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Bullish on Bundled Payments: How Specialists Can Benefit From the Program

By April 18, all healthcare organizations and providers interested in piloting a bundled payment program must submit an application to CMS.

Bundled payments have become one of the many poster children for healthcare reform, and the opportunities surrounding them could prove to be valuable for hospitals, physicians and post-acute providers alike.

In an April 10 webinar hosted by Becker's Healthcare, two presenters — John Cherf, MD, president of OrthoIndex, an orthopedic surgeon at the Chicago Institute of Orthopedics and a member of OrthoCentrix Solutions; and Dave Terry, CEO of Archway Health Advisors — gave a background of CMS' bundled payment program, and specifically why specialists may want to give it a try.

Why bundled payments matter
Bundled payments — defined as fixed payments for a discrete episode of care, like a total joint replacement — are not new to the healthcare industry. In 1988, CMS started the Medicare Participating Heart Bypass Center Demonstration, which negotiated Medicare bundled payments for coronary artery bypass graft surgery. By 1993, the government had seven hospital participants, and over the course of the five-year demo, Medicare saved $42.3 million on bypass patients in those hospitals.

However, bundled payments have become heavily emphasized in the new era of healthcare reform because they are now seen as a mass-scale initiative to help taper off the rise in U.S. healthcare costs.

"The economics of healthcare are front and center," Dr. Cherf said. "It's difficult to pick up a newspaper or periodical and not read about healthcare costs. The government recognized the current trends are not sustainable."

Dr. Cherf said bundled payments could offer the healthcare system the "greatest opportunity for savings, which is good for society and patients." For providers, the biggest conduit for entering the process is through CMS.

CMS and the Bundled Payments for Care Improvement program
CMS officially launched the Bundled Payments for Care Improvement program in January 2013. BPCI participants could choose four different projects: Models 1, 2, 3 and 4.

Models 1 and 4 are inpatient-specific, while Models 2 and 3 focus more on a broader continuum of care. Mr. Terry said for physicians, Models 2 and 3 make the most sense.

Models 2 and 3 will, for the first time, test bundled payments in a post-acute care setting. Model 2 includes both the inpatient stay as well as post-acute care, and the provider decides the scope of DRGs to be included. Model 3 focuses only on post-acute care, beginning when the patient is discharged from the inpatient stay. Similar to Model 2, the provider or organization chooses the DRGs.

Those models will also use retrospective payment. This means providers still receive the usual fee-for-service payment, but there is a retrospective comparison with the target price outlined beforehand. If there is a positive difference, providers can keep the savings or share those dollars with all parties involved, but if there's a negative difference, providers must owe money to CMS.

Mr. Terry said specialists, specifically orthopedic surgeons and cardiologists, have much to gain from Models 2 and 3 because many bundles focus on their episodes of care. He said of the 48 bundles, roughly 25 percent involve high-volume, high-cost orthopedic procedures like major joint replacements, and another 25 percent involve heart medical and surgical procedures.

The beauty of the bundled payment design, according to Dr. Cherf, is the ability for all providers to collaborate and share in the savings produced. "There's an opportunity for orthopedic surgeons to move from proceduralists and to take on a more managerial role, to take on some real ownership and risk and manage the continuum of care, which I'm bullish on," Dr. Cherf said.

What do actual savings look like?
Mr. Terry and Dr. Cherf presented an example, based on reviewed data, to give providers a sense of how bundled payments can tangibly save dollars.

If an orthopedic surgeon wanted to take out 10 percent of the costs associated with a particular DRG in one of the post-acute models, Dr. Cherf said the physician would look to reduce days in a skilled nursing facility by two, cut readmissions by 10 percent and slash the costs of medical devices by 10 percent — all of which he said are reasonable to accomplish. If savings to CMS totaled $2,500, half would stay with CMS and pay other overhead costs. That means per case, a physician could net $1,250. If the physician did 100 of those bundled payments per year, providers would gain an extra $125,000.

Taking charge now, before it's too late
Providers have a tight deadline to get involved with BPCI, but Mr. Terry said the right steps can be taken.

•    April 18, 2014: All interested healthcare organizations must submit a nonbinding indication of interest to CMS. Submitted this application only reserves providers' spots in the program, and providers can still back out if they decide they cannot do it later on.

•    May-July 2014: Program planning begins as all key provider partners are engaged.

•    July-October 2014: Providers select the final bundled after deep evaluations of the bundle pricing data.

•    October-November 2014: Providers execute their contract with CMS or their convening partner.

•    Jan. 1, 2015: Risk-sharing and the bundled payment program goes live.

Dr. Cherf said he's optimistic this program will benefit specialists, who can start taking more control of their continuum of care. Further, he said the whole process reminds him of advice from his father: "John, what you can't change, embrace."

"And I'd say this is the future," Dr. Cherf said. "This is a very interesting and unique and, quite frankly, good opportunity for proceduralists and specialists. Good things don't last forever, and this probably won't last forever."

To learn more about bundled payment options, contact:

Dave Terry,, Archway Health Advisors
Dr. John Cherf,, OrthoIndex

Download the webinar presentation here.

View the webinar by clicking here. We suggest you download the video to your computer before viewing to ensure better quality. If you have problems viewing the video, which is in Windows Media Video format, you can use a program like VLC media player, free for download here.

Note: View archived webinars by clicking here.

More Articles on Bundled Payments:

Why Anesthesiologists in Bundled Payment Programs Should Look to Increasing Implant Price Transparency
How to Create a Bundled Payment Model for Colonoscopy
CMS Bundled Payment Program: Orthopedic & Spine Surgeons Have Another Chance to Enroll


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