Rethinking the Targets
When you think about bundled payments, chances are that surgery is what comes to mind. But the potential for savings from bundling goes way beyond the operating room.
CMS’s Bundled Payments for Care Improvement—Lower Extremity Joint Replacement (BPCI-LEJR) initiative has garnered a great deal of attention in healthcare circles. It has also required a tremendous investment of administrative resources. The final rule is 282 pages long; the official FAQs alone take up 48 pages. Alternative payment models (APMs) are inherently complicated.
Are joint replacements the best focus for value-based payment efforts? On the face of it, no one would quibble. In 2014, more than 400,000 Medicare beneficiaries received a hip or knee replacement, costing more than $7 billion for the hospitalizations alone. So the logical progression would be to scale it up and replicate it nationwide for all Medicare joint replacements, right?
Not necessarily. Administrative resources are limited and should be used wisely. So let’s consider what Medicare could save by scaling up the joint replacement initiative: about $400 million per year, according to an HFMA analysis. At first glance, that may not seem like pocket change. But relative to total healthcare spending, it’s decimal dust—that $400 million translates to 0.01 percent of U.S. national healthcare expenditures in 2016. In other words, the savings from scaling up BPCI-LEJR would be roughly equivalent to the annual revenue of a 200-bed hospital.
In contrast, consider the largely untapped opportunity to reduce unnecessary healthcare spending on chronic conditions. That’s where the lion’s share of healthcare dollars go. Among Medicare fee-for-service beneficiaries, people with multiple chronic conditions account for an astounding 93 percent of total Medicare spending. Consider just one example of the potential savings: a 13 percent reduction in the number of people with uncontrolled hypertension would save the healthcare system $25.3 billion per year in averted disease costs.
By focusing on surgical procedures, we may be missing the big picture. Yes, surgery—especially orthopedic and cardiac surgery—is expensive. Yes, there are opportunities to reduce waste. But at the end of the day, surgery is an episode, and it’s measured in days. In contrast, chronic conditions, once acquired, can last a lifetime.
It’s understandable that chronic conditions were not the first target for APMs—they pose challenges that surgery does not. Management occurs largely outside of acute care settings. And the fee-for-service system does little to facilitate the coordination among providers or support between office visits that these patients need.
HFMA’s three circles concept is based on the premise that only collaboration among hospitals, physicians, and health plans (the three circles of health care) can solve challenges like these. We must find ways to collaborate to better meet the needs of people living with chronic conditions—and to keep healthcare costs from spiraling upward in the years ahead.
Follow Joe Fifer on Twitter: @HFMAFifer
From the President’s Desk
Joe Fifer expands on his ideas in his April column.