Prioritizing Episodes of Care – Starting a Bundled Payment Program


Aver is keenly focused on helping healthcare organizations use bundled payments for episodes of care as a key value-based contracting tool. Aver begins by using historic data to model the underlying, fee-for-service activity in the context of episodes of care. We still operate in the fee-for-service world, and payers don’t have a “lens” through which they can identify and think about episodes. Aver’s Episode Snapshot tool provides that lens.

The bundle opportunity analysis we conduct for each client identifies the greatest opportunities to improve quality and reduce cost through bundled payments. By analysis a payer’s data, Aver prioritizes both episodes of care and provider partners to approach when starting a program. While these are two different steps in the bridge Aver’s tools create to help healthcare organizations move from volume- to value-based contracting, we encourage payers to think about them together. Payers can’t make decisions about which episodes to target and which providers to approach in a vacuum - each decision must inform the other.


"Aver prioritizes both episodes of care and provider partners to approach when starting a program. "


Aver prioritizes both episodes of care and provider partners to approach when starting a program.

As we mentioned in a previous post, most clients have gut feelings, or hypotheses, about which episodes of care they might first target for bundled payments. We work with clients to further build out these hypotheses, adding our own expertise as we develop this framework for the bundle opportunity analysis. Our analysis either validates or invalidates these hypotheses and suggests additional episodes of care for payers to consider.

Aver’s first cut at a payer’s historical data offers a view of episodes of care, using either PROMETHEUS or BPCI bundle definitions, along several dimensions including average episode cost, quality, overall volume, and variation. The following graphic provides a visualization of episodes of care along three of these four dimensions. Ideally, payers should look for episodes with a fairly high cost and volume, as these episodes provide opportunities to create economies of scale and legitimate savings opportunities. In addition, targeting high-quality episodes will allow a payer to work with providers in the best position to bend the cost curve.

Aver - Episode Cost

Cost variability is another key episode metric to consider when prioritizing conditions to target for bundled payment. Episodes of care with high cost variability often represent opportunities to bring outlier providers toward a more standard care path or to offer an approach to reduce that variability. The following image, pulled from Aver’s bundle opportunity analysis, illustrates one way we present this data to our clients. One measure of episode cost variability we use is the interquartile range. The interquartile range is the difference between the upper quartile and lower quartile and describes the middle 50% of values when ranked from lowest to highest.  By eliminating the highest and lowest values, the interquartile range offers a measure of spread that is less influenced by outliers. This report also provides the median, or middle value, in the range of episode costs as well as many other summary statistics to offer payers this a bundled payment lens through which to view their data.

© Aver Inc. 2017.  All Rights Reserved.

© Aver Inc. 2017.  All Rights Reserved.

While there is much science and statistical analysis that goes into identifying episodes of care for bundled payment, there is definitely an art to the process as well. That becomes apparent in the next two characteristics we encourage clients to consider in identifying episodes for their program.

First, when starting a bundled payment program, it is important to begin with episodes that are easy to execute. These tend to be procedural episodes of care because it is easier to understand the bundle definition when there is a clear trigger event (the procedure) with clear pre- and post-trigger windows around it. This is part of why we see a lot of clients bundling payment for hip and knee replacements, coronary artery bypass graft (CABG) surgery, and percutaneous coronary intervention (PCI). Often, when we first conduct a bundle opportunity analysis, routine sick care and preventive care are the highest volume episodes and tend to have high cost variability. While these factors would suggest they would be good candidates for bundled payment, the care pathway tends to be less straightforward and it is very challenging to take these bundles to market, at least initially.

Second, we encourage payers to further focus on episodes of care with a fairly high degree of modifiable spend because these episodes present greater savings opportunities. In a bundled payment context, we think of modifiable spend as costs that are at least somewhat directed by the episode initiating provider. For example, in a joint replacement bundle, some modifiable elements may include the implant and the post-acute care provider. By using a more economical implant with the same or better outcomes, surgeons can reduce the total cost of a joint replacement episode. Or, by discharging patients to home, with home health and physical therapy, rather than to a skilled nursing facility, surgeons can also reduce total episode cost.

By analyzing these factors, Aver can help payers quantify the savings opportunity - Consider a provider whose average knee or hip replacement costs $30,000. By making quality improvements and care pathway modifications, they could likely reduce their average cost to $28,000, a savings of $2,000 for each of the 400 knee and hip replacement procedures that provider conducts annually. This would yield a substantial total savings of $800,000 per year, even if shared with the episode initiating provider.

By using historic data to model the underlying, fee-for-service activity in the context of episodes of care, Aver’s Episode Snapshot tool helps payers “see” fee-for-service activity through a bundled payment lens. Our initial bundle opportunity analysis identifies the episodes of care with the greatest opportunities to improve quality and reduce cost, showing payers where to begin their program. But what about payers looking to expand their bundled payment program? Our next blog will tackle that very question.


Customer Delivery Team
Aver, Inc


Customer Delivery Team
Aver, Inc

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