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AAOS Now

Published 5/1/2009
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Jacque Roche

AAOS takes stance on bundled payments and gainsharing

By Jacque Roche

Position statement outlines necessary safeguards

Increasing healthcare costs are prompting federal policymakers and payors to investigate and implement various types of incentive programs designed to help control the cost of delivering care. “Episode of care” bundled payment initiatives and gainsharing arrangements between hospitals and physicians are just two examples of these new programs.

At its meeting in February, the Board of Directors of the American Association of Orthopaedic Surgeons (AAOS) approved a new position statement on Alignment of Physician and Facility Payment and Incentives, developed by the AAOS Health Care Systems Committee. The statement had previously been vetted through the Council on Advocacy.

The position statement addresses the current push for a value-driven healthcare system through the alignment of payment and incentives, particularly in light of the Centers for Medicare and Medicaid Services’ (CMS) Acute Care Episode Demonstration Project and congressional discussions on healthcare reform. In particular, it notes the following:

“The AAOS supports efforts of all stakeholders to develop and evaluate payment methodologies that will incentivize coordination of care among providers (including physicians and hospitals) and help curb healthcare inflation. As the demand for musculoskeletal care increases with a more active society and an aging population, it is incumbent on orthopaedic surgeons to participate in the discussions and to take a lead role in the development and deployment of such programs.”

Defining the terms
As traditionally defined, an episode of care bundled payment is a single payment made to all providers—physicians, facilities, laboratories, and all other healthcare professionals—for the entire episode of care provided to the patient. Episode of care payment programs may include a physician incentive or gainsharing component.

Gainsharing refers to an arrangement between a physician and a hospital to share in the cost savings that result from specific actions to improve the efficiency of care delivery. Gainsharing programs may also be established independent of bundled payment programs.

Previously, the AAOS took a cautious approach to gainsharing arrangements under which direct financial incentives would be made to physicians. The new position statement looks beyond gainsharing arrangements and supports the development and evaluation of payment and incentive arrangements that improve coordination of care among providers and improve the value of care delivered.

Safeguarding patient-focused care
The statement identifies the following safeguards that must be present to protect patient-focused care:

  • The patient must be the primary focus of all initiatives.
  • The patient should be empowered to be a fully participating stakeholder in the healthcare process.
  • The patient’s access to quality care must always be a priority over cost savings.
  • The physician must be the patient’s primary advocate for his or her unique medical needs.
  • All stakeholders must disclose potential conflicts of interest when providing patient care.
  • All stakeholders must not be incentivized to limit care or provide unnecessary care.
  • Patients must maintain access to a variety of necessary providers and facilities.

To further protect unintended consequences to patient access, the position statement outlines the following:

“The AAOS believes risk adjustment is an indispensible component of a successful episode of care or bundled payment initiative and policy. Risk adjustment is important because unpredictable and unavoidable outcomes can occur even in the presence of evidence-based practice. Episode of care must be risk-adjusted for patient demographics, comorbidities, severity of illness, and procedure-specific characteristics that account for the differences that contribute to outcome and costs of treatment.”

Equitably aligning providers
To protect provider equity, the statement calls for a process that is transparent to all stakeholders, allows representation of all stakeholders in developing initiatives to align payment and incentives, and promotes “fair and reasonable” compensation for all providers. It specifically notes the following safeguards:

  • Payment must be agreed upon prior to delivering care.
  • Payment must be risk-adjusted for patient- and procedure-specific characteristics.
  • One provider must not have control over another provider.
  • Competition must be maintained in the healthcare system.
  • A physician must have the autonomy to provide care that addresses each patient’s unique medical needs.

The full text of the position statement on Alignment of Physician and Facility Payment and Incentives is available at www.aaos.org/about/papers/position/1171.asp

Continuing involvement
The AAOS Health Care Systems Committee, under the direction of the Council on Advocacy, will continue to address the alignment of care among providers. The committee, under the leadership of Kevin J. Bozic, MD, MBA, engages with many stakeholders conducting demonstrations of both episode of care bundled payment methodologies and gainsharing arrangements.

When developed and evaluated in a transparent manner with multiple stakeholder input, bundled payment methodologies and gainsharing arrangements have the potential to improve care for musculoskeletal patients as well as benefit all providers. The AAOS will continue to work with the necessary stakeholders to ensure patient access and provider equity.

Jacque Roche is a federal policy analyst in the AAOS office of government relations. She can be reached at roche@aaos.org