Published 10/1/2015
Jeffrey D. Angel, MD; Scott Leggett, MS; Alexandra Page, MD

Beyond the Hospital: Outpatient and Physician-owned Bundled Payments

Bundled payments have gained traction as a payment option, particularly for surgical procedures, with both government (Medicare) and private payers (commercial payers and self-funded employers). Although Medicare demonstration projects—including the Comprehensive Care for Joint Replacement, the proposed rule mandating bundled payments—are limited to inpatient orthopaedic surgeries, other payers are moving ahead with broader interpretations of bundled payments. This article highlights two emerging bundled payment experiences.

Bundled payment in the ASC setting
Global One Ventures (G1), based in California, has developed outpatient bundles through a network of ambulatory surgery centers (ASCs). G1 acts as a third-party administrator, and more than 2,000 bundled payment cases have been performed in G1 network facilities.

G1 initially began bundling surgical services in 2009. In 2011, its network facilities became participants in the Integrated Healthcare Associates (IHA) 3-year bundle payment demonstration, funded by the Agency for Healthcare Research and Quality. The nine G1 network ASCs participating in the demonstration project performed more bundled surgery cases than all of the hospital providers combined.

The project demonstrated the feasibility and scalability of bundled payments among a range of payers and providers in California. Bundled payments for commercially insured patients receiving total hip or total knee replacements and meniscal knee repairs were initially implemented at nine ASCs. Although the IHA demonstration was unable to implement bundles across multiple payers and sites, it provided valuable lessons for all participants.

Based on this experience, G1 has developed and implemented a bundled payment mechanism for Blue Shield of California (BSC) beneficiaries. This initiative includes 30 participating ASCs; the eventual goal is 75 ASCs statewide. Orthopaedic procedures covered by bundled payments include the following:

  • partial knee replacement
  • total knee replacement
  • total hip replacement
  • one- and two-level cervical fusions
  • lumbar diskectomy
  • rotator cuff repair
  • knee arthroscopy
  • anterior cruciate ligament reconstruction

Importantly, getting to this mature stage required extensive background work. After the bundled payment concept was developed, G1/BCS had to get approval for the bundled payment contracts from the California Department of Managed Care. In addition, a regulatory compliance review was required by the California Department of Insurance.

The program pairs a comprehensive patient-centric education session with clinical advancements in anesthesia and surgery. The patient and a family member or friend (“coach”) are directly involved in the treatment regimen.

Preoperative and postoperative education for patients and their coaches is provided. Patients receive a surgery-specific guide that reviews the procedure and explains what can be expected with surgery and recovery. Pain management, recovery in facility and at home (including appropriate and safe physical therapy exercises), and frequently asked questions are also covered. If possible, a preoperative home visit or call is provided through a home health company. Potential safety issues are identified, accessory items that might be helpful during recovery are reviewed, and other items relating to postdischarge recovery are discussed.

Patients and their coaches also visit the ASC and meet with a nurse and/or a patient care extender for an overview of the entire process—from admission through discharge and rehabilitation after surgery. Postdischarge care and instructions, including physical therapy and home preparation recommendations, are addressed. The visit allays patient concerns and anxiety regarding pain control, healing, and resumption of normal activities.

The final component necessary for a successful model is the financial structure. The bundled payment methodology facilitates an integrated team approach among physicians, facilities, and ancillary providers. For example, in Monterey County, Calif., G1’s network of providers (ASCs, surgeons, and anesthesiologists) performed 225 bundled surgical cases in the first six months of 2015. Participating payers included BSC, UnitedHealthcare, and a large self-insured employer group with 10,000 covered lives. More than 60 percent of the 225 cases were orthopaedic (including spine).

The model is exceeding financial expectations. The average allowable procedure reimbursement rate (hospital, surgeon, and anesthesiologist) for the 225 cases would have been $23,103. The average bundle fee rate at the G1 provider network (ASC, surgeon, and anesthesiologist) was $13,708. Total savings to the payers (patients, employers, and insurance companies) was $2,113,875.

The average savings per case was $9,395 or 41 percent, which is at the high range of average savings generated through the G1 bundle payment network in California. Patient satisfaction rates for surgeries in the ASC setting were high. Nearly one-half of all patients completed a satisfaction form, and 98 percent of respondents indicated they would recommend the ASC to family members or friends requiring a similar surgery.

Outpatient bundles in rural Arkansas
In Arkansas, development of bundled payments was quite different. Under the Health Care Payment Improvement Initiative (2012), Arkansas Blue Cross and Blue Shield, Arkansas Medicaid, and QualChoice established bundled care episodes for total joint replacements, as well as for some nonorthopaedic procedures and diagnoses.

The methodology used is a retrospective reconciliation episode-of-care method, with one principal care provider who receives a bonus, no bonus, or a penalty based on reconciliation of claims data following a calendar year of care. In Arkansas, for relevant episodes of care, participation in the bundle is mandatory.

Using a perioperative surgical home (PSH) and “lean” methods, author Jeffery D. Angel, MD, of Batesville, Ark., developed bundles for participation in the Medicare Bundled Payment for Care Initiative as well as the mandatory episodes of care in total joints and other areas listed above. The PSH emphasizes shared decision making, patient-centered care, and protocols to enhance care and decrease waste. These fundamentals were used to break into the area of outpatient orthopaedic bundles.

Shoulder arthroscopy was selected for the first outpatient bundle, due to significant variations in care among surgeons. In the first 8 months of instituting an outpatient bundle for shoulder arthroscopy, the percentage of patients with overnight stays decreased from 30 percent to 11 percent. Readmissions decreased by 60 percent, from 7.0 percent to 2.9 percent. Standardized pain control protocols greatly improved patient satisfaction.

Initial hurdles included establishing agreement among service line doctors on protocols and ensuring all physicians abided by the same rules. However, surgeons were already familiar with the need to standardize preoperative and postoperative protocols, including pain management and physical therapy.

A notable difference between inpatient and outpatient bundles is the impact on finances from postprocedure improvements in care. Some improvement can be seen by stratifying patients who need therapy, selecting appropriate duration of postoperative therapy, and encouraging home programs. Standardization of implants with vendor negotiations has also helped with cost. Stratification and optimization of patients preoperatively has decreased complications and readmissions.

Owning the bundle
For orthopaedic surgeons, bundled payment models have multiple advantages. Surgeons are in the best position to understand which components in the care cycle of an orthopaedic procedure are critical and which can be removed. In the ASC setting, surgeons typically have greater control over decision making. Partnership interest in the ASC can further improve the surgeon’s ability to influence the highest value care.

Outpatient bundles are far simpler than inpatient bundles, which must often take into account more complex cases, as well as multiple other medical providers, post-acute care, and readmissions. Perhaps more importantly, in outpatient models, physicians, rather than the hospital, can own the bundle. With mandatory bundling for total joint replacement on the horizon, orthopaedic surgeons should be preparing for ways to participate more widely in the model.

Conflict of interest disclosure information for the authors can be found at www.aaos.org/disclosure

Jeffrey D. Angel, MD, is codirector of the Peri-operative Surgical Home at White River Medical Center. Scott Leggett is cofounder of Global One Ventures and a past president of the California Ambulatory State Association. Alexandra Page, MD, chairs the AAOS Health Care System Committee.


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