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Designing and Implementing Post-Acute Networks for Bundled Payment Programs

Sheldon Hamburger
Principal/Consultant, The Aristone Group, Raleigh-Durham, North Carolina

The Role of Post-acute Care in Bundled Payments
Bundled payment programs are almost always centered on and measured by performance improvement in the post-acute area. In addition to commercial payer bundle programs, Centers for Medicare & Medicaid Services (CMS) through the Center for Medicare & Medicaid Innovation (CMMI) has launched several programs in this area including Medicare Acute Care Episode (ACE), Bundled Payments for Care Improvement (BPCI), and now Comprehensive Care for Joint Replacement Model (CJR). These models have given the industry some good experience for new entrants to leverage in developing their programs and they form the basis for much of what is presented in this article.

As the primary contractor for bundles, hospitals take on the responsibility for post-acute spend while generally having little experience in that area. This creates a significant challenge to create successful and profitable programs. Here is an example of how post-acute spend breaks down for a representative hospital system for 48 bundles under BPCI:

Developing a Strategy for Post-acute Care

Diagnosis-Related Groups (DRGs) already put hospitals at risk for the inpatient portion of the bundle (anchor stay in Figure 1) so the key to financial success lies in the ability to effect positive change after discharge. Shifting post-acute services to lower-cost venues or eliminating them altogether can yield great financial rewards. For example, the average daily spend of home health agency (HHA) is less than half that of skilled nursing facility (SNF) (see Figure 2).

The two big spending drivers in the post-acute experience are readmissions and direct care in the post-acute setting. Readmissions, sometimes accounting for over 40 percent of post-acute spend,1 can be addressed during inpatient care for issues such as surgical site infections or medication management (for example, as part of Hospital Readmission Reduction Program (HRRP)).

Patient care delivered directly in post-acute care settings such SNFs, inpatient rehabilitation facility (IRF)s and long-term acute-care hospitals (LTAC) represent the other spending driver in bundled programs. SNFs alone can account for almost 25 percent of post-acute spend with about 25 percent of SNF patients being readmitted to the hospital.2

Clearly, optimal financial results can be achieved by enlisting post-acute partners who support initiatives to address both readmission and direct spending. But further complicating the situation is the fact that Medicare patients cannot be required to use specific post-acute providers unlike commercially insured patients who may have benefit limitations that drive them to a limited network.

Themes for a Successful Post-acute Partnership

Some key issues in developing a strategy for an effective post-acute network include:

  • Analyzing the past performance of post-acute providers. (Where have our patients been going? What have providers been performing?) 
  • Identifying the key success factors for a post-acute network partner (e.g., reducing readmission rates, reducing length of stay, improving patient satisfaction).
  • Creating a formal process for identifying and contracting with the best (preferred) post-acute care providers (i.e., those who will commit to the new performance goals and pathways). 
  • Developing a method to enlist and integrate preferred providers into the care process. A tightly integrated, almost seamless continuum of care from admission throughout the bundle timeline will provide optimal patient care with minimal necessary spend.

As we will discuss, a successful post-acute partnership involves: 

  • Setting expectations up front at point of selection, thru contracting and on an ongoing basis; 
  • Establishing regular, two-way communication about patient status and everyone’s (hospital and partner) performance; 
  • Developing consistent care pathways and protocols for similar patient acuity; and
  • Maintaining a singular point of contact/responsibility for the program.

Identifying Post-acute Opportunity for Success

Not all bundles represent opportunities for you to generate post-acute savings. For example, elective joint replacements typically show that most SNF spend occurs within 30 days of discharge. If you can construct a care pathway to reduce or eliminate that SNF spend (for example, by moving that patient home with some home health services), this becomes an opportunity for spending reduction.

On the other hand, if SNF care is an integral part of the care pathway, it might not be possible to generate significant spend reduction. This is often the case with hip fracture patients. So this situation would represent a risk in a bundled arrangement.

Note: In BPCI and CJR, both elective and fractures are included in a single bundle.

  • Post-acute opportunity vs. risk
  • Historical data provides insight
  • Integrate your network into care pathways
  • Establish success thresholds

 Using Historical Data to Drive Analysis

A rigorous analysis should be performed to identify the post-acute opportunity.

Historical performance data is a key factor in determining which bundles make sense (i.e., where there is opportunity) in developing a strategy for deploying your post-acute network to drive savings.

Figure 3 shows the distribution of post-acute spending by calendar quarter. This bundle is an opportunity for SNF (in green on Figure 3) spending reduction if your post-acute network can be leveraged in the care pathway.

Reviewing your care pathways to optimize the use of post-acute care becomes an essential part of your strategy. Creating pathways specific to patient acuity gives you an even better chance for success.

At this point, you should identify initial metrics and thresholds that support your network performance targets. These metrics will generally fall into the area of financial, clinical/quality and patient satisfaction measures. Obvious examples include metrics such as SNF/IRF length of stay, readmission rates to/from those settings, surgical site infection rates, patient satisfaction scores, etc.

Performance thresholds should be a function of your program’s goals. For example, you’ll likely want to require your partners to commit to a reduced readmission rate from the current figure, but by how much? This will require analysis of historical data so that both parties can agree on a mutually acceptable benchmark.

Designing a Post-acute Network

  • Define your partnerships
  • Aligned financial incentives
  • Formalize selection process
  • C-suite support

It is important to consider the nature of your relationship with your prospective partners. Create an “inventory” of potential partners and their roles, particularly for your informal partners that may help support the socioeconomic needs of patients such as nutrition and transportation.

Establishing formal contractual relationships is essential for partners with whom you will be establishing formal performance requirements. On the other hand, you might establish an informal relationship with a service that provides discounted transportation for your patients on an as-needed basis. Formal contracting for such an arrangement is probably overkill.

Clearly, your major post-acute partners will be SNFs, IRFs, HHAs and LTACs. Each of these entities will have a different level of participation depending on the bundle. However, once you’ve established your network, you can use it as needed depending on the opportunity of the bundle. For example, an orthopedic bundle may use lots of SNF and HHA, but limited IRF. On the other hand, a cardiac bundle may have limited SNF and IRF but lots of HHA.

Consider the possibility of your emergency department (ED) acting as a post-acute partner. Often, ED’s are run independently and use their own technology. They are also the first stop for readmissions—a costly category of care. Including them in your post-acute care pathway can help you optimize results and reduced readmissions.

Aligning Partner Performance

As you begin to think about your post-acute partners, you should bear in mind that optimal performance will be achieved by aligning incentives. Therefore, it is imperative that your partners understand the value proposition of being in your network. This value proposition is much more long-term than near-term as the ultimate value for the partner to participate in the network is to be part of the future of the value-based world of healthcare.

  • Standardize care pathways
  • Tighten risk stratification
  • Use reasonable technology
  • Attack care transitions
  • Continuous improvement
  • Education is ongoing

Remember that your goal is to create a “narrow network”3 of providers in each segment (i.e., SNF, IRF, LTAC and HHA). While your patients may currently be discharged “on the order of” one hundred SNFs, your goal is to limit that world to three or four “preferred partners.” This limited network will make it easier for you to contract and manage going forward.

Figure 4 shows a breakdown of discharges to SNF (only showing the first 16 of about 100 SNFs using Medicare claims data). The range of discharge volume, average payment and readmission rate demonstrates the performance variability that you need to address in developing and managing your network.4

Consider that you will be attempting to standardize care pathways for up to 90 days post discharge. It is far easier to work with a limited set of willing partners than a large number of lukewarm participants. Fewer preferred providers simplify the process and reduce errors and miscommunications.

  • Too many “partners”
  • Inconsistent performance
  • Lack of control
  • Unaligned incentives

In addition, channeling your patients to a limited number of partners means that each partner will receive, on average, more referrals. This trading of census in return for improved performance (particularly reduced length of stay or utilization which translates to lower topline revenue) is a negotiating point that will work in your favor but only if you have a limited partner network.

If successful, you will achieve change that alters the chart to something like this. (See Figure 4).

Whatever method you choose to evaluate and formalize the partnership, it will be imperative you have support from your C-suite. Your partners need to know that your program has support at the highest levels of your organization. Remember that this will not dissuade some of them from contacting your senior management to express their concern or objection so leadership needs to be carrying the message.

  • Limited, true partners
  • Consistent performance
  • Predictable results
  • Program alignment

Establishing Your Network

Once you’ve decided on an acceptable selection process for your preferred partners, you should establish a reasonable timeline in which to complete it. The process should be open to all possible candidates based on your own analysis. A transparent process with a reasonable timeframe and availability for candidate partners to interact with you regarding questions sends a message that you intend to be a cooperative partner in this new model.

Of course, most of the candidate partners in your process will be rejected. You will need to establish a protocol for dealing with objections. It would be wise to notify interested rejected organizations that there may be a future opportunity to participate in the network if, for example, a selected partner drops out. Some of the rejected partners will continue to improve their performance hoping for a future opportunity. Having a “bench” of alternate candidates is a good asset.

Integrating Your Preferred Partners into Your Program

From the outset, you should establish a formal integration plan to bring partners into your new care continuum. This plan should address issues such as data sharing, patient records sharing and standardized care pathways. As you redesign your care protocols and pathways (with your partners’ input), it will become clear where your partners will play a role. This analysis will help you prepare for the integration process. This is an ongoing exercise that is never complete as your strive for best quality outcomes.

One of the biggest challenges you will face, both internally and with your partners, is managing change to existing workflow. You should make every attempt to use existing processes to support your program. Minimizing disruption will spur more rapid adoption and help ensure successful implementation.

A technology solution that connects you, the patient and your post-acute partners is a great asset in creating an effective partner network. It could provide each partner with the most accurate information at precisely the time it is needed. While no single technology solution can achieve this overall goal, you can work with your partners to implement data exchange connections that exploit everyone’s existing workflow. Augmented with rudimentary manual/spreadsheet processes, you can quickly implement a cost-effective solution that you can expand/extend over time.

Care Transitions and Pathways

The specific data to be exchanged is a direct function of your care pathways. As you redesign those pathways, consider the information requirements that will be needed at each care transition point. Your care navigator will need access to all of these. Again, this is an ongoing process that will require continuous improvement.

Evaluating and redesigning your care pathways gives you an opportunity to implement changes your team may already have considered but were never able to implement. Issues such as the development of assessments, home visits prior to discharge and tightening medication reconciliation at discharge are a few examples of these. Other items to consider include formalizing patient progress reports to share with family and primary care providers (PCPs), enhancing palliative care and establishing a patient specific risk stratification strategy and methodology.

Key factors to consider are risk stratification process, information sharing and notifications for intervention. Your risk stratification methodology should drive patients to specific care pathways—optimally with patient-specific predictive analytics. This will dictate what information needs to be shared, between which parties and when (even real time). Your goal is to allocate your resources to the neediest patients. Be careful not to create processes that bombard people with updates and notifications. Notifications by exception should be the order of the day.

The most resource intensive part of your network implementation is the ongoing effort of educating your organization and your partners. Bundled payments require a new way of thinking—a culture change—that will be difficult for some people to adopt. Ongoing reinforcement of your message and program goals is essential. In addition, you will be learning lessons along the way that need to be shared.

Be sure to involve everyone. Internally, this means areas such as leadership, finance, all areas of clinical including surgeons, nurses and extenders, social work and discharge planners and behavioral management. Externally, this means all post-acute providers.

Operational Issues

Now that you’ve completed designing, developing and contracting with your network, it’s time to put it into operation. This is where the proverbial rubber meets the road.

Your care navigator, generally a new role within the organization, is ultimately responsible for overseeing the operation of your post-acute network. The navigator will have constant interaction with preferred and non-preferred partners as well as patients and their PCPs. These interactions, both manual and electronic, give the navigator unique and valuable insight into the ongoing and long-term operational aspects of your program.

  • Navigate your way to success
  • Leverage technology to monitor operations
  • Drive patients to your network
  • Enforce remediation for underperformers

Optimally, the navigator will need real-time electronic access to internal and external systems to view patient status and assessments. For example, SNF connectivity could enable a real-time notification that a patient is decompensating. Rather than simply readmitting the patient, the notification could trigger the navigator to have a clinician review the situation first; perhaps even using a telehealth solution.

It is more likely that information will be made available to the navigator in a variety of ways, including electronic access, phone calls and personal visits. Consolidating all of the information, even using simple tools such as a spreadsheet, enables the navigator to develop a complete picture of the patient’s status and care/outcome trajectory, enabling reporting to the organization and the driving of corrective action.

As the central operational point of contract for your network, the navigator is in a position to drive partner compliance by measuring performance and working together to improve results. Using reports, dashboards and technology tools, the navigator identifies at-risk patients who will require more attention and care resources and works with all resources (internal and partners) to optimize resource utilization toward the best outcomes.

Technology: Following Patients Through the Care Continuum

Technology solutions for the navigator(s) may even include spreadsheets. Don’t forget, the number of patients in your program at any given time will be small at the outset making manual processes more palatable at the start of your program. This also gives you an opportunity to determine what information is needed, from whom, when and how often. Leveraging existing technology capabilities such as transmission of Continuity of Care Documents (CCD) (electronic or printed), SNF registries and regional health information exchanges can serve as a backbone to support the necessary information exchange capabilities with each entity’s electric medical record. Case management and guided care pathway software can also provide technology pieces to support the program. Of course, integration with your data warehouse should be included in your plan.

Ongoing Education

To help your patients get to your preferred providers, it will fall on your staff to explain the network and its value to patients. Therefore, it’s essential to thoroughly educate your staff about the program, the network and the clinical and financial value to the patient of using a preferred partner. Everyone needs to be trained on possible patient objections, how to deal with them, and, most importantly, how to reinforce that you used a rigorous process to select these partners in order to provide patients with the best possible outcome.

All situations where patients choose a non-preferred provider need to be reviewed in order to determine how the situation might have gone differently. These “lessons learned” need to be shared with staff on an ongoing basis. Failure to learn from these cases can sink an entire program.

Aligning Metrics with Desired Operational Outcomes

One of the first questions that will arise is whether the program is working as designed. The answer to this, and most other questions, will be found in the operational metrics that you established at the beginning of the program. With just a few basic metrics, the navigator will have a good sense of what is not going well and needs attention. For example, an inpatient rehabilitation facility (IRF) showing high readmission rates will cause the navigator to drill down further, both into the data and working directly with the partner, to determine the driving factors for this high rate.

The performance of the network down to the level of specific partners and patients will be under constant scrutiny. Using performance thresholds (which should be in the partner contract), it will be relatively easy to monitor partner performance. It is essential that this information be shared with partners on an ongoing basis so that they know you’re watching and that you want them to remain in compliance. Through this collaboration, everyone can learn from each other.

Being a good partner requires that you work with underperformers in order to help them. This requires ongoing communication when things don’t go well and providing opportunities to improve the situation. As the navigator monitors the program’s operation, these situations will appear. Sometimes the navigator’s efforts may not work and senior leadership may need to step in.

It is not uncommon to find partners who are not fully cooperative even after signing formal agreements. A reasonable chance must be given for partner remediation after which they should be replaced. This process should be spelled out in a formal agreement. Conclusion The key to success in your bundled program is an effective post-acute network of willing providers dedicated to value-based care. This is a two-way partnership requiring dedication on your part as well as theirs. Identifying the best partners is an important start. Setting realistic expectations, ongoing communication and mutual dedication to providing the right care at the right time will help ensure an effective network leading to a successful program.

  • Narrow post-acute network of select partners with a high quality record
  • Dedicated care navigator to oversee the operational aspects of the network 
  • Data availability as close to real-time as possible
  • Usable technology starting with the basics
  • Educating everyone on a continuous basis
  • Optimizing care pathways and transitions involving all parties
  • Enlist everyone to keep patients in the network
  • C-level support


The key to success in your bundled program is an effective post-acute network of willing providers dedicated to value-based care. This is a two-way partnership requiring dedication on your part as well as theirs. Identifying the best partners is an important start. Setting realistic expectations, ongoing communication and mutual dedication to providing the right care at the right time will help ensure an effective network leading to a successful program.

1 Actual hospital data
2 Actual hospital data 
3 For an example about the success of narrow networks see: California Hospital Networks Are Narrower In Marketplace Than In Commercial Plans, But Access And Quality Are Similar; http://content.healthaffairs.org/content/34/5/741.abstract
4 See here for further data about SNF performance: https://www.medicare.gov/nursinghomecompare/search.html

Sheldon Hamburger is an Alternative Payment Model advisor for hospitals and healthcare firms nationally. With a focus on program implementation, he brings extensive knowledge and experience gained from more than 25 years of healthcare financial consulting, technology design and development and sales & marketing strategy for Fortune 1000 clients. He is a frequently sought-after speaker and writer on regulatory and technology trends affecting hospital operations, provider reimbursement issues, BPCI/CJR, programs and regulations, medical expense strategies and payer-provider dynamics. Residing in Raleigh, NC, he is an active member of HIMSS, HFMA & ACHE. He earned his Bachelors in Computer Engineering degree from the University of Michigan. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. or (248) 613-7166.

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