Bundled payments: 4 critical questions for success in the total joint episode of care and beyond

By attending conferences and working with customers around the country, we have a true pulse on the current and future landscape of bundled payments. Here are some critical questions you should address when considering your plan for success in bundled payments.

Will you be ready to have 90% of payments tied to quality metrics by the end of 2018?

It is clear that CMS plans to achieve a goal of having 50% of all payments made through Alternative Payment Models (APMs) such as bundled payments and Accountable Care Organizations (ACOs). CMS also plans on having 90% of payments tied to quality or value by the end of 2018. With these goals, CMS will increasingly turn to mandatory programs such as Comprehensive Care for Joint Replacement (CJR) where the hospital is put at financial risk for total joint procedures, including a 90 day post-acute period that is beyond the hospital’s direct control. CMS is not alone as commercial insurers are also adopting this model and following suit.

Are you ready for the impact of similar models in other service lines? Are you prepared to adopt similar models with private payors?

Due to the growing volume of procedures and substantial financial savings opportunities, orthopaedics (especially the total joint episode of care), play a major role in payment reform initiatives. While there has been a lot of focus on the total joint episode of care, there has been increasing activity in other bundled payment episodes, including oncology, maternity and cardiac. CMS recently proposed the Episode Payment Model Rule (“EPM”), which proposes three new mandatory bundled payment episodes for hip and femur fractures, heart attacks and cardiac by-pass. CMS also requested comments on a variety of different types of bundled payments, signaling its intention to continue to experiment with new bundled payment episodes.

On the commercial side, Hill Physician Medicine Group has implemented an Oncology bundled payment model that focuses on reducing drug costs, Providence Health and Services has implemented a cardiac commercial bundle and Minnesota Birth Center has developed a “BirthBundle” which uses midwives in a non-hospital setting to reduce costs while providing a better patient and family experience. In addition, commercial payors are stepping into this arena and are partnering with physician groups and hospitals. CIGNA and Horizon Blue Cross Blue Shield in New Jersey now offer “pre-packaged” bundled payment episodes that physician groups can enroll in.

What are some of the obstacles that hospitals and physician groups face when trying to pursue commercial bundled payments?

Under the CMS bundled payment program, and some commercial insurer bundled payment programs, providers bill and are paid separately under the normal fee-for-service method. At the end of the year, the payor adds up the claims it paid and compares this amount to the target price that was calculated based on historical claims costs. If the actual claims paid are higher than the target price, the party taking the risk must repay the payor the amount of the episode “loss”. If the actual claims paid are lower than the target price, the payor pays the party taking the risk the amount of the episode “savings”. This is called a “retrospective reconciliation”. It is technically not a true bundled payment where the party taking the risk receives an advance payment from the payor (“prospective reconciliation”) and then process the bills from the various providers involved and pays them.

Some commentators are noting that “true” care redesign can only be achieved with prospective reconciliation and with condition based bundled payments that are triggered by the first visit to a specialist. This is a shift from a procedure based bundled payment which is triggered by the decision to operate and misses the opportunity to incentivize the provider to utilize less risky, less expensive treatment that can avoid the procedure.

Insurers are set up to process fee-for-service claims electronically, but were forced to consider hand-processing for prospective bundled payment arrangements. OrthoCarolina worked with payers to take much of the burden off of the payer and the patients. They developed their own internal Third Party Administrator capability to submit and accept claims and payments, making sure that everyone received their contracted rate. They also gave patients a separate insurance card to use when accessing bundled payment services, to prevent double billing and submission of claims from both the bundle and their traditional insurance. OrthoCarolina's Dr. Walter B. Beaver Jr. said, "It ends up simplifying things for the patient so they get one bill and make one payment, improving the patient experience and increasing patient satisfaction."

What four critical success factors can help my organization be successful under bundled payments?

1. Taking in, analyzing and understanding your internal and payor-generated external data to enhance your ability to standardize care protocols and eliminate the variation in practice and cost patterns

2. Effectively managing care redesign to improve quality, patient satisfaction and market share while reducing costs

3. Creating properly structured hospital/physician alignment to help drive care redesign

4. Engaging the patient throughout the entire episode of care, including the 90 day post-acute period and beyond, to optimize outcomes

Stryker’s Performance Solutions is committed to leading impactful change through payment reform and risk-based programs. We have an established track record of helping hospitals and orthopedic physician groups implement optimal payment and risk-based strategies and have programs to address all four bundled payment critical success factors.

1.800.616.1406 | spsinfo@stryker.com

Paul Jawin, JD

Vice President, Alignment, Strategy and Reform

Paul brings more than 30 years of legal, business, financial and capital markets experience to his role in developing physician alignment and payment reform programs. A co-founder of Comprehensive Care Solutions—acquired by Stryker in 2012—he has helped physician organizations and health systems align and turn reform into opportunity by utilizing new payment and delivery structures, including Accountable Care Organizations (ACO) and bundled payments.

Paul is a regular speaker at industry conferences and events, including the American Academy of Orthopaedic Surgeons Hospital-Physician Alignment Symposium. He co-founded and served as Senior Vice President and General Counsel of Secured Independence, Inc., and has held senior executive positions with public and private companies involved in real estate and senior housing. Paul has a Bachelor of Arts degree in History from Ithaca College, and practiced corporate, securities and real estate law in New York City for more than 10 years after graduating from Syracuse University School of Law with a Juris Doctor degree.

Leslie Golba, MBA

Manager, Medical Education

Leslie joined Stryker in 2010 and has established a strong record of delivering exceptional results. She led the development work for the SPS website and updated sales materials after the acquisition of Marshall|Steele and CCS. Leslie created sales training guides that were utilized to help train new SPS client executives as well as Stryker Spine. Those materials and others led to the creation of the Sales Portal, an online resource for our Client Executive team to find up-to-date training materials and customer facing materials and templates. In 2015, Leslie managed the development and launch of the Academy of Healthcare Insights which houses over 60 video presentations on a variety of topics. She has also managed the Summit, a national Orthopedic & Spine conference that played host to almost 800 unique attendees over the past 4 years.

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