At the 11th Annual Orthopedic, Spine and Pain-Management Driven ASC Conference in Chicago on June 13, Paul Jawin, principal at Stryker Performance Solutions, discussed best practices for bundled payment contracting for orthopedics and spine services.
He began by providing an overview of the concept of bundled payments. Under bundled payments, a hospital or other facility accepts a single payment for facility, physician and anesthesia fees from payers for a certain service, and any profit above the cost of providing the service is shared among the various providers whose services have been lumped together. While the bundle generally offers a discount to payers, the bundled payment price is set at a rate that offers providers the ability to increase their payments if they can successfully work together to improve efficiency and outcomes.
Mr. Jawin then shared six critical success factors for bundled payments:
Providers may offer bundled payments through a variety of models. Medicare's Bundled Payments for Care Improvement Program offers four different models for providers: three involve retrospective payments and one involves prospective payments. The four models also differ on the range of services (pre-admission, acute and post–acute) included in the bundle. Private payers are also increasingly interested in bundled payment agreements.
Assessing opportunities, risks
Mr. Jawin then discussed how providers should assess various bundled payment opportunities. He explained that providers should look for variation and outliers, and then drive best practices among physicians and facilities. For example, one surgeon might perform a hip replacement for just over $15,000, while another surgeon's cost could be over $20,000. By identifying the differences in practices between these physicians and encouraging the higher cost surgeon to change his or her practices, as long as outcomes are maintained, a savings of $5,000 could be reaped.
There are also risks to bundled payments. Under bundled payments, the financial risk transfers to the provider. If costs are higher than the contracted rate, it is the provider's loss, unless an exception has specifically been written into the contract.
Providers also need to be aware of legal issues surrounding gainsharing and ensure their agreements are compliant with applicable law.
However, the benefits may outweigh the risks for many providers, especially those looking to improve collaboration between physicians and hospital leadership. "It gives you an opportunity to have physician leader and hospital leadership to come together," said Mr. Jawin.
He began by providing an overview of the concept of bundled payments. Under bundled payments, a hospital or other facility accepts a single payment for facility, physician and anesthesia fees from payers for a certain service, and any profit above the cost of providing the service is shared among the various providers whose services have been lumped together. While the bundle generally offers a discount to payers, the bundled payment price is set at a rate that offers providers the ability to increase their payments if they can successfully work together to improve efficiency and outcomes.
Mr. Jawin then shared six critical success factors for bundled payments:
- Be inclusive in your application process. Engage physician partners from all groups eligible for participation from the beginning.
- Physician-hospital alignment with strong physician leadership. Physicians must be aligned with the hospital in order for the two to successfully work together to bring down case costs.
- Shared vision among the hospital and physician groups.
- Targeted education and marketing to key stakeholders. Explain what a bundled payment is and what the opportunities are.
- Applied best practices in efficiency, effectiveness and cost.
- Proof of top 10 percent quality performance. The providers offering the bundle must be able to provide care that performs in the 90th percentile or above on various quality measures. If providers are unable to demonstrate high quality, there will be little interest from payers in contracting with them on bundled payments.
Providers may offer bundled payments through a variety of models. Medicare's Bundled Payments for Care Improvement Program offers four different models for providers: three involve retrospective payments and one involves prospective payments. The four models also differ on the range of services (pre-admission, acute and post–acute) included in the bundle. Private payers are also increasingly interested in bundled payment agreements.
Assessing opportunities, risks
Mr. Jawin then discussed how providers should assess various bundled payment opportunities. He explained that providers should look for variation and outliers, and then drive best practices among physicians and facilities. For example, one surgeon might perform a hip replacement for just over $15,000, while another surgeon's cost could be over $20,000. By identifying the differences in practices between these physicians and encouraging the higher cost surgeon to change his or her practices, as long as outcomes are maintained, a savings of $5,000 could be reaped.
There are also risks to bundled payments. Under bundled payments, the financial risk transfers to the provider. If costs are higher than the contracted rate, it is the provider's loss, unless an exception has specifically been written into the contract.
Providers also need to be aware of legal issues surrounding gainsharing and ensure their agreements are compliant with applicable law.
However, the benefits may outweigh the risks for many providers, especially those looking to improve collaboration between physicians and hospital leadership. "It gives you an opportunity to have physician leader and hospital leadership to come together," said Mr. Jawin.