Bundled payments: Quality measurement and the role of analytics

March 17, 2014

In January 2013, CMS put its weight behind bundled payments by launching the Bundled Payments for Care Improvement (BPCI) initiative, subsequently enrolling more than 500 healthcare organizations into the program.

The widespread adoption of bundled payments has the potential to benefit multiple stakeholders within the healthcare system by shifting accountability and financial risk from the payer to the provider. However, in order to implement an effective bundled payment program, healthcare organizations will have to navigate multiple challenges, such as accurately defining care episodes, bundle pricing, aligning care team members and capturing information across all service levels. Both payer and provider infrastructure will also need to be modified to calculate claims based on the new reimbursement model. It will be necessary for an effective mechanism to distribute gains – based on performance and level of care provided – to different stakeholders in the care bundle.

Despite these challenges, hospitals are fast realizing that the benefits of a well-managed bundled payments program significantly outweigh the risks.

Quality measurement plays an important role

The need to track and improve provider performance makes quality measures one of the most important constituents of an effective bundled payment program. The CMS Hospital Inpatient Quality Reporting Program (HIQRP) and Hospital Outpatient Quality Data Reporting Program (HOQRP) provide a list of measures that participating providers need to track under the BPCI initiative. Additionally, providers are encouraged to define custom measures using evidence based guidelines to monitor the quality of care delivered. These may include clinical quality, financial and utilization related measures. 

For example, a typical care bundle for Total Hip Replacement could include pre-operative tests and office visits for 30 days before the procedure, all inpatient care, and related outpatient care for 90 days post operation. The table below lists some of the IQR and customized measures that can help an organization evaluate a Total Hip Replacement care bundle:




Clinical (IQR


Hospital-Level 30-Day All-Cause Risk-Standardized Readmission Rate (RSRR) Following Elective Total Hip Arthroplasty (THA) and Total Knee Arthroplasty (TKA) 

This readmission measure estimates a risk-standardized readmission rate (RSRR) based on unplanned readmissions to any acute care hospital within 30 days of discharge.

Clinical (IQR


Hospital-Wide All-Cause Unplanned Readmissions

The HWR measure includes Medicare FFS beneficiaries aged 65 years and older who were discharged from an inpatient stay at a short-term acute care hospital. CMS estimates each hospital’s risk-standardized readmission rate (RSRR) based on unplanned readmissions, for any cause, within 30 days of discharge.

Clinical (IQR


Hip/Knee Complication:

Hospital-Level Risk Standardized Complication Rate following Elective Primary Total Hip Arthroplasty


Cost per episode

Services expected within the episode period (may not be separately billed), as well as Services which, if they occur within the episode period, may not be separately billed


Cost per discharge

Bundle of health services used to treat patients while in the hospital

Utilization/ Operational

Labor utilization

Total nursing hours per patient day: Total number of nursing hours by level of training/ Total number of discharges



Hospital readmissions

Percentage reductions in avoidable hospital readmissions


Hospital acquired infections (HAI)

Total Incidence of healthcare-acquired infections

Addressing the quality measurement challenge

With the right set of analytics capabilities, organizations can develop a structured, modular approach to managing quality measurement in bundled payments:

  • Defining payment contracts: The BPCI initiative includes four distinct models for bundled payments, based on the type of care setting and care provided. This, along with diverse payer-provider arrangements, brings a great deal of complexity to the way bundles are defined. Analytics can provide powerful financial modeling capabilities to effectively manage diverse financial contracts and define bundles based on provider-payer negotiations.
  • Effectively identifying episodes of care: Organizations need to be able to make clear and relevant definitions of care episodes for a care bundle, and identify the applicable set of quality measures. Analytics tools provide organizations with a large amount of historical data that can be structured and studied to identify conditions, procedures, or services that constitute a meaningful bundle, and present the best opportunity for cost and quality improvements.  
  • Pre-configuring measures for care bundles:  Many analytics tools today are built on top of powerful rules engines, with the ability to define and customize measures depending on end-user requirements. Some even come with pre-configured KPIs or measures across a range of incentive programs such as Meaningful Use, ACO-33, HIQRP, HEDIS and PQRS.  
  • Tracking and benchmarking bundle performance: To maximize returns from bundled payment programs, providers need to effectively track clinical and financial performance metrics against evidence-based guidelines and benchmark standards. This allows healthcare decision makers to identify performance and quality of care gaps, and enhance / refine care bundles to improve performance.  
  • Leveraging predictive analytics to improve clinical outcomes: Specialized analytics tools can provide a view into future trends, especially in areas like readmission management.  Clinical informatics teams can monitor various performance metrics such as expected payments and adjustments, estimated member months, RVUs, DRGs, Medicare equivalents, etc.
  • Care Coordination: With bundled payments focusing on care episodes, providers need to identify care gaps, optimize care coordination workflows and better manage care transitions. Analytics tools provide effective feedback mechanisms that loop inpatient, post-acute care and payer settings to ensure continuous improvements in coordinated care. This also impacts many other care coordination programs including medical homes, readmission reduction programs and Accountable Care Organizations.

Given the potential impact that bundled payments are expected to have on the healthcare market, we should expect more analytics vendors to step up to address many of the challenges. At the same time, healthcare organizations that have already participated in initiatives like BPCI need to collaborate with technology vendors, payers and other stakeholders in healthcare ecosystem, share best practices and play a proactive role in driving greater value from bundled payments.

Shivam Mundra is a healthcare IT consultant at CitiusTech.
Shyam Manoj is the Assistant Vice President at CitiusTech.

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