Remedy Partners, a company that helps hospitals and physicians with bundled payment programs, has raised $50 million from Bain Capital Ventures. The investment signals a growing interest in fixed-cost, episode-based care.
Bundled payments—predetermined amounts of money paid to providers to cover procedures and services over a set period of time—are a major component of the Affordable Care Act's push to reform the financing of healthcare. HHS said this year that by the end of 2018, it wants half of all Medicare payments to be tied to value-based models, such as bundled payments and accountable care organizations. Those models have been encouraged as ways to boost care coordination and quality while reducing costs and moving away from fee-for-service payments.
The most aggressive demonstration of episodic payments is Medicare's Bundled Payments for Care Improvement program, which went live in 2013. Hospitals and doctors voluntarily chose up to 48 different clinical episodes for which they would receive a bundled payment from Medicare.
The episodes begin at the hospital treatment and end from 30 to 90 days after the patient leaves the hospital, depending on the provider's choice. Providers are at risk for the costs of any care that is delivered outside the fixed payment. More than 900 hospitals and physician groups are participating in BPCI as of May 2015.
This month, the CMS upped the ante on bundled payments by instituting a mandatory program for hospitals in 75 metropolitan areas, starting Jan. 1. Those bundled payments will only go for hip and knee replacement surgeries.
Remedy Partners is one of a few companies working with the CMS to help providers with the bundled payment demonstration. The Darien, Conn.-based firm is working with more than 1,200 hospitals, physician groups, skilled-nursing homes and home health agencies. Remedy provides the software, analytics, training, networking and other administrative roles associated with bundled payments.
Some of Remedy's BPCI clients include Hackensack (N.J.) University Medical Center, Lifespan in Providence, R.I., Sharp HealthCare in San Diego, Yale-New Haven (Conn.) Hospital and University of Pennsylvania Health System in Philadelphia.
The $50 million will help Remedy hire 150 more workers, giving it a total of 350 employees. The money will also allow the company to fund the start-up costs for more providers interested in bundled payments.
“When you grow like this all at once, you have to fund the working capital to help organizations launch,” said Steve Wiggins, founder and chairman of Remedy Partners, which started in 2011. Wiggins used to be CEO of Oxford Health Plans, a New York-based health insurance company that was acquired by UnitedHealth Group in 2004, but he was ousted after Oxford suffered large losses due to computer problems.
The Bain Capital investment is Remedy's second round of funding. Remedy initially received $35 million from an undisclosed group of investors.
The CMS' new required bundled payment program, along with BPCI, has created a booming niche market for the company. Commercial insurers, state Medicaid agencies and large self-funded employers that want to experiment with bundled payments also represent areas of growth.
“We suspect that many will join the 1,200 customers we have,” Wiggins said.
Some health policy observers worry that bundled payments will encourage providers to deny care, since they won't be reimbursed for anything beyond the lump sum. Tying rewards and penalties to patient outcomes “can help counter the incentive inherent in fixed payments to compromise the quality of care,” healthcare experts wrote in Health Affairs in 2011.