5 Key Concepts for Orthopedics Bundled Payments

Laura Dyrda -  
Here are five key concepts of bundled payments for orthopedics.1. Physicians have a key role to play. Most bundled payment deals sprouting up around the country include insurance companies and hospitals, but surgeons have a big part to play in the negotiations. The surgeons, after all, will be providing the care. Surgeons should plan to meet with other stakeholders to develop treatment protocol, patient selection and reimbursement rates.

"Physician involvement and leadership is absolutely critical to the success of bundled payments," says Thomas Lundquist, MD, vice president of performance measures at BlueCross BlueShield of Tennessee, which entered into a bundled payment agreement with Tennessee physicians and TriZetto. "They have to engage in and review the data to define the bundle and identify best practices that, in many cases, will lead to efficiency. Our approach with Blue Cross has been very collaborative. From day one, we've had Blue Cross and TriZetto representation at the table reviewing data with the physicians, and we allow them and their partners to have a significant role in defining the shape of this initiative. We're still in the implementation stage, defining the bundles and care plans with the physicians and other ancillary providers working together."

Bundled payments place more risk on the providers than every before, so it's important for surgeons to understand these new stakes.

"The bundled payments get the physicians thinking more broadly about their own fees to the overall management of their care prior to, or up to, 90 days for total hip and total knee replacement," says Dr. Lundquist. "They realize a couple of things: their fees are relatively small compared to the total cost of care for the patient and they can impact the cost of care significantly. There is tremendous variation in the care plans for patients and all of it can't be best practice. They start having conversations about what is really the best care for patients and thinking about the overall cost of care. We've defined the bundle and what should be included in the overall cost, from that we've increased incentives for them to maintain and improve quality."

2. Think like the insurance companies during negotiations. Providers understand the clinical world when taking care of patients; with bundled payments, you must begin thinking like the insurance companies to negotiate terms that make sense for the providers. Figure out how you can predict which patients are most likely to succeed or are at increased risk for complications..

"You want to focus on predictability and that's where you get into a lot of the literature search and statistical analysis," says James Caillouette, MD, an orthopedic surgeon with Newport Orthopedic Institute and Hoag Orthopaedic Institute in Irvine, Calif., who participated in the coordination of those programs and more recently sat on the advisory board for the Integrated Healthcare Association's pilot project for bundled payment in California. "This is something very different for providers; providers have never had to enter this world before. Now we have to understand and act in the world where actuarial and insurance companies have been for a long time."

If providers don't understand the data, they could accept more risk than they are able to absorb. "The biggest risk for physicians and hospitals is they are naïve to all this and they might accept risks that they shouldn't accept," says Dr. Caillouette. "If they are going to accept them, build in financial safeguards so they can absorb complications as they occur."

3. Decide whether to include post-acute care in the bundle. Patients undergoing orthopedic surgery have an extended period of post-acute recovery that hospitals must consider when they are deciding how to bundle their payments. Some hospitals may be able to cover this period in the "episode of care" while others may not.

"What has been really eye-opening across the board of the hospital side is how much the entire cost of the episode of care is really spent outside of the hospital or outside of the hospital's control," says Mark Bogen, CFO and Senior Vice President of Finance at South Nassau Communities Hospital in Oceanside, N.Y. "That is true with orthopedics where traditionally there is so much post-acute care. You have ongoing care with physical therapy and rehabilitation."

If the hospital offers physical therapy and other post-acute services, it's easy to bring those into the bundle; however, patients may not want to use the hospital's physical therapy services. If the hospital doesn't have physical therapy, it can contract with an outside provider but it would be hard to guarantee all patients in the bundle would receive their services.

"We don't have a sub-acute rehabilitation unit at the hospital so all of our orthopedic cases go either home and have home care or they go to a rehabilitation stay at sub-acute rehabilitation units," says Mr. Bogen.

4. Plan to reduce length of stay where appropriate. Many orthopedic procedures are now being done through minimally invasive approaches that allow for a quicker recovery time and shorter length of stay. Some of these procedures can be performed on an outpatient basis, but many patients will still need inpatient stays to recover. Even when patients need to stay a few days in the hospital, plan accordingly so they won't be staying longer than is necessary.

"Knee replacements that are done on a Thursday could be discharged on a Saturday in theory," says Mr. Bogen. "The problem in New York is that discharging and transferring patients to a post-acute setting on the weekend isn't very easy. Many times beds are not available in the post-acute setting until Monday. Now you have the patients for an extra day or two."

Every extra day in the hospital wracks up more expenses, but the insurance company will only pay the negotiated fee for bundled payments, regardless of how long the patient stays. "Work with our orthopedist to look at operating hours and see if that can be changed as part of the cooperative nature of the situation," says Mr. Bogen.

5. Educate physicians about the new concept to increase buy-in. All surgeons must be on board with the bundled payment agreement for it to work. Since this is a new concept, and it places more risk on the providers, some surgeons may be weary of joining the new program. Physician education sessions and complete transparency will help turn the tide of trust in bundled payments.

"The biggest challenge is helping the providers understand and trust this new concept," says Ms. White. "You have to create alignment between the physicians and hospital to agree to terms before going forward. Someone will be getting a big check and must distribute it among the others — that's something you need to discuss."

Be transparent with the payments, which isn't something hospitals and physicians usually share. It may take time for both parties to become comfortable with the arrangement.

"If you can educate all the providers in terms of the concept of bundled payments so they understand that everyone is sharing risk and everyone is accountable for the entire process of care, you have an opportunity to solve your problems," says Dr. Caillouette.  "It creates a higher level of focus because there is a higher level of accountability than with other systems."

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