Last month at AAOE in San Francisco, we had the opportunity to learn more about how providers and physicians are developing bundled payment programs. Kimberly Hartsfield, senior manager at ECG Consultants, designs Medicare, Medicaid, commercial, and direct-to-employer bundled payment programs, and co-presenter Jason Lee is a strategic planner with a focus on hospital/physician alignment. Here is what we learned:
With CJR in effect, 794 sites will move from fee for service to mandatory regional pricing. Alternative payment methodologies are the wave of the future, and bundles will be used for elective procedures with a cost of care element wrapped around it.
Evidence supports that bundled payments lower cost of care. CMS anticipates saving 340 million dollars with this initiative – and that may be conservative. Because of the savings generated, Ms. Hartsfield foresees another round of BPCI.
Shoring Up Support for Bundled Payments
Bundled payments do more than lower the cost of care; they improve quality of care with smarter spending – and support a healthier population. Even so, the transition is complex. Health systems need a dedicated plan that focuses on four key areas:
- Get the data needed for reporting
- Achieve alignment with physicians and improve operational success
- Developing collaborator agreements that are mutually beneficial
- Support from dedicated teams and care managers
- Track everything
Types of Bundles
Commercial bundles are a key growth area for providers. The more providers can demonstrate value, the more successful they will be at generating revenue for their groups. There are two types of bundles:
Prospective bundles carry a greater risk. This gives health systems money up front that can be allocated appropriately.
Retrospective bundles allow health systems to provide care, get paid via fee for service, and at end of calendar year, look back and compare.
The majority of bundled payments are retrospective, but more and more are willing to take on risk of prospective bundles.
Bundled Domains and Cost Breakdown
Four bundled domains
- Employer – self-funded
Cost breakdown in the Bundle:
(based on average joint replacement cost of $26,000)
- Physician: 10 – 12 percent
- Hospital: 50 to 60 percent
- Imaging and ancillaries: 15 percent
- Post acute is the remainder
The post-acute period represents the largest opportunity for savings, since many are going into three weeks of inpatient rehab when it’s clinically inappropriate. Now, most whole joints are being discharged home with no services.
Many patients are concerned bundles have restrictions or rationing of care, but with strong care management, the patient is directed to the appropriate level of care. This brings a high level of satisfaction to everyone involved – patient and provider – and ensure better outcomes.
Ideally, there is a dedicated ortho-care manager in place. This could be funded by providers, hospitals or both.
There is no downside risk in the first year which is why it’s a great time to get on board with the process and create the baseline.
It’s time to start putting together collaborator agreements. Some providers are finding commercial payors aren’t ready yet. If that is the case, look for small increments instead of a full prospective bundled payment. An alternative is to evaluate self-funded employers around you – many have successfully negotiated with regional employers.
It’s critical to have clear protocols and standardization.
When you present data and have a fact-based conversation, you may find doctors didn’t know they were performing differently from peers. Having bundled payments on the table opens a productive conversation with physicians. This allows you to make changes, for example, to pain and anesthesia protocols.
Engaging the physician in the process will be key to successful bundles. Hospitals will need to communicate the protocols to doctors regarding implants, pain and other savings initiatives.
Four components of the cost equation to communicate to physicians:
- Post discharge
- Patient stay
- Create standard discharge protocols
- Set expectations for post discharge settings
- Implement post discharge protocols at preferred facilities
- Evaluate baseline readmission rates and causes
- Initiate quality improvement projects
- Monitor and share data regularly to track progress
Based on the time required for cost allocation and collaborator agreements, it’s time to begin working on bundled payments now.
The Ortech team found this session to be pretty sobering. It’s time for health systems to take action on bundled payments. Fee for service will continue to become more and more scarce, and it takes time to shore up your resources for bundled payment negotiations and reporting.
Patient-reported outcomes are a critical aspect of reporting for bundled payments – one that EMRs can’t readily provide. For orthopaedic practices of any size, Ortech can help you get started within 2 weeks.
If you would like to discuss data collection for your bundled payment program, we are happy to answer your questions and guide you through the process.