Partnering With Healthcare Purchasers

August 10, 2016 3:16 pm

Mount Sinai Health System sought out purchasers interested in innovative payments—and landed a partner for a bundled payment contract.

Mount Sinai Health System’s first direct contract with a healthcare purchaser stemmed from its request of a payer partner.

In its dealings with Empire BlueCross and BlueShield, a major health plan in the New York City market, Mount Sinai made it clear that it wanted to move away from fee-for-service payments and fights over reimbursement rates.

“And we asked them, ‘If you find any plan sponsors that are interested in trying something new, let us know,’” says Niyum Gandhi, M.D., Mount Sinai’s chief population health officer.

Shortly thereafter, a date was arranged with leaders of the 32BJ Health Fund, which provides health benefits for the largest property service workers union in the country.

“Empire BlueCross BlueShield put us in a room with them and said, ‘Mount Sinai wants to do some novel things and you guys want to do some progressive things—let’s discuss,’” says Angelo Dascoli, Health Fund (Fund) director.

That was in March 2014. The two organizations were unfamiliar with one another, inexperienced with novel payment methods, and new to the concept of direct purchaser/provider contracting. So they spent the first few months just talking.

“As we learned more about 32BJ and the Fund, we were really excited to collaboratively design something with them,” Gandhi says. “We wanted to figure out—and they did too—how to make health care more affordable for their members through better care coordination while creating great experiences for their members.”

By the fall season, the parties began focusing on a bundled payment program for joint replacement surgeries. They spent more than a year designing the program.

In April 2016, Mount Sinai and the Fund entered into a contract designed to save money for the purchaser, create growth for the health system, and improve outcomes for patients who need hip and knee replacements.  

The program builds off the care redesign that Mount Sinai undertook when it joined the Centers for Medicare & Medicaid Services’ Bundled Payments for Care Improvement (BPCI) initiative. But Gandhi says the 32BJ program is fundamentally different because it was designed with input from Fund members who shared their joint-replacement experiences.

“This is really taking it completely to another level; it goes beyond just a payment model or a clinical model,” he says. “It’s actually a holistic member experience, which we couldn’t have done without the insights about what 32BJ members need.”

Designing the Program

32BJ Health Fund provides insurance coverage for the doormen, porters, handymen, building superintendents, office cleaners, and security officers that belong to Local 32BJ and their dependents—about 200,000 lives in total. In an average year, it pays for about 200 joint replacement surgeries. In recent years, the price for those procedures has ranged from $27,000 to more than $60,000.

Historically, only about 10 percent of 32BJ members who had joint replacement surgery chose Mount Sinai for their procedures. Thus, the challenge was to create a program that incentivized union members to opt for the health system’s services while lowering the Fund’s costs, says Lucas Pauls, director of  research and planning for the Fund.

An early step was to hold focus groups to determine what 32BJ members who had previously had joint replacement surgery liked and disliked about their experiences. “There’s no better way to learn than to listen to the customer,” Gandhi says.

The focus group findings were not necessarily intuitive. “We found that transportation sometimes was an issue because in New York City a lot of people do not have cars,” Pauls says.

“And because we have a low-income population, when some people got home, if they did not have family nearby, they may not have had enough food in the house or someone to cook for them.”

The program design team knew that if patients felt confident to go home after surgery, it would reduce the use of skilled nursing facilities. And if they had a successful transition to home care, it would reduce emergency department visits and hospital readmissions.

Thus, the bundled payment program includes several features designed to improve patient outcomes.

  • A Fund service representative who guides members through the process, explaining benefit design, making appointments, and helping to choose surgeons. Patients have a single point of contact at Mount Sinai, who facilitates communication and coordination.
  • A “joint class” to learn about preparing for surgery and what to expect during recovery.
  • A care navigator who attends joint school with patients, visits patients in the hospital to build customized rehabilitation plans, assists with home transitions and stays in contact via phone or e-mail.
  • A car service to take patients to and from the hospital, if needed.
  • Grocery-delivery services to the home after surgery, if needed.

As the program was being developed, Mount Sinai and the Fund determined which party would take responsibility for each element. For example, Mount Sinai offers the joint classes and nurse navigators, while the Fund provides transportation and home services.

“In the traditional fee-for-service model, we have collectively as payers and providers put it all on the patients to coordinate everything for themselves,” Gandhi says. “32BJ has been a great collaborator and helped us think through how to smooth all of that out. As members go through their whole experience, the goal is for them to feel like their hand is being held for all of it.”

Key components of the program design include the following.

Aligning benefit design. To make the program a success, a majority of 32BJ members who need joint replacements need to choose Mount Sinai—although historically 90 percent of the patients had opted for another provider.

Research suggests that patients’ out-of-pocket surgery expenses must be at least $400 before cost will influence provider choices. That presented a challenge for the Fund because its members have a rich benefit: No annual deductible, $100 copayment per hospital admission, low outpatient copayments, and a large provider network.

The sticks-and-carrots approach to incentivizing members to choose Mount Sinai was limited by that low level of cost-sharing. “We have very few sticks we could provide so we had to work with carrots mainly,” Pauls says. Those included the following plan design elements.

Cost incentive. No out-of-pocket costs during the bundle period for members who choose a Mount Sinai orthopedic surgeon participating in the bundled payment program.

Support services. Those services mentioned above (i.e., care navigation, transportation, home assistance).

Reference-based pricing. The Fund established a reference price, defined as the amount the Fund will pay for any total joint replacement procedure no matter where it is provided. If the price for the surgery is below the reference price, the member pays nothing for the admission and surgery. If the price for the surgery is above the reference price, the member is responsible for the difference between the price of the surgery and the reference price. However, the member’s responsibility is limited by the annual out-of-pocket maximum for in-network services, which is $5,190 for 2016.

“We are going to great lengths to make sure people who we think might be on the road to having a total joint replacement are very aware of this program, the possible benefits of being in the program, and the consequences of not being in it,” Pauls says. To raise awareness, the Fund takes the following actions.

  • Fund members who, based on their insurance claims paid within the last 24 months, appear to be potential candidates for joint replacement surgery in the future receive personal letters from the Fund explaining the 32BJ Joint Replacement program with Mount Sinai.
  • The program is publicized in the Fund’s newsletter and on its website.
  • Physicians at the Fund’s preferred patient-centered medical homes are being educated about the program so they refer patients to Mount Sinai orthopedists for joint-replacement consults.

Defining the bundle. The episode of care starts with surgery and includes all physician fees, inpatient and outpatient services, radiology, implants, durable medical equipment, post-acute care and other costs through 30 days after surgery. During that time, Mount Sinai is responsible for the costs associated with any complications, including emergency department visits and readmissions.

Identifying the surgeons. A limited number of orthopedic surgeons, all of whom are employed by Mount Sinai and participate in BPCI, are allowed to participate in the Fund bundled payment program. This ensures that all members will have surgeons who have a high volume of joint replacements. “Like lots of surgical procedures, the more hips and knees you do, the better you do them,” Pauls says.

Monitoring progress. One measure of success will be whether the rate of joint replacement surgeries remains steady.

“I think the Mount Sinai folks will not look at this as a joint replacement program, but a patient mobility improvement program, which means that something other than surgery might be the best way to help the patient,” Dascoli says. “We are monitoring how many people who go to Mount Sinai for a consult actually get surgery and how many do not to see if it is consistent with previous years.”

Beyond that, the Fund and the health system worked together on a survey to assess patients’ satisfaction with their experiences. “These surveys will allow us to determine how we can improve the program in the future,” Dascoli says.

Setting the Price

Determining the price of the bundle was more of a data analytics project than traditional price negotiations, Dascoli says.

“There really needs to be a roll-up-your-sleeves-together collaboration as opposed to negotiation when you’re working through the financials,” Gandhi says. “If you are doing what’s typical in a zero sum negotiation where each party holds certain information for themselves and uses the information as power, you will never get something like this off the ground.”

To create a program that would be financially sustainable for both the Fund and the health system, Mount Sinai and Fund leaders took the following steps.

Sharing data despite constraints. The Fund’s contract with its third-party administrator prohibits sharing its claims data with Mount Sinai. “So it was kind of a complicated back-and-forth trying to get us to a price without sharing the actual price points,” Pauls says.

Mount Sinai hired an independent actuary who used the codes that would trigger a joint-replacement bundle to identify the claims paid for all elements of the bundle, including the inpatient admission, surgeon fees, anesthesiology, and all other costs for 30 days post-surgery.

The parties then removed all the patients who would be excluded from the bundled program for various reasons and the claims for patients who were in the bundle but had unrelated services during the episode.

That allowed all parties to know what the Fund has historically paid for the bundle of services involved in joint replacement.

Analyzing the utilization patterns. The claims analysis found that about 30 percent of the Fund’s joint-replacement patients were discharged to skilled nursing facilities and about 4 percent of patients had readmissions because of complications.

Identifying opportunities for savings. Citing evidence-based care standards, Mount Sinai believed it could significantly reduce skilled nursing facility utilization and readmissions if patients had good education and post-discharge support at home.

Comparing notes. The Fund and Mount Sinai each used the data analysis and savings strategy to come up with a suggested price for the bundle. On first pass, the two were far apart. “After they looked at our data, they agreed,” Dascoli says. “It was not a contentious thing—it was just a process we had to go through.”

Determining a volume discount. If all 32BJ members who have joint replacement surgery choose Mount Sinai, it could increase surgery volume several-fold. The parties negotiated an increased discount for steering members to the bundled-payment program. “We have a set of tiers and for each tier we hit, we get a lower price for the bundle within that tier,” Dascoli says. “All in all, this became very attractive for us.”

Another key takeaway: Just because joint-replacement surgeries have been a cash-cow for health systems in the past does not mean they should be in the future. Novel payment arrangements should be designed to be financially sustainable, rather than to maximize profits at the expense of purchasers and patients, says Gandhi.

“Of course we wouldn’t have done this if we thought we were going to lose a ton of money,” he says. “It needs to be financially sustainable for the delivery system but that’s all. It needs to provide value for the member and for whoever is responsible for that member’s total cost of care. So you need to listen to them.”

Redefining Success

Negotiating contracts with purchasers, with the support of payers and TPAs, offers opportunities for health systems to innovate, but they must be open to doing so, Gandhi says.

“Each party needs to approach such an arrangement with a fair degree of humility,” he says. “I know a lot of providers say, ‘Well, we know exactly how to do this, so this is what we’re doing.’ But we learned so much from 32BJ going through this process and I hope they learned from us, too.”

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

Interviewed for this article: Angelo Dascoli, director of the Health Fund, 32BJ Health Fund, New York City.

Niyum Gandhi, MD, chief population health officer, Mount Sinai Health System, New York City.

Lucas Pauls, director of Health Fund research and planning, 32BJ Health Fund, New York City.


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