The Centers for Medicare and Medicaid Services (CMS) has been laser focusing on ways to reduce healthcare costs and improve the quality of treatment provided to patients. One way they are doing this is by revamping the way physicians are being paid.

The “bundle” appears to be emerging as a favorite type of payment. CMS’ Bundled Payment Care Initiative was rolled out in 2013, but focused on hospitals and post-acute care facilities. The bundles centered on episodes of care for conditions including urinary tract infections, renal failure, and diabetes.

A new program is currently under development that would, for the first time, focus bundling on individual physicians for procedures and chronic condition management: The Specialty Practitioner Payment Model. This may be new territory for many specialists, but one that they should be actively exploring, according to Allison Brennan, senior advocacy adviser for the Medical Group Management Association.

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“One of the challenges for specialists is to find where their niche is in these programs because many are focused on [primary care providers] and across specialties,” she said. “But there is a huge role for specialists to play because they are responsible for a lot of the care provided and the more costly care that is provided.”

CMS is “pushing and driving” the change in the way physicians are paid, but Brennan said she is encouraging practices to explore opportunities with both Medicare and private payers. Fee-for-service reimbursements likely won’t be gone anytime soon, but having flexibility to try different kinds of payment models may help practices remain afloat as health reform moves forward.

In addition to conditions such as diabetes and urinary tract infections, Teresa Koenig, senior vice president of The Camden Group, said bundled payments could easily span procedures and radiation for such illnesses such as end-stage renal disease and cancer. CMS is currently exploring an oncology model that could include common diagnoses like prostate cancer.

Cass Schaedig, director of Data Solutions for HealthTronics IT, Inc., is a data cruncher who has worked with hospitals to figure out what they should be charging for bundled care. Understanding the cost of a bundled payment begins with choosing the trigger for the bundle, like the presence of benign prostatic hyperplasia (BPH) with a new patient visit or if a current patient comes in to initiate care for the condition.

Next, a physician has to define a window of time for the length of care needed to treat the condition. Third, and most importantly, they need to establish what should be included in the bundle. Providers will need to go through their records to find out what kind of services were provide to patients after the diagnosis and how often these services occur. They then need to calculate the cost based on relative value units (RVUs). When figuring the costs, she said providers have to take into account how that relates to what they are currently paid for the services and if it will cover their overall costs.

Schaedig has helped develop a simulation of what a BPH bundle might look like. She culled data over a 2-year period from more than 200 urology groups to see what an episode of care would cost. She looked at both large and small practices and asked for their average reimbursement under fee-for-service arrangements. They included covered services beginning with a diagnosis of BPH with urinary obstruction and ending 90 days later. She found that the average payment per episode was approximately $691 and included just more than 18 RVUs and from 7 to 8 work RVUs. More than 80% of the total payments came from surgery and evaluation/management.

It is important, particularly when negotiating with private payers, to “carve out” things that should not be included in the diagnosis, Schaedig said. This way, providers aren’t responsible for the cost of things that are out of their control like external labs or other services. In her accounting, she excluded patients with other conditions like prostate malignancy from her tabulations. Some services can be carved out of the bundle and patients with too many other diagnoses may have to be left out altogether, she said.