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Bundling Healthcare Payment: Driving Value-Based Care

Dr. Dan Mazanec, MD

Chief Medical Officer, Dorsata

The Center for Medicare and Medicaid Services (CMS) Innovation Center recently announced a potentially transformational program — the Comprehensive Care for Joint Replacement (CCJR) model for payment for total knee and hip replacement surgery.

  • Expanding the “episode of care”
  • Shifting financial risk
  • Driving increased coordination of care
  • Central role for Health IT

Building on bundling pilots since 2013, the new initiative is a game-changer. Surgeons are very familiar with an earlier “bundle” concept — the “global surgical package.” This package simply represents a single payment for all care associated with a surgical procedure. Depending on the extent of the procedure, it can encompass payment for all services provided by the surgeon over one to 92 days from preoperative to postoperative care.

Of note, this model doesn’t include payment to the hospital for the bed, use of the operating room, anesthesia services or any post acute care. Beginning with the Bundled Payments for Care Improvement Initiative introduced in 2013, CMS has explored expanding the bundle concept to multiple providers and healthcare organizations involved in a single “episode” of care with an emphasis on shared financial risk and responsibility for patient outcomes.

By changing the reimbursement-to-risk landscape and redefining the episode of care, CMS incentivizes more nimble healthcare organizations to create a more integrated structure to deliver value-based evidence informed services across the full continuum from outpatient through hospitalization and the post acute care space. State of the art, smart and user-friendly health IT platforms will enable linkage of diverse providers in different settings across this broader spectrum of care.


Bundles and Episodes Redefined

The original concept of a bundled payment for services referred to single provider — the surgeon — and a so-called episode of care. For purposes of a surgical procedure, all care provided from the day before the surgery to up to 90 days after was included in a single episode with a “global” payment. In the past 3 years, CMS has progressively redefined the bundle to include all services provided for the care of a patient with a medical or surgical condition, either acute or chronic.

For acute conditions (e.g. heart attacks), the bundle might include a single payment covering the entire episode of care: the emergency room care, cardiac catherization, placement of a stent, intensive care and hospital stay, cardiologist services, post discharge cardical rehabilitation services and home healthcare. The organization receiving the payment would proportionally disperse the funds to the involved providers.

Unlike the “fee for service” model in which payment is made to each billing provider by CMS, the organization is at risk if the actual cost of care exceeds the bundled payment. In the chronic disease model, the healthcare organization, an Accountable Care Organization (ACO) for example, accepts a single “bundle” payment for all care required for the patient’s diagnosis (e.g,, Type 2 diabetes). This might include physician visits, podiatric care, eye exams, home healthcare, social services and emergency room visits.

Again, the financial risk is shifted from the payer (CMS) to the healthcare organization providing the services. By redefining the bundle, CMS has forced a realignment of incentives to caregivers to provide cost efficient care.

Care Coordination is Key to Success

Coupled with the increasingly intense focus on patient outcomes by CMS and other payers, bundling is expected to drive healthcare organizations to focus intensely on optimizing clinical workflows from both quality and cost perspectives. The recently introduced CCJR program for knee and hip replacement clearly incentivizes hospitals to reduce costs by decreasing length of stay (LOS) and reducing costly readmissions. Hoping to drive down the LOS in the pilot, in 2017, Medicare will waive the current rule requiring a three night acute hospital stay before transfer to a skilled nursing facility (SNF).

Post surgical patients who need assistance with walking, live alone or lack sufficient assistance at home and require daily therapy are typically discharged to a SNF for a short term (1-2 weeks) stay focusing on rehabilitation. For patients with better mobility and a reasonable support system, an even more cost saving discharge is directly to home with home healthcare (HHC) services, particularly physical therapy and nursing care as required. High quality post acute home nursing care and chronic disease management should reduce the risk of acute hospital readmission within the 90-day bundle time frame.

It’s likely that the best opportunity for hospitals and healthcare systems to achieve the savings required to beat CMS targets is in the post acute care arena. Coordinated, integrated workflows through the full continuum of care will be required to manage resources, costs and ultimately, achieve the best outcome for the patient.

Central Role for Health IT

A cohesive electronic medical record (EMR) built with clinically relevant workflows and caregiver friendly interfaces which spans the acute and post acute phases of care functions as the backbone of this emerging transition to value-based care. For joint replacement, acute care workflows addressing venous thromboembolism prophylaxis, management of medical comorbidity (e.g., diabetes), postoperative pain and acute physical and occupational therapy offer potential to shorten LOS and reduce unnecessary inappropriate costs.

As LOS decreases, implementation of well designed clinical workflows in the post acute phase of care is particularly critical to optimizing patient outcomes while controlling costs. Post acute caregivers are under increasing pressure to document their work and demonstrate its effectiveness. Health IT needs to provide easy access to regularly updated evidence informed clinical decision support and user-friendly interfaces to facilitate documentation and track outcomes.

I expect telemedicine to play an increasing role in the transformation to the value based model. A retrospective study published this month, compared a telemedicine (phone or secure video) behavioral health program in patients with a recent major cardiovascular event to a non-intervention group. The telemedicine group had 31 percent fewer hospital admissions and 63 percent fewer hospital days during the six-month study.

There was also a nonsignificant trend to less use of ED services in the intervention group. The authors estimated that the program saved $864,000 in the follow up period. The study clearly demonstrated a telemedicine-delivered intervention to patients with a high risk medical condition can reduce medical resource utilization and lower healthcare costs within six months.

CMS has set an objective that 50 percent of all reimbursement for services shift from traditional fee for service to “alternative” value-based methods by 2018. Bundled payment models are the principal driver of this accelerating transformative initiative.

Dr. Dan Mazanec, MD

Chief Medical Officer, Dorsata

Prior to joining Dorsata in 2016, Dan Mazanec, MD was the Associate Director of the Center for Spine Health at the Cleveland Clinic. Board certified in internal medicine and rheumatology,…