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Catholic Health Initiatives (CHI), one of the nation's largest health systems, likes bundled payments. In the first six quarters of the organization's participation in the federal Bundled Payments for Care Improvement (BPCI) initiative, readmission and complication rates fell while patient experience scores improved.
"And, financially, we did very well," says Chris Stanley, MD, vice president for population health at CHI. "Within the first couple of quarters, every one of our facilities was saving money and getting a bonus check for joint replacements, and that has been sustainable over time."
Triangle Orthopaedic Associates, an independent medical practice based in central and eastern North Carolina, is another fan of payment bundles. In addition to a BPCI contract, the practice has bundled payment contracts with three commercial insurers and additional agreements on the way.
Purchasers can reap benefits as well. The health fund for a big trade union recently launched the Joint Replacement Bundled Payment Program through a direct contract with Mount Sinai Health System in New York City.
And health plans are enthusiastic. At Blue Cross and Blue Shield of North Carolina (BCBSNC), bundled payment contracts were used for about 35 percent of the joint replacements that the insurer paid for in 2014. It expects that volume to grow this year.
The biggest commitment to bundled payments comes from the biggest payer—the Centers for Medicare & Medicaid Services (CMS), which made bundled payments for joint replacement mandatory in 67 markets as of April 1 through the Comprehensive Care for Joint Replacement (CJR) program. (See sidebar below.)
Bundled Payments Go Mandatory
Despite the widespread enthusiasm, the bundled payment fan club may be limited to early adopters that support the transfer of financial risk from health plans to providers. An analysis by Avalere found that 60 percent of hospitals required to participate in the CJR program may face financial penalties because their costs exceed those of their regional peers.
For CHI and other organizations that are winning with bundled payments, the success factor is clear: a level of collaboration among all parties that exceeds anything in the past.
"That means getting physicians, care managers, and others across the entire care continuum to sit down together to decide the best care across the 90-day episode," Stanley says. "And as we think about the entire continuum of care, we must choose partners that will collaborate in a positive way to manage to that care model."
Chris Stanley (left), MD, vice president for population health at Catholic Health Initiatives, says collaboration with patients and with post-acute providers have been key to the organization’s success in a bundled payment initiative. (Photo: Catholic Health Initiatives)
CHI jumped into CMS's BPCI program when it started in 2013; as of April 2016, the systems' facilities have 35 different bundles in either BPCI or CJR. Most of the organization's bundles are hip and knee replacements, and the results reflect the promise touted by bundle advocates: During the first six quarters of BPCI participation, CHI decreased readmissions by 46 percent, improved patient experience by 10 points on a 100-point scale, decreased skilled nursing facility (SNF) use by 45 percent, and improved patients' postoperative functional assessment scores by 25 percent.
Stanley identifies three types of collaboration that are key to bundled payment success. The first is a multidisciplinary approach to developing an end-to-end care model designed to optimize patient outcomes. "Everybody understands what their role is and what is expected on Day 1 and Day 20 and otherwise," he says. "Our physicians have not only been at the table, they have designed that care process."
Second: collaborating with patients to improve the chances of good outcomes. In the early days of participation in BPCI, some CHI facilities required patients to attend a "joint academy" at which they learned about what to expect during the surgery and rehabilitation, about the need to stop smoking at least six weeks before surgery, and about the importance of making sure their hemoglobin A1C was in good control.
"Over time we've seen the best outcomes in the locations that require attendance, require smoking cessation, require diabetes being under control," Stanley says. "So we now have that as a system-wide standard."
The third type of collaboration is with post-acute care providers. Traditionally, CHI hospitals in a given market discharged patients to dozens of different SNFs, some of which were better than others. Most SNFs served relatively few CHI-discharged patients and had little incentive to follow the health system's protocols for patients recovering from joint replacement surgery.
"We realized that we were spreading ourselves way too thin on the communication, the data sharing, and the care model redesign that needed to happen," Stanley says.
The health system addressed that issue by creating a continuing care network (CCN) in each of its markets. SNFs were vetted through a multistep process that included a site visit and reviews of staffing, protocols, training, therapy services, hospital readmission rates, and other factors. Those that earn a spot in CHI's preferred network are willing to support CHI's care model for joint replacement surgery, to work on quality improvement projects together, and to communicate closely to prevent avoidable hospital readmissions.
Today, each market's CCN is made up of about 10 to 20 SNFs. Although patients are allowed to choose any Medicare-approved facility, CHI encourages use of its preferred facilities on the grounds that patients are likely to fare better.
"We want to have a collaborative partner who sees the same vision and is really focused on quality of care in the entire episode," Stanley says. "We share data back and forth with them. They know what to expect of us as a hospital. We know what to expect of them as a subacute nursing facility."
Mount Sinai Health System (MSHS) worked out the care redesign needed to succeed with joint replacements in the BPCI program—and used that as a launching pad for a bundled payment contract with a single purchaser.
"This is really taking it to completely another level that goes beyond just a payment model or a clinical model," says Niyum Gandhi, chief population health officer for MSHS. "It's actually a holistic member experience, which we couldn't have done without the complementary set of insights on what the member needs."
He is referring to information from consumer focus groups conducted by the purchaser—Building Service 32BJ Health Fund—as it worked with MSHS to develop the Joint Replacement Bundled Payment Program, which started earlier this year.
The Health Fund provides health benefits to members of the Local 32BJ union, which includes property services personnel such as doormen, building superintendents, office cleaners, and security officers; it currently covers about 200,000 lives between members and their dependents. The Health Fund typically pays for about 200 joint replacement surgeries each year—and, in recent years, the tab for a single patient's care has varied from $27,000 to more than $60,000.
In 2015, MSHS conducted only 22 of those surgeries, but its new partnership is designed to make Mount Sinai an easy choice for any 32BJ member or dependent who needs joint replacement surgery. Patients have no out-of-pocket costs if they choose MSHS— and if they choose another hospital, they are responsible for the cost differential between MSHS and the other hospital.
Furthermore, the bundled payment program is designed to make the entire experience easier for patients. "We did focus groups with our members who have had total joint replacement to find out what they had struggled with, what was good about their experience, what was bad about their experience," says Angelo Dascoli, director of the Health Fund.
Administrators heard from patients who struggled to navigate the healthcare system, who had no transportation home from the hospital, and who went to a nursing facility upon discharge because they had no one to prepare meals or help them around the house during their recovery.
Local 32BJ shared that information with MSHS, and the partners worked together on how to meet patients' needs. Under the new agreement, MSHS provides a single point of contact for 32BJ patients who schedule joint replacement surgery, and a care navigator meets each patient at the health system's "joint class" for learning about preparing for—and recovering from—surgery. The navigator visits the member in the hospital to create a recovery plan, arranges for the transition to home, and is available for follow-up phone calls. For patients who require extra support, the Health Fund provides a car service to take the patient home, grocery-delivery service, or a home health aide as needed.
That spirit of collaboration, which reduces the use of costly post-acute facilities by allowing more patients to go home after surgery, extended to the financial agreement between the partners. The term "negotiation" does not really describe the process they used, Gandhi says. Rather, the Health Fund and its third-party administrator brought claims data to the discussion, and MSHS brought its cost data.
"As we looked at the numbers," Gandhi says, "we said, 'Where could we get costs down working together?' And then, 'What is the fair price to land at, so that both parties can have this in a financially stable manner?' If you're working in a typical zero-sum negotiation where each side keeps certain information for themselves and uses the information as power, you'd never get something like this off the ground."
Dascoli thinks the bundled payment partnership will hit the Triple Aim. The Health Fund is expecting significant savings, in part by lowering utilization of the higher-cost hospitals its members have used in the past and in part by improving patient outcomes and, in turn, reducing expensive complications.
"If we get prices lower than we have been paying, Mount Sinai gets a bit more money in its pocket, and our members get a quality experience, we all win on that," he says.
In 2013, Triangle Orthopaedic Associates (TOA) and BCBSNC entered into North Carolina's first bundled payment contract between an insurer and a physician-owned practice. The contract was limited to hip and knee replacement surgeries performed at North Carolina Specialty Hospital, which is partly owned by TOA.
Just three years later, 25 TOA surgeons are performing six types of procedures under bundled payment arrangements. Last year they performed more than 1,200 bundled payment surgeries in 13 hospitals across the state under four contracts, including CMS's BPCI program.
The payment model works, says Chris Zito, TOA's manager of bundled programs, because it incentivizes the use of care management. TOA employs three nurse care managers who meet patients before their surgery to help them know what to expect.
The care managers work with the patients for the entire 90-day episode, making sure they successfully transition to home or post-acute care, adhere to rehabilitation regimens, and, whenever possible, avoid emergency department visits that lead to readmissions.
"If patients have an issue, they can call the case manager and, because she is an RN, she can help the patient through most any problem," Zito says. "Patients really enjoy knowing that they have that angel on their shoulder."
While hospitals that administer value-based contracts sometimes lament the difficulty of getting physicians to cooperate, that observation goes both ways. TOA holds a BPCI contract, making it financially responsible for each patient's care, but the practice has little control over the care patients receive in hospitals. "Trying to break through with the case management and social workers at every hospital to find out their processes has been a tough fish to fry," Zito says.
He understands the hospitals' perspective: If only one orthopedic clinic is using a certain protocol, it may not be worthwhile for hospital staff to deviate from their standard processes for a small subset of patients. As bundled payments become more common—the government's CJR program is in place throughout much of North Carolina—Zito thinks hospitals will adjust their processes to support bundled payment success.
One advantage of learning to succeed in bundled payment arrangements: preparing to accept even more risk as value-oriented payments evolve.
CHI's Stanley considers BPCI and CJR to be incremental steps toward a future in which health systems will be held accountable for the quality and cost of care more broadly. For starters, CHI is looking to leverage the care models and data analytics it has developed for those federal programs to support additional value-based contracts with commercial health plans.
"And while joint replacements are a nice, easy starting point for us and for most other systems, we certainly think that Medicare and commercial payers—and frankly we—want to get into oncology and cardiovascular bundles as the next stepping-stone into overall value-based care and reimbursement," he says. "These joint replacement bundles are not endpoints in and of themselves."
A Health Plan’s Perspective on Bundled Payments
Lola Butcher writes about healthcare business and policy topics for several HFMA publications.
Interviewed for this article: Chris Stanley, MD, vice president, population health, Catholic Health Initiatives, Englewood, Colo.
Niyum Gandhi, chief population health officer, Mount Sinai Health System, New York City.
Angelo Dascoli, director, 32BJ Health Fund, New York City.
Chris Zito, manager, bundled payment joint programs, Triangle Orthopaedic Associates, Durham, N.C.
Amber Maxwell, senior strategic contract consultant, Blue Cross and Blue Shield of North Carolina, Durham, N.C.
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