Episodes of care and bundled payments

Written by Paul J. Slosar, MD, of SpineCare Medical Group/San Francisco Spine Institute | July 07, 2019 | Print  |

This article is a portion of a book titled "Challenges, Risks and Opportunities in Today's Spine World " edited by Stephen Hochschuler, MD, Frank Phillips, MD, and Richard Fessler, MD. You can find links to the previous chapters at the end of this article.

The traditional fee-for-service (FFS) reimbursement model is a major driver of escalating health care costs. As it compensates physicians on the volume of treatments, not the medical outcomes produced, it is difficult to reward those providers who actually obtain the best outcomes and problematic for patients to seek them out. It is also resistant to cost reduction efforts since eliminating unnecessary procedures leads to lower physician incomes. Bundled payments (BP) models were proposed as a new, disruptive reimbursement model in order reward providers that deliver value care to the patients, defined as improved or successful outcomes at lower costs than historical average.

The Centers for Medicare and Medicaid Services (CMS) recently concluded its first bundled payment program, Bundled Payment Care Initiative (BPCI) Classic. This demonstration program ran from 2015-2018. Effective October 1, 2018 BPCI-Advanced (BCPI-A) is now underway with physicians across the country participating in bundles, with a significant focus on orthopedic, spine, and cardiac services. As the federal government has set a target of driving >50% of Medicare payments to value-based programs, rather than fee based for service, and private insurances have more aggressive targets (75%), it is important for spine surgeons to understand the realities of these programs. With payer-driven disruptions in the reimbursement models for physicians come financial opportunities, as well as risks.

BPCI-Advanced is defined by four characteristics. 1.) An eligible Episode is triggered upon the date of surgery (inpatient or outpatient procedure) and runs through discharge plus the following 90day period. 2.) 29 different Inpatient Clinical Episodes are triggered by the submission of a claim to Medicare for the inpatient hospital stay identified by the DRG. 3.) 3 Outpatient Clinical Episodes are triggered by the submission of a claim to Medicare for the outpatient procedure. 4.) Target Prices are provided in advance of the first Performance Period and will be adjusted during the semi-annual reconciliation process to calculate Final Target Prices reflecting the actual patient case mix.

The services and related costs included in an eligible Episode encompass the inpatient or outpatient services (Anchor Stay or Procedure) as well as the post-discharge care such as inpatient
rehabilitation, home-health agency, or skilled nursing facility stays. Payments for BPCI-A do not disrupt the normal Medicare payment process for any services provided to a patient, however, the payments or invoices for the Net Payment Reconciliation Amount (NPRA) involve a retrospective reconciliation between the Actual Costs vs. Target Prices, resulting in either a positive or negative NPRA.
Significant financial opportunities exist for those participating spine surgeons who maintain skillful and near real-time management of their patients after hospital discharge. This “down-stream” risk management is not easy in practice, as in our fragmented healthcare system the surgeons can lose track of patients, their lengths of stay in rehab, or medical complications after discharge. Setting up near real-time communication channels and comprehensive navigation tools are proving to be essential for optimizing this care management during the 90-day bundle period.

Not surprisingly, most commercial payers are moving forward with Bundled Payment / Episode of Care programs of their own. The contract terms of these commercial bundle programs are variable; usually regional and local-market based. The spine care bundles can be particularly appealing to these carriers given the widely variable costs and outcomes associated of many spinal surgeries.

For surgeon interested in participating, is important to understand that 80% of the success or failure for surgeons resides in the negotiation of the terms for each bundle contract. This is a world where having data and understanding how to use it is critical to negotiating a fair set of terms and bundle contract. Surgeons must understand that a bundle contract is not the same from one payor to another and not the same from one physician to another, even in the same market.

A cornerstone goal of the Medicare bundled payment program is to reward the surgeons who can provide better (or equivalently good) outcomes at reduced costs. Non-Medicare payors do not necessary subscribe to the same priority of goals and objectives. They are not beholden to the taxpayers’ federal government. They are looking to lower costs and increase market share while not compromising quality. The BPCI-A program is a good catalyst of many payors and will serve as guidepost as they design their own bundles.

A large national payor recently announced it is participating in the BPCI-A program, in partnership with Episode Solutions, a bundled payment services company, in selective markets across the United States. This pilot will likely serve to facilitate Medicare Advantage and commercial bundles to patients in spine, total joints, and cardiac episodes. A number of other payors are experimenting with various bundle structures as well. We expect to see more bundles in the next couple years, as successes of these early pilot programs should stimulate an increasing adoption rate across these and other large commercial insurance carriers.

In order to drive value efficiency (best outcomes at lowest cost) into a market that traditionally reimburses on procedure fee for service alone, Bundle structures introduce an element of financial risk to the owner of the eligible episode of care. Physicians can be the owner and arguably are the most appropriate as the physician is best position and most appropriate stakeholder to coordinate their
patient’s entire episode of care. With risk, comes the opportunity for reward to those spine surgeons who are adept at providing exceptional surgical care as well as coordinating and managing appropriate post-surgical care for their patients.

In conclusion, bundled payments/ episodes of care are a work in process with many variations. Now with BPCI-A, as well as increasing Medicare Advantage and commercial bundle pilot programs gaining traction, spine surgeons will increasingly be faced with bundles opportunities either as controlling party or as participant. Which do you want to be?

Previous chapters:

Challenges, risks and opportunities in today's spine world

Spine care - Balancing cost with innovation

What are big data and predictive analytics

Predictive Analytics and Machine Learning

The HSS Spine Care Model, Part 1

The HSS Spine Care Model, Part 2

The Rothman Model, Part 1

The Rothman Model, Part 2

The History of Texas Back Institute

Texas Back Institute, Part 2

Private practice vs. hospital employee: Where we are today and why

ASCs: The economics of ASCs

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