Published 2/1/2016

Winning with Payment Reform

Panelist points out how orthopaedists can manage change
"What's important to us is maintaining our independence and our relevance," noted Peter A. Caprise, MD, of the Orthopaedic Center of Central Virginia (OCCV). "So when we look at payment reform, we don't see burdens that are coming down the pike, but opportunities for our practice to shore up our bottom line and ensure our independence."

Dr. Caprise shared OCCV's strategy for winning with payment reform at the Fall Meeting of the AAOS Board of Councilors/Board of Specialty Societies.

"Ten years ago, we were three small groups with 14 surgeons. Now, we are 12 surgeons, 2 podiatrists, 2 primary care sports medicine physicians, and 2 rheumatologists serving a 300,000 patient catchment area. During the years of discussion that preceded the merger, all the surgeons came to realize that the threats to their individual practices were not other independent orthopaedic practices, but were external. Competing against each other was folly," said Dr. Caprise.

Thus the first step in creating a winning strategy was to merge practices. "The advantages for us were easy," said Dr. Caprise. "Combining resources enabled us to develop a robust C-suite, so that we could delegate responsibilities. We were also able to start recruiting to the community's needs rather than to the call and overhead burden. We could speak with a single voice to the hospital in negotiations. And we could invest in ancillaries to improve revenues."

In addition, the new practice joined an Orthopaedic Forum to gain a national perspective and access to outcomes measurement, benchmarking, and cost data. It also took a more active role in advocacy on both the state and federal level through participation with the AAOS and the American Association of Orthopaedic Executives.

Merging practices, however, did have a downside. Dr. Caprise noted a loss of singular control and intimacy, and pointed to the need for a culture of quality and compliance.

Service line comanagement
The next step was to reach a service line agreement for trauma services. The agreement included flat fee payments for surgeons on call and dedicated operating room (OR) time for trauma cases. The practice committed to taking a half-day out of the elective schedule to run the trauma room and devoted administrative time to improving trauma services.

"This began a working relationship with the local hospital," explained Dr. Caprise, "that markedly improved trauma care in the community." The arrangement benefited both the practice and the hospital.

An orthopaedic advisory board (four surgeons and three hospital representatives) was established and charged with oversight of all orthopaedic services, including both inpatient and outpatient care and marketing. For the first time, physicians were paid for the time they spent on administrative activities.

The advisory board put physicians and the hospital on a common course, resulting in clinical improvements in patient care. For example, standard procedures for hip fracture care—from the time the patient arrived in the emergency department until surgery was performed—were adopted. The hospital achieved Total Joint Certification from The Joint Commission and was named a "Center of Excellence" by Blue Cross/Blue Shield.

Three years ago, an orthopaedic service line comanagment agreement was reached, making OCCV responsible for managing the entire service line. The agreement included payments to physicians for administrative time and achievement of incentive goals, based on annual metrics. Metrics included both care processes (administration of antibiotics within 1 hour of surgery; daily discussions with patients about pain levels) and outcomes (surgical site infections).

The results were, according to Dr. Caprise, financially successful for both the hospital and the practice. "Most importantly," he noted, "we created a culture within the orthopaedic services line that understood the importance of value, clinical excellence, and efficiency."

The going wasn't always smooth, however. Establishing the service line was costly, requiring 3 years of administrative time and substantial legal fees. Goals are not always perfectly aligned, and competition between the hospital and the practice for imaging and therapy services continues. But the clinical pathways established—and the penalties necessary to enforce them—enabled the next move—participation in the BPCI Model 2 bundle.

"The concept of standardizing care across communities, adopting best practices from across the country, and improving the value of the health care we provided was very appealing," said Dr. Caprise. Under the retrospective model, the Centers for Medicare & Medicaid Services determines an average cost for an episode of care, and takes 2 percent of that as its savings. The remaining dollars are managed by the participant. "Payments to care providers are made prospectively," said Dr. Caprise, "with a retroactive reconciliation against the target price."

If the cost of the episode of care is lower than the target, the awardee (hospital/practice) keeps the difference; if costs exceed the target, the awardee must pay the difference. It's a complicated system, admitted Dr. Caprise, but "surgeons are paid first."

Savings can be found in several areas, including readmission rates, utilization of post-acute care (skilled nursing facilities, inpatient rehabilitation, and home health), and reduced hospital costs (implant acquisition, length of stay, ancillary testing).

With the practice serving as the "awardee," it remained in charge of all aspects of patient care. "The work was significant," said Dr. Caprise, "including investments in infrastructure and dedicated physician time to build pathways that were efficient, improved quality, and reduced readmissions.

"Quality care remains the ultimate goal," concluded Dr. Caprise, "with value as the corollary. Although the local hospital was our biggest threat, it was also our best collaborator. Merging practices just for the sake of improving revenues will fail. Each practice will need to evaluate its own capabilities; remember, all politics is local. But don't wait too long—opportunity is fleeting."