payer will reimburse the hospital, for example, which then forwards the appropriate payments to the surgeon and anesthesiologist. In other cases, the payer will reimburse each of the three parties separately, but will adjust the payment so as not to exceed the set price.

There’s no fixed answer as to which of the two payment modes are better, as it will depend on each hospital or clinic’s unique situation. However, as such a model becomes more prevalent, it pays to start rethinking one’s current billing process.

Results Thus Far

Of course, it might seem like the bundled payment system skews to the patients’ favor. This isn’t necessarily the case, though. In a study conducted by the JAMA Internal Medicine journal, the Baptist Health System—an early participant of the bundled payment system—saw a 20.8% decrease in Medicare expenditure for lower-extremity joint replacement surgery for cases without complications, and 13.8% even for those that did. Likewise, post-acute care also declined by 27%, which led the study to conclude that the bundled model can indeed generate savings—and income—for healthcare providers.

The Importance of Eligibility

It’s understandable why the bundled payment system is backed by Medicare: with so many indigent people needing care, making the treatment more cost-efficient is of utmost importance. That being said, hospitals can further protect their bottom lines by making sure that their patients apply for and qualify for Medicare benefits. That way, their treatment costs are backed by the government, minimizing the likelihood that unpaid bills will become potential bad debt.

Fortunately, there are eligibility experts like DECO that guide patients through the entire process to ensure higher rates of application approval. With their help, both patients and healthcare providers can reap the benefits of the bundled payment system.


Understanding the Basics of Bundled Payments in Healthcare,
Bundled Payments And Episodes Of Care: What's Next,

Pete Ash

Pete is the Vice President of Sales & Client Services at DECO Recovery Management. He covers the Mid Atlantic region and specializes in Medicaid related topics. It is DECO’s Mission to maximize reimbursement to our clients by leveraging innovative technology, processes and compassionate advocates to provide exemplary service.

Categories: Hospital Revenue Cycle Management

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