Each episode-of-care is created in collaboration with physicians and practice managers. The care rendered to patients is determined by clinicians, not by the health plan.


Horizon Blue Cross Blue Shield of New Jersey (Horizon), a pioneer in episode-of-care payments, is using the pay strategy for procedures, acute-care events, and chronic condition management.

Since launching its first episode-of-care initiative in 2010, Horizon has found that the payment strategy can improve the quality of care, save money, and boost patient satisfaction while improving the dynamic between the health plan and its contracted hospitals and physicians.

“We’ve seen the spirit of relationships change dramatically between ourselves and our providers,” says Lili Brillstein, director of Horizon’s episode-of-care program. “That’s a beautiful thing, on top of having the pillars of the Triple Aim all improve.”

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Horizon, the largest health insurer in New Jersey, has nearly 20 episodes, ranging from orthopedics to oncology, in place or under development. Providers in episode-of-care contracts are responsible for managing the total cost and quality of the care delivered for specific diagnoses, procedures, or healthcare events within defined time periods.

“This is part of our migration from fee-for-service, where the focus is on all the care rendered by one physician, to fee-for-value, where the focus is on all the care rendered to one particular patient across the full continuum,” Brillstein says.

Horizon, believed to have the largest episode-of-care program of any commercial health plan in the country, uses episode-of-care payments for the following services:

  • Hip and knee total joint replacement
  • Knee arthroscopy
  • Pregnancy and delivery
  • Colonoscopy
  • Various types of cancer
  • Heart failure
  • Coronary artery bypass graft
  • Inflammatory bowel disease (e.g., Crohn’s disease and ulcerative colitis)
  • Hysterectomy
  • Shoulder replacement
  • Low back pain
  • Gastroesophageal reflux disease (GERD)
  • Diverticulitis

Each episode-of-care program is created in collaboration with physicians and practice managers who are interested in contracting for episode-of-care payments. Together, they discuss what will trigger episodes (e.g., a surgical procedure, a diagnosis, chemotherapy administration), what criteria will be used to determine whether patients are covered by episodes-of-care, the length of episodes-of-care, and quality measures. The care rendered to patients is determined by clinicians, not by the health plan.

While care is being delivered, all providers are paid on fee-for-service bases. At the end of episode periods, Horizon performs retrospective reviews. If quality metrics are met and savings are attained, the savings are shared with providers.

If physicians’ performance falls short—either quality metrics are not met or no money is saved—physicians are not subject to financial penalties. Horizon wants to create no-risk environments for providers and health plans so they can learn together how to create success in value-based models.

Brillstein describes herself as “one of the country’s biggest advocates” for starting episode-of-care programs with retrospective reviews and no financial risks for providers. It takes time for physician practices to learn new ways of managing patient care. Offering incentives for successes—rather than penalties for failures—creates better foundations for payer/provider relationships to move to shared risk over time.

“If [quality metrics and savings] aren’t met, we don’t take money back and we don’t punish our providers,” she says. “The goal is to work together to figure out how to create success. We continue through the evolution, and we move toward risk-based and prospective models.”

Episode-of-Care Experience to Date

After the first full year of its episode-of-care program, Horizon reported the results from five procedure-based episodes: hip replacement, knee replacement, knee arthroscopy, pregnancy, and colonoscopy.

A comparison of the 2014 claims data for members who received care from episode-of-care practices with those who received the same procedures from non-episode-of-care practices found the following results:

  • 100 percent fewer hospital readmissions for knee arthroscopy patients
  • 37 percent fewer readmissions after total hip replacement surgery
  • 22 percent fewer readmissions for total knee replacement patients
  • 32 percent reduction in unnecessary Caesarean sections

In 2014, more than 8,000 Horizon members were treated by physicians in episode-of-care contracts, and the health plan paid out approximately $3 million in shared savings to 51 specialty physician practices that achieved quality, cost efficiency, and patient satisfaction goals.

Episode Payments for Chronic Conditions

In 2015, Horizon extended its episode-of-care program to chronic conditions by launching an episode that covers the care provided to patients diagnosed with congestive heart failure and other forms of heart failure.

The health plan is currently pilot-testing a chronic condition episode for Crohn’s disease—with a new twist. Patients with Crohn’s and other chronic diseases sometimes struggle with behavioral health conditions that adversely affect their health status and the effectiveness of their treatments. Proper support may increase the likelihood that patients stick with treatment plans, manage the symptoms of their diseases, and avoid emergency department visits and inpatient stays.

For that reason, the Crohn’s one-year episode includes a mental health assessment and treatment into the care plan.

Through a pilot project that began Jan. 1, seven gastroenterologists will screen patients diagnosed with Crohn’s disease for behavioral or psychological issues. The physicians will collaborate with behavioral health professionals who have experience working with patients who suffer from Crohn’s and other chronic gastrointestinal conditions.

Hospital Alignment Strategy

Horizon also uses episodes-of-care to develop closer working relationships with hospitals. It recently announced a strategic partnership with University Hospital in Newark with an initial focus on episode-of-care payments for pregnancy and delivery.

Poorly managed pregnancies can lead to health risks for mothers and babies. Through this new collaboration, the health plan’s physicians, nurses, and coordination team leaders work with hospital staff to help improve outcomes by managing care during pregnancy, delivery, and the post-partum period.

Lessons From the Front Line

Episode-of-care programs need to be tailored to diagnoses or procedures, Brillstein says. Horizon’s retrospective review approach—providers are paid based on fee-for-service during treatment and, at the end, a “shared savings” payment is made if quality and cost targets were met— does not work quite as well for chronic conditions, including some types of cancer, because the incentive comes so long after the care is delivered.

For that reason, Horizon will launch some prospective episodes at the end of this year.

“That means our partners will take on some of the risk, but they will get a payment up front,” Brillstein says. “That will help support the services that will be rendered across the continuum and that have to be really well-managed.”

Other observations based on nearly four years of program experience with episodes-of-care include the following.

The technical aspects of episode-of-care payments are challenging. Brillstein sees widespread enthusiasm—from both providers and payers—about the episode-of-care concept, but slow adoption. “Payers’ payment systems are not configured to pay this way, and there are a lot of things that have to be changed,” she says.

Quality measurement needs to be well thought out. While process measures are easier to track, outcomes are what counts, Brillstein says. “We mostly look for outcomes measures and not process measures,” she says. “We don’t tell providers how to take care of their patients.”

The measures need to be developed in consultation with the providers because they know what is truly meaningful during an episode of care. “What should we be looking at? And what are they already reporting?” she says. “We don’t want to be creating additional work.”


Lola Butcher is a freelance writer and editor based in Missouri.

Interviewed for this article:

Lili Brillstein is director-episodes of care, Horizon Blue Cross Blue Shield of New Jersey, Newark, N.J., and is a member of HFMA’s New Jersey Chapter.

Discussion Starters

Forum members: What do you think? Please share your thoughts in the comments section below.

1.      Does your organization participate in episode-of-care programs with commercial health plans?

2.      What are the primary advantages and disadvantages of episode-of-care payments in comparison to fee-for-service?

Publication Date: Tuesday, May 16, 2017