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Are bundled payments worth it? An ASC case study

Gabby WhiteBundled payments are relatively new to healthcare and the results of these payment programs have been mixed thus far. A three-year pilot program for orthopedic bundled payments across hospitals and ASCs in California was deemed a failure, but case studies of Horizon Healthcare Services and Arkansas Blue Cross and Blue Shield have shown promise. With such a mixed bag of results, how can ambulatory surgery center leaders decide whether or not bundled payments are worth the risk?  

Bundled payments have yet reach full potential — bumps along the way are inevitable — but there are ASCs that demonstrate cost-effective, successful programs. The Orthopedic Surgery Center of Orange County, in Newport Beach, Calif., has effectively run a bundled payments program since 2008.

“Our orthopedic hospital was the lead hospital in the California bundled pilot and it hasn’t failed. We continue to do bundled payment cases since the completion of the pilot, with three major payers,” says Gabrielle White, RN, CASC, executive director of ambulatory services and network development with Hoag Orthopedic Institute and OSCOC. “More accurate statement is the California bundled payment pilot/program did not deliver all that was expected, however, bundled payment still progresses at Hoag Orthopedic Institute.”

Creating the model
OSCOC has two bundled payment models: one for cash-pay accounts and one for a third-party administrator that coordinates medical tourism cases for employers. Several companies expressed interest in a bundled rate for traveling patients, so OSCOC leadership coordinated with the surgeons and anesthesia group to create the rate for a number of procedures.

"We discovered it is a payment model that made sense, is easy enough to coordinate for an ASC and the customer/patient really appreciates the total cost up front," says Ms. White.

The programs initially began with rates covering care given from admission to discharge. It has now evolved into a bundle including a 90-day warranty for joint replacement at the affiliated hospital, Hoag Orthopedic Institute. "The process is one of extreme simplicity when managing bundled cash patients to one of more complexity when working with a bundled arrangement that offers a warranty," says Ms. White.

Risk vs. reward
Bundled payments carry the risk of not covering an entire episode of care; unexpected complications may quickly exceed the bounds of a pre-set rate. But, an effective model manages risk and ensures that the final reward will be greater. Procedures that are candidates for a bundled rate are high volume and predictable. OSCOC offers bundled rates for almost all their procedures including, but not limited to total hip replacement, carpal tunnel, spine procedures and knee arthroscopy.

"Centers should know the total cost of the cases they choose and then apply a rate that incorporates their margin plus the professional fees," says Ms. White. "Bundling care into one fee encourages waste reduction in the system and maintaining high standards for the best outcomes as another measure to manage costs." Examples of OSCOC’s bundled prices can be accessed on their website at oscoc.com

Looking forward
The bundled payment conversation focuses heavily on commercial payers and they are certainly the next piece of the puzzle. "We are still waiting for commercial payers to understand the benefits of and agree to have cases as bundled cases," says Ms. White. "It is a matter of getting the insurance carriers to step outside the box and take a chance."

OSCOC has been able to launch an effective program without payer involvement. When the time comes, the surgery center will have years of cost-savings and outcomes data to demonstrate to payers exactly how bundled payments are a strategy worth pursuing. Between OSCOC and Hoag Orthopedic Institute, there have been over 250 bundled payment episodes bringing price predictability to high quality care and further adding to the value driven model.

Recreating success
Each surgery center is different, as is each market. What has worked for OSCOC may not be the perfect model for every center, but it has laid the framework that any center's leadership can flesh out and make their own. Ms. White suggests ASC leaders interested in bundled payments:

•    Know their center's data
•    Know the cost per case by each individual provider
•    Carefully select high volume, predictable procedures
•    Plan the claims management process ahead of time
•    Incorporate ideas from all parties involved and build trust
•    Foster strong communication between all provider groups
•    Educate patients
•    Create a transparent model

OSCOC has experienced a bump in patient volume due to bundled payments and has achieved high levels of patient satisfaction. Interest in bundled payments continues to grow, and despite set-backs, the concept will continue to improve. ASCs willing to take on the new payment model are poised to reap the benefits of cost-savings, strong payer relations and high patient satisfaction.  

More articles on ASC issues:
10 concerns facing ASCs heading into 2015
Colorado price transparency website to add ASC costs
Are physicians fueling the price transparency trend?

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