Successful Implementation of Bundled Payments in an ASC

Healthy Habits of Billing and CodingBundled payments are a more recent trend in reimbursement for Ambulatory Surgery Centers (ASCs).  What this means is, for a particular procedure, rather than billing each individual involved in the process, the bundled payment covers the reimbursement in a “one-bill-fits-all” kind of way.  The Ambulatory M&A Advisor takes a look at the positives of bundled payments, the negatives, options providers have and more, when it comes to the successful implementation of this method into an ASC.

Joan Dentler, President, CEO of Avanza Healthcare Strategies explains that bundled payments incentivize providers (physicians, facilities and ancillaries) to provide high-quality, low-cost care to patients.  They are rewarded for good outcomes and penalized for higher costs. When a bundled payment arrangement is successful, it can be a win for ASCs, patients and payers as it represents a clear way to predict cost.

“A bundled payment may be a worthwhile outpatient strategy for a facility, such as an ASC, to explore if it represents an opportunity to expand case volume. As long as the ASC can effectively manage expenses, bundled payments can bring more volume and increase margins,” Dentler says.

According to Dentler, the lack of standardization in what should be included in a bundled payment for a given procedure often causes confusion for providers and patients. It needs to be clearly defined and communicated.

“Bundled payments are also often difficult to execute due to the number of potential parties that may need to be included in the bundle. In the case of ASC, where patients are initially seen in a physician’s office, referred to and undergo the procedure in the ASC, and then may receive physical therapy or other post-discharge services in an ancillary setting, coordinating a bundle across these settings can be challenging, especially when ownership varies,” Dentler says.

Dale Skoff, Director, Contracting Services for Abeo says that in his experience the positives of bundled payments used in an ASC are structured control, employers, individuals, etc. know exactly what they will be charged for the entire episode of care. It also allows for more controlled quality measures as everyone involved is part of a single payment.

Steve Selbst, CEO HealthCents Inc. says the main positive would be that if a provider can calculate the bundled payment as an ASC, or in general, as a provider, then they would get consistency and predictability of payment and profit.

“The risk is that much like an actuarial assessment if you end up with more patient visits, higher cost of implants, unexpected procedures or multiple procedures that were not included in your initial calculations, then you could end up losing money as compared to a fee-for-service scenario,” Selbst says.

Skoff adds that another negative is that hospitals and ASC’s do not have the ability nor staff to track and distribute these payments.  Skoff says that providers are also not willing to establish a review/control committee, there needs to be a committee in place that track and monitors, quality etc.

Another negative Skoff adds is in regard to how future increases are built into the program.

“Once a Hospital or ASC sets the current bundled rate what are the steps to get the payor to provide future increases? This could be based on quality, dollars saved that payor would have to be willing to share,” Skoff says.

“Also, if same service is provided by a provider at another location but under same tax ID, will a payor deny it because the code billed is showing as part of a bundled program?”

Skoff is concerned with how bundled payment locations will be incentivized and whether they will gain more business because payors will make employer groups aware of the programs and encourage steerage to these locations.

Provider Options

“Bundled payments are still not extremely common and therefore, you might even view them as being more experimental or done on an exception basis at this time.  Bundled payments can take different forms.  For instance, if it is an ASC that does eye surgery, perhaps it is a one time payment for all of the treatment surrounding a cataract surgery.  It could be that it encapsulates all of the treatment for a particular kind of procedure or surgery,” Selbst says.

“It could also be that perhaps there is some sort of a value-based component that if there isn’t a hospital readmission over a certain period of time after the procedure, there would be some sort of a bonus payment in the bundle.  I can say that it would be a highly negotiable scenario where there is a bundled payment, and they are very infrequent and rare at this point.”

Dentler adds that there are multiple types of bundled payments that cover different procedures and associated services.

“Two of the most common types of bundled payment models are employer-direct programs, where typically employers work with third-party administrators (TPAs) to contract with providers for specific treatments for employees, and payer-direct programs, where provider(s) contract directly with a payer for an episode of care. There are different models of these approaches,” Dentler says.

As there is no standardization at this point, understanding exactly what is and is not included in the bundle is critical for providers to understand before moving ahead with contract negotiations.

Dentler says the industry is seeing them in all types of surgical and non-surgical episodes of care. If the episode of care can be defined and all required interventions coordinated and controlled, then providers should consider bundles.

Dentler says the Advisory Board Company tracks bundled payment adoption throughout the country. The service lines with the most bundles are cardiovascular (primarily by employers), orthopedic (a majority by commercial insurers) and spine (all employers).

Approaching an ASC and Why it May Not Work

Skoff says that before approaching an ASC with a bundled payment plan it is important that all providers included in the bundle develop which services/CPT codes/ASC groupers will be part of the program.  Skoff says that this can be total hips, joints, knees, any ortho services, eye services, colonoscopy, etc.

The approaching parties also need to decide what providers will be involved, and how providers will be added to the program.  Skoff stresses that a bundled payment needs to be a controlled provider environment

“Will providers still submit claims to the payor and be paid at $0.00 with a reason code of “bundle payment program”?Payors still need to collect all data from providers, and cannot do this without a claim being submitted,” Skoff says.

“Also, determine how repeats, if they happen we been dealt with.  A payor is not going to pay for the same service to be done again if it was not successful the first time (all involved need to understand this).”

As far as to why an ASC would reject a bundled payment option, Skoff says this can be due to low reimbursement packages, providers being unable to agree that they are all getting equal reimbursement, quality review programs not in place, and a bundled payment may require an advisory board to review cases and determine if service could have been done in a more efficient manner.

Selbst adds that another reason would be because the ASC would be uncomfortable or uncertain with their ability to predict the total cost surrounding a major procedure, all of the related implants and uncertainties that might surround it.

“There can be variability; for instance, if you were doing a hand surgery, what if you needed a certain kind of an implant that you didn’t expect and the implant costs thousands of dollars.   It could be very hard to predict all of the cost that would be encapsulated with a particular kind of a treatment.  Therefore, there would be the concern that they would undershoot the treatment cost because of not being able to anticipate the bearability of cost and treatment requirements,” Selbst says.

If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or

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