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Orthopedic bundled payment models on the fast track


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Deirdre Baggot and the leading experts in bundled payments discuss orthopedic bundled payment models.

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Orthopedic bundled payment models on the fast track

  1. 1. Continued on page 6 Continued on page 8 IN THIS ISSUE The monthly publication for OR decision makers 2018 Ambulatory Surgery Centers ASC workforce stable amid rise in cases 29 SEPTEMBER Volume 34 Number 9 Salary/Career Survey Finances OR Manager Conference Aiming high nets ‘wins’ for OR Manager of the Year 7 Patient Safety Munro Scale research supports streamlining risk levels 18 ECRI Institute Perspectives Top 10 Patient Safety Concerns for 2018 21 Sterilization & infection prevention Validate and verify medical devices to ensure safety 25 T he Centers for Medicare & Med- icaid Services (CMS) is poised to launch Bundled Payments for Care Improvement (BPCI) Advanced on Octo- ber 1, 2018, and is continuing its Com- prehensive Care for Joint Replacement (CJR) bundled payment model for total hip and knee arthroplasty (THA, TKA). Jeffry Peters “Orthopedics is the most important service line for most hospitals, and joints are where they make the most money,” says Jeffry Pe- ters, chief executive offi- cer (CEO) of Surgical Di- rections, a consulting company based in Chicago. THA and TKA are the most common inpatient surgical procedures for Medicare patients, and Peters says every hospital his company is working with is focusing on improving value re- lated to joint replacement surgery. A total of 54% of hospital respon- dents to the 2018 OR Manager Salary/ Career Survey chose “more bundled payments for orthopedic” as one of their top three reimbursement trends over the past year. Bundled payments are finding their way into ambulatory surgery centers (ASCs), too, as re- Orthopedic bundled payment models on the fast track—Part 1 Surgical volume outpaces growth in nursing staff T he good news/bad news for OR leaders from the 2018 annual OR Manager Salary/Career Survey: Surgical volume continues to increase for many hospitals, but staff turnover and recruitment difficulties remain, creating challenges in meeting that increased volume. Another ongoing challenge is reimbursement changes; more than half of respondents report bundled payments for orthopedics as the top reimburse- ment trend compared with a year ago. More survey highlights Other key findings of the survey include: • Models of care are making only modest inroads. One-third of respon- dents reported that none of the care model options presented in the sur- vey—such as Enhanced Recovery After Surgery (ERAS), Accountable Care Organizations, and the periop- erative surgical home (PSH)—had been implemented or were planned Continued on page 8 Continued on page 13 Conference issue OR Manager Conference September 17-19, 2018 Nashville, Tennessee
  2. 2. OR Manager | September 2018 flected in the 30% of ASC survey re- spondents who chose it as one of the top three reimbursement trends. Two major orthopedic groups with ASCs recently announced bundled payment partnerships with third party insurers. Steven Schutzer, MD If your organization isn’t looking at bundled pay- ments, it needs to, says Steven Schutzer, MD, an orthopedic surgeon who is cofounder and medical director of the Connecticut Joint Re- placement Institute at Saint Francis Hospital and Medical Cen- ter in Hartford. “2018 is going to be viewed as the watershed year in the movement to value-based healthcare, and that includes bundled payments,” adds Dr Schutzer, who calls himself a bundled payment “zealot” and has been involved with orthopedic bundled payments since 2010. These trends suggest it’s an ideal time to revisit orthopedic bundled pay- ments. Part 1 of this two-part series provides an overview of bundles, includ- ing benefits, challenges, and the cur- rent state. Part 2 will explore the ways in which OR directors can help develop and implement successful bundled pay- ment models in their organizations. Rise of bundled payments In a bundled payment model (also re- ferred to as an episode of care model), providers and/or healthcare facilities receive a single payment for all of the services delivered during an episode of care (care delivered for a type of surgery or condition over a specified amount of time). “It’s a concept of packaging goods and services, with a warranty for the purchaser of healthcare,” Dr Schutzer says. For federal bundled payment pro- grams, typically there is an entity that facilitates coordination among those providing care and apportions the finan- cial risk; in some of its bundles, CMS calls this the “convener.” Conveners, which may be physician groups, hospi- tals, or commercial entities, have con- tracts with their partners. Many of today’s bundled payment models are “retrospective,” with pay- ment calculated ahead of time (the tar- get price) and then reconciled against the actual costs after the episode of care. However, bundles can also be “prospective,” in which a budget for the episode is created, a fee is paid to the convener, and payment is then distrib- uted to the care providers. Participa- tion in bundled payment programs may be mandatory or voluntary, and as of yet there is no definitive answer about which model is better. Bundled payments date back to 1984, but they came of age with the 2010 Patient Protection and Affordable Care Act (ACA), which created the Cen- ter for Medicare & Medicaid Innova- tion (CMMI). The center launched the original BPCI model in 2013 and added CJR, which is mandatory for hospitals in specified metropolitan statistical areas, in 2016. In November 2017, CMS reduced the number of CJR locations from 67 to 34 and canceled the hip fracture bun- dle. As of February 2018, 452 hospitals were participating in CJR, which means about half dropped out when they could. Of that total, 86 are participating volun- tarily. In early 2018, CMS announced BPCI Advanced, a voluntary program that for the first time includes outpatient sur- geries, as the next iteration of BPCI. Deirdre Baggot, PhD, MBA, RN, a na- tional expert on bundled care, says that 1.5 million Medicare patients have par- ticipated in BPCI to date. Commercial payers are following the government’s migration into bundled payments, which means that the model is here to stay and will have a major impact on market share for hospitals. “It’s a key driver of the value-based movement, which emphasizes price, quality, and transparency,” Dr Schutzer says. A 2016 McKesson report on value-based reimbursement projected that over the next 5 years, bundled pay- ment would grow the fastest of the vari- ous payment models. Benefits of bundled payments Deirdre Baggot, PhD, MBA, RN The major benefit of bundled payments is lower cost. For example, a 2017 study reported that the Baptist Health System, which partici- pated in Medicare bun- dled payment programs, had a cost decline of 20.8% for lower joint re- placement surgery without complica- tions. New York University Langone Medical Center, which joined BPCI in 2013, reduced costs for each episode of lower extremity joint arthroplasty by $3,017. Most savings come from shifting postdischarge care to the home and from standardizing implant and supply choices. Reducing physician variance achieves gains, but it isn’t an “absolute requirement for success under bundled payment,” a study finds. Baggot notes that bundles also reduce overtesting and overtreating. Commercial payers are also report- ing cost benefits. UnitedHealthcare notes that its spine and joint bundled payment program reduced hospital re- admissions for joint replacement surger- ies by 22% and reduced complications by 17%, compared with facilities that didn’t participate in the program. And when Horizon Blue Cross Blue Shield of New Jersey (Horizon) compared 2014 claims data for those who received bundled payment care with those who Finances Bundled payments Continued from page 1 Continued on page 14
  3. 3. www.ormanager.com14 OR Manager | September 2018 didn’t, it found 37% fewer readmissions after THA and 22% fewer readmissions after TKA. Dave Terry Other benefits of bun- dled payments include their structure, special- ist engagement, im- proved quality, and at- tainment of organiza- tional goals. Structure. “Bundles are much simpler than ACOs [account- able care organizations], where you are responsible for the whole population and have to manage their entire health, including wellness,” says Dave Terry, CEO and founder of Archway Health in Watertown, Massachusetts, which helps physician practices manage bun- dled payments. “It’s easier to implement and man- age episodes [bundles] than ACOs because they require much less infra- structure than other total cost of care models,” says Lili Brillstein, MPH, direc- tor of episodes of care for the market innovations team of Horizon. “They’re bite-sized chunks of value-based care, and what we learn can be extrapolated to larger entities such as ACOs.” Engagement. Bundles also do a bet- ter job of engaging specialists, who, Terry says, control 70% of healthcare spending. “ACOs focus on primary care physicians, and bundles focus on spe- cialists,” he says. “The bundled pay- ment model creates opportunity for specialists to move away from fee for service, collaborate along the care con- tinuum, innovate around new ways to care for their patients, and get rewarded for doing so.” Quality. A 2012 report from the American Hospital Association noted that the bundled payment model can spur quality improvement. But Cynthia Emory, MD, MBA, associate professor and vice chair, department of orthope- dic surgery at Wake Forest School of Medicine in Winston Salem, North Caro- lina, says the literature on bundled pay- ments is mixed. She attributes some of the inconsistency to patient selec- tion. For example, total joint patients placed in bundles are often category I or II in the American Society of Anes- thesiologists Physical Status Classifica- tion System, which puts them at lower risk. “You have to be careful that you are comparing apples to apples when you’re looking at patient populations,” Dr Emory says. In addition, studies have focused on elective procedures. “A review of the evidence would sug- gest that we have good data to sup- port bundled payments for elective pro- cedures,” Baggot says. She adds the literature shows a strong relationship between bundled payment and reduc- tions in cost (primarily from reduced di- agnostics, therapeutics, readmissions, and postacute care resource utilization). Baggot doesn’t know of any study showing that bundles erode quality, so the focus on outcomes will benefit hos- pitals, providers, and patients. Lana Smith, MSN, RN Goal achievement. Bundles can also help achieve larger organiza- tional goals, says Lana Smith, MSN, RN, corpo- rate director of service lines at Adventist Health in Roseville, California. Adventist has 20 hospi- tals in Hawaii, California, and Oregon. “We wanted to drive toward a more sys- tem-oriented approach,” says Smith. When three of Adventist Health’s hospitals were mandated to join the CJR program because of their geo- graphic locations, it provided an oppor- tunity to pull people together to rede- sign care. “We had the same focus and goals, so we could redesign care not only to improve outcomes and costs, but also to improve the patient expe- rience,” Smith says. Before CJR, no hospital in the system had worked with bundles. “We now develop standards based on evidence that are used across the system, and we track outcomes more consistently.” Pathways devel- oped to achieve CJR goals are used for non-Medicare patients as well. Challenge of bundled payments Cynthia Emory, MD, MBA Although Dr Emory sup- ports the bundled pay- ment model, she ac- knowledges its potential downsides. Incentivizing providers to deliver com- prehensive care to pa- tients may also incentiv- ize them to withhold care from those who re- quire more resources than the bundle allows, such as those from a lower so- cioeconomic status. “Whether it’s a spine or a joint re- placement, the literature says that pa- tients who are morbidly obese have a higher risk of infection, and their surgery is more difficult and takes more time,” Dr Emory says. “Surgeons may be less likely to offer surgery to that patient because of the increased risk of compli- cations.” The typical bundled payment model doesn’t take patient selection into con- sideration. “It generally is not designed to address whether the patient actually needed the surgery or not,” Brillstein says. “Their participation in the bundle is triggered when they are scheduled for surgery.” She says Horizon is reworking bundles to change that. And although bundled payment mod- els such as BPCI Advanced are starting to integrate patient morbidity, Dr Emory notes that the current DRG structure Finances Continued from page 13 Bundled payment growth projected to outpace that of other payment models.
  4. 4. OR Manager | September 2018 can make that challenging. “DRGs have comorbidity modifiers, but they are in- sufficient for truly capturing all the differ- ent comorbidities that patients have,” she says. Despite the challenges, bundled pay- ments are moving forward on several fronts. Current state: Government Baggot, who was an expert reviewer for BPCI, says that the uncertainty of what would occur under the Trump admin- istration lessened with the April 2018 appointment of Adam Boehler as direc- tor of the CMMI, which is responsible for new payment models, and as deputy administrator of CMS. Boehler has ex- tensive experience in industry and was most recently chief executive officer of Landmark Health. Baggot notes that Boehler has out- lined three criteria for new payment models: simplicity, transparency, and accountability. “Given that bundles meet all three of Adam’s criteria, I be- lieve we will continue to see new mod- els being tested over the next several years,” she says. Baggot adds that the Trump administration appears to sup- port new payment models and, because Boehler is from the private sector, she expects those models to be rolled out more quickly than in the past. CJR, which is scheduled to run through the end of 2020, will likely con- tinue. “CJR is one of the most success- ful models CMS has tested. It’s manda- tory, it has downside risk, and it has saved money,” Baggot says. “BPCI Advanced is the first major value-based initiative for the Trump ad- ministration and signals its commitment to value-based care,” Terry says. (For more on BPCI Advanced, visit the Tool- box at and click on “BPCI Advanced at a Glance.”) Current state: Commercial payers In the past, commercial payers did not focus much on alternative payment models, but according to Baggot, they are starting to invest in them. That’s because customers with a large number of employees are advocating for lower costs. Baggot lists Anthem, Aetna, United HealthCare, and Blue Cross/ Blue Shield as the largest commercial payers who are players in this area. Horizon has an in-depth program of more than 20 bundled payments, in- cluding ones related to THA, TKA, knee arthroscopy, shoulder replacement, and spine (sidebar above). Horizon works primarily with providers, but also with its ACO accounts and some hospitals. Horizon uses what Brillstein calls a practice-level, case-mix adjusted budget to establish pricing. Using 2 years of historical data from the practice, the company runs a simulation to deter- mine what the cost would have been as part of a bundle. The budget is estab- lished based on the results. “They’re competing against their own history,” Brillstein says. “It allows us to flex the model to help address the question of whether a member [patient] needed to be in that episode of care rather than only managing them when they’re in.” Horizon also has tweaked bundles away from a specific procedure. For exam- ple, the low-back pain bundle differs from what could have been a bundle focused on laminectomy, which the evidence shows might be done even when less invasive treatments would yield similar re- sults. Proxy measures such as emergency and hospital visits are used to rule out acute pain that requires different manage- ment, and then patients are followed for 1 Finances Continued on page 17 What about spine? Although spine bundled payment models exist, they aren’t nearly as prevalent as those for total joints. Why? Here are some of the reasons: ➤➤ Market share for total joints. “Joints are about 90% of most hospitals’ business,” says Steven Schutzer, MD, an orthopedic surgeon who is cofounder and medical director of the Connecticut Joint Replacement Institute at Saint Francis Hospital and Medical Center in Hartford. ➤➤ Complexity of spinal surgery. Dr Schutzer says spine procedures tend to be more complex and often present greater surgical variability than total joints. For example, spine proce- dures can be cervical or lumbar and, for either procedure, they can be instrumented (using hardware) or not instrumented. Multiple levels can also be involved. “You can see all of the possible combinations, making it challenging to create a single package price,” he says. ➤➤ Number of implant vendors. “With joint surgery, there are four major vendors, but with spine surgery, there are many more vendors and more smaller vendors,” says Deirdre Baggot, PhD, MBA, RN, a national expert on bundled care. ➤➤ Patient selection. “The growth rate of spine procedures has far outpaced predicted use rates for a population,” Baggot says. Patients who are not good candidates may be under- going the procedure, which makes it difficult to establish standard criteria for surgery. “The first question of bundles is: ‘What is the right care for the patient?’” she adds. ➤➤ Surgery setting. Most spine procedures are performed in an outpatient setting, where penetration of bundled payment models is currently low. That’s not to say spine payment models won’t become more common; however, the characteristics of providers and organizations that participate may differ from those for total joints. “You have to have a sizable spine practice to have a lot of Medicare patients who fit into the bundles that the Centers for Medicare & Medicaid Services chose,” says Dave Terry, CEO and founder of Archway Health in Watertown, Massachusetts. “Unless you have a big practice, you won’t have the critical mass of volume needed to spread the risk.”
  5. 5. OR Manager | September 2018 year, the length of the episode. Once again, the rate of surgery, this time for laminectomy, is built into the budget model. “If the needle moves and the rate comes down, there’s less risk for the patient and there’s improved quality,” Brillstein says. “Patients get back to their lives sooner, and there is huge potential savings to the system.” Lili Brillstein, MPH So why haven’t more commercial payers em- braced bundled pay- ments? Brillstein says one reason may be the technology required to shift from paying based on fee for service to pay- ing based on a bundle. Brillstein says Horizon plans to move next into prospective bundled-payment models, which are more complicated than retrospective ones. “The focus [in both models] is on patient outcomes and the patient experience, and with that, the quality and experience are im- proved and overall cost of care comes down,” she says. Current state: Providers/hospitals “We’ve seen bundles work best when the specialist is in charge or actively in- volved,” Terry says. “If the specialist is leading the process, everyone else pays attention.” Brillstein echoes that senti- ment: “The physicians are the ones who make the decisions about where the care is rendered and what happens to the patient.” However, she says that increas- ingly, physicians and hospitals will need to align. “They will co-conduct the epi- sodes [bundles],” she says. “The models rely on collaboration, not just with the payer but with the partners across the continuum in order to create success.” A case in point is the Connecticut Joint Replacement Institute at Saint Francis, which has orthopedic bundles for several procedures based on a part- nership between commercial payers and surgeons, anesthesiologists, and the hospital. Standardizing care weeds out waste and efficiency and drives down costs. In the CJR model (non-gainsharing), those savings accrue to the hospital, but Dr. Schutzer says surgeons, for the value they create, can also do better with the distribution of the bundled payment revenue. The surgeons’ professional fee, which is embedded in the bundle, may be a bit higher than that under tra- ditional fee-for-service reimbursements. “This is the carrot for implementing and complying with standardized protocols that I have held out to our surgeons since 2010, and we’ve been successful with it,” he says. Baggot notes that many physicians say they aren’t ready to take on down- side risk associated with bundled pay- ments, but those who do may reap sig- nificant financial benefits. Call to action The move to the bundled payment model is picking up speed. “If you aren’t actively participating, your peers are outpacing you, and if there is a switch to mandatory programs, you’ll be behind,” Terry says. He advises or- ganizations to analyze the data and look for opportunities. “You have to improve, and you have to share the value of that improvement with others,” Terry adds. As bundled payment and other al- ternative payment models increase in prevalence, it’s worth remembering the overarching goals. “We, as a country, need to raise the bar in terms of health- care,” Baggot says. “We’ve improved a lot of areas, but we still have major system work if we’re going to truly make healthcare more cost effective.” ✥ Cynthia Saver, MS, RN, is president of CLS Development, Inc, Columbia, Mary- land, which provides editorial services to healthcare publications. References American Hospital Association. Bundled payment–an AHA research synthesis report. 2012. https://www.aha. org/2017-12-11-bundled-payment- aha-research-synthesis-report. American Hospital Association. CMS to allow participants to withdraw from bundled payment model in March. 2018. headline/2018-07-09-cms-allow-par- ticipants-withdraw-bundled-payment- model-march. BPCI Advanced. 2018. tives/bpci-advanced. Butcher L. Why Horizon BSBSNJ likes episode-of-care payments. HFMA. 2017. tent.aspx?id=54164. Comprehensive Care for Joint Replace- ment Model. 2018.https:// Deb S. A closer look at BPCI ad- vanced. AOAS Now. 2018. https:// Advocacy/advocacy02/. Dryda L. 2 orthopedic groups with ASCs partner with insurers on bundled payments in the same week: 5 things to know. Becker’s ASC Review. 2018. https://www. orthopedic-groups-with-ascs-partner- with-insurers-on-bundled-payments- in-the-same-week-5-things-to-know. html. Edmonds C, Hallman G L. CardioVas- cular Care Providers. A pioneer in bundled services, shared risk, and single payment. Tex Heart Inst J. 1995;22(1):72-76. Jubelt L E, Goldfeld K S, Blecker S B, et al. Early lessons on bundled payment at an academic medical center. J Am Acad Orthop Surg. 2017;25(9):654-663. Kaplan R S, Anderson S R. Time-driven activity-based costing. Harv Bus Rev. 2004;82(11):131-138, 150. Finances Bundled payments Continued from page 15 Continued on page 19
  6. 6. OR Manager | September 2018 really have to look at the four levels side by side to see any difference be- tween them.” Simulation methodology The simulation method was used to test how a change of risk thresh- olds affected patient risk levels. The method allowed for exclusion of risk factors having greater uncertainties and compared two-level versus three- level outcomes. “This simulation methodology was a whole new world, a whole new lan- guage, and a whole new method of test- ing for me,” says Munro. It involved building the Munro Scale into an Excel spreadsheet that has the capability of also inserting simulated patients based on real patient data. “Once the information is there, you can run analyses on a real patient population or in a statistical fashion to determine numerical calculations of each risk factor and test changes to the Munro Scale thresholds,” she says. An analysis of 1,000 simulated pa- tients on a two-level outcome deter- mined a minimum high-risk threshold of: • 9 for the preoperative phase • 23 for the intraoperative phase • 27 for the postoperative phase. “My model can now create a simu- lated population up to 10,000 patients that is based on real patient data and characteristics,” says Munro. “It is a tool that is alive and can strengthen the validity of the model itself” (sidebar, p 18). Statistical model results Using the statistical model of mul- tivariate logistic regression, Munro compared the Munro Scale (ie, count method) statistics that were generated from simulated patients to the regres- sion method (ie, characteristics of real patients), which showed agreement in the results. Risk factors were weighted using the simulated patient data and then applied to real patient data for ad- justment of the thresholds. “In other words,” says Munro, “they confirmed each other—the count method matched the regression method. This was a form of validity for the Munro Scale with the two-level out- comes,” she says. Next steps “The two-level risk outcomes should streamline the assessment scale and improve the differentiation of low and high risk,” Munro says. The next steps will include: • determining which risk factors con- tribute the most to a patient’s risk and, therefore, should be retained in the model • determining weighting of risk factors that will best predict risk • deciding how the model can be ap- propriately calibrated so that it pro- duces a balanced mix of low- and high-risk results. Future testing with the simulation model is pending. ✥ —Judith M. Mathias, MA, RN References AORN. Guideline for positioning the patient. 2018 Guidelines for Periop- erative Practice. Pp 673-744. AORN. Prevention of perioperative pressure injury tool kit. https:// resources/tool-kits/prevention-of- perioperative-pressure-injury-tool-kit. Joint Commission Resources. Under pressure: Preventing perioperative pressure injuries. The SourceTM. 2017:15(11);1, 12-15, 20-21. Patient safety Refinements will help distinguish low vs high risk for pressure ulcers. Liao J M, Emanuel E J, Whittington G L, et al. Physician practice variation under orthopedic bundled payment. Am J Managed Care. 2018;24(6):287-293. McKesson Health Solutions. Journey to value: the state of value-based reimbursement in 2016. https:// wp-content/uploads/vbr-study- 2016v3.pdf. Navathe A S, Anastos-Wallen R E, Emanuel E J, et al. What’s in a name: Will BPCI-advanced hold back or advance bundled payment policy? Health Af- fairs Blog. 2018. https://www. hblog20180131.50449/full/. Navathe A S, Liao J M, Polsky D, et al. Comparison of hospitals participat- ing in Medicare’s voluntary and man- datory orthopedic bundle programs. Health Aff. 2018;37(6):854-863. Navathe A S, Troxel A B, Liao J M, et al. Cost of joint replacement using bundled payment models. JAMA Intern Med. 2017;177(2):214-222. jamainternalmedicine/ fullarticle/2594805. Sullivan R, Jarvis L D, O’Gara T, et al. Bundled payments in total joint arthroplasty and spine sur- gery. Curr Rev Musculoskelt Med. 2017;10(2):218-223. UnitedHealthcare’s value-based care program for knee, hip and spine procedures demonstrates improved health outcomes and reduced costs. 2018. https://newsroom. Healthcare-Value-Based-Program- For-Joint-and-Spine-Demonstrates- Improved-Health-Outcomes-and- Reduced-Costs.html. What are bundled payments? NEJM Catalyst. 2018. https://catalyst. ments/. Bundled payments Continued from page 17