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Key considerations in a bundled paymentmodel (BPM) design:Amusculoskeletalconditioncase study Carol Bazell, MD, MPHCherie Dodge, RN, MPHKetaki Nagarkar, DPT financial risk from payers for the performance of providerparticipants in bundled payment programs. In exchange, theconveners have the opportunity to receive payments forachieving performance targets.Self-insured employer groupsandworkers’ compensation insurers also participate in bundledpayment models. Depending on their role, these stakeholdersmay or may not be directly involved in bundle design but cancreate a demand for entering into VBP models. For risk-bearingorganizations,participation ina bundled payment arrangementcan be voluntary, or it may be the only way a payer, self-insured employer group, or workers’ compensation insurer iswilling to pay for a set of services. Introduction In recent years, payment for healthcare services has movedaway fromfee-for-service reimbursement toward value-basedpayment (VBP) models, including accountable careorganizations and bundled payments.The goal of VBP modelsis to reduce costs by improving care coordination andeliminating unnecessary services while maintaining orimproving quality of care.1For example, in 2021 the Centers forMedicareandMedicaid Services (CMS) established a goal tohave 100%oforiginalMedicare beneficiaries and the vastmajority of Medicaid beneficiaries in accountable careorganization (ACO)relationships by 2030 as part of thestrategic refreshby theCenter for Medicare and MedicaidInnovation(CMMI).2Bundled payments are one type of VBPmodel, typically executed as a fixed-price agreement for apredefined episode of care that commonly contains aprocedure and all related services, or all care for a specificmedical condition. CMS has invested significant resources intothese types of models, and they recently announced a newmandatoryfive-year bundled payment model called theTransforming Episode Accountability Model (TEAM),whichaims to incentivize care coordination by holding selectedhospitals accountable for the total cost and quality of careduring and 30 days after certain surgical procedures.3 Organizational goals when enteringinto a BPM ORGANIZATIONS TRANSFERRING FINANCIAL RISK Organizations typically transferring financial risk include payerssuch asCMS, commercialhealth plans,and self-insuredemployer groups.Theirprimary goals are to lower costs andimprove (or maintain) quality of care. The predictability of costwith a bundled payment model is also attractivefor participants.Organizations transferring risk are typically the groups designingthe bundled payment models, or these organizations may findthemselves in a situation where they can select a predesignedbundled payment model for implementation. In thispaper, wepresent a case study related to kneeosteoarthritisand highlight why musculoskeletal(MSK)conditions such aslow back pain, cervical neck pain,andknee or hip osteoarthritis are well suited for bundledpayments. In addition, we will discuss the features that shouldbe considered by organizationsthatare designing a bundledpayment model(BPM). Many health plans have designed bundled payment modelsandcontracted directly with their network providers. As anexample,one nationalpayerhas developed a prospectivebundled payment for selectorthopedic surgeries in multiplestates. Thestatedgoal ofitsprogram is toincreasetransparency and connectpatients to quality care at apredictable and affordable cost.4 Types of organizations enteringinto a BPM Some self-insured employer groups and providers choose tocontract directly to offer value-based arrangements toemployees. Large employers,including General Motors,Lowe’s,Walmart, and JetBlue havepartnered directly withselect healthcare organizations in the country for high-costspecialty surgical procedures via bundled paymentarrangements.5While their primary goal is to mitigate costs,direct contracting also allows the self-insured employer grouptohave more control over benefit designs and offerings. A variety of organizations participate in bundled paymentarrangements. In a typical bundled payment arrangement,there are two sides—organizations transferring financial riskand organizations taking financial risk. While many of the earlybundled payment models were designed by payers andadopted by providers, there are other stakeholders willing totake financial risk. For example, conveners are third-partyorganizations (not providers or payers) that generally take on ORGANIZATIONS TAKING ON FINANCIAL RISK Procedure-based bundles are appealing to payers as they drivelower per procedure cost. However, payers may be concernedthat the procedural episodes do not provide incentives forproviders to intensify medical management that may potentiallyavoid procedures altogether. To address concerns aboutpotential overutilization of elective procedures that may resultfrom the provider opportunities presented by procedure-basedbundled payments, bundled payments for episodes c