Bundled Payments & Cost Efficiency in Surgery Centers: Q&A With Gabrielle White of Hoag Orthopedic Institute

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Gabby WhiteGabrielle White, RN, is the executive director of ambulatory services and network development at Hoag Orthopedic Institute in Irvine, Calif. Ms. White explains the growing trend of bundled payments and how this trend will affect ambulatory surgery centers.


Q: What basics should ASC leaders understand about bundled payments?

Gabrielle White: Bundled payment includes combining multiple providers' fees into one set rate requiring one payment by the payer or patient. The rate is known before treatment, thus creating price transparency.

Bundled payment can be defined as a single payment for an episode of care for a specific procedure. The inclusion criteria outline what services are included in the bundled payment rate and may, in addition, state what is excluded over a specific period of time. A bundled payment may or may not include a warranty period. The terms of a bundled payment can be negotiated.

Q: What role is bundled payment playing in the ambulatory surgery center setting?

GW: There is a limited volume of bundled payment in the ASC setting at the moment, however, that seems to be beginning to change. There is increasing attention toward bundled payment and the potential value of this payment model within the healthcare environment. In my opinion, ASCs are a great fit for bundled payment given the types of procedures being performed in the ambulatory setting. Today, some ASCs are providing bundled payment for the private pay patients or self-insured employers.

At our orthopedic ASC, we have been managing bundled payment on a small scale with self -insured employers since 2009 and additionally through an IHA-sponsored pilot with three commercial payers at the hospital [Hoag Orthopedic Institute] since 2011.

The commercial market is showing interest in the bundled payment model for certain procedures because it helps manage costs and provides increased predictability in pricing. Bundled payment in the ASC is simpler to coordinate than in the hospital since during the episode there are relatively few providers and departments needed to deliver patient care. Plastic surgery is a specialty that has used cash bundled payment option for their private pay patients for years where they offer the patient a bill for a single amount that covers the facility, surgeon, anesthesiologist and all other elements needed to perform the procedure. Based on our experience, I think bundled payment will become increasingly common, especially in ASCs if the commercial payers adopt it.

Q: How can bundled payments facilitate efficiency in ASCs?

GW: Most ASCs are highly efficient in delivering care and value. The design of the bundled payment model will drive greater awareness toward higher quality and greater cost containment, since a poor outcome that requires additional care may not be reimbursed. This drive toward value will encourage greater efficiency as the facility and the professional providers work together toward these quality and financial outcomes. The positive impact for the patients and payers is the predictability of the cost before the procedure, and then a single payment. Simplicity, transparency and predictability are the hallmarks of bundled payment.

There is a concern by some that providers may withhold appropriate care in a bundle payment model in an effort to maximize financial gain. I think that most providers do what is right and best for their patients to get the best results. Providers who take advantage for financial gain will experience the cost of their decisions. Bundled payment is driven by quality and managing waste; cutting necessary care will do the opposite and will become evident in the outcomes.

Q: What other efficiency initiatives can be used to improve cost processes in ASCs?

GW: Many things including physician preferences, a lack of standardization, costly new technologies, poor inventory management and waste of resources drive the cost of care. If we identify the waste in our products and processes, we can begin to improve managing costs. A very effective tool to reduce cost is to know your center's true cost data and to share the data with those who contribute to decision-making. This effort should include but not be limited to the surgeon, the anesthesiologist, the OR charge, RN/manager, OR staff and the materials coordinator. All of these people need to be accurately informed in order to make better decisions.  If those responsible for providing the care, especially the physicians, are not well informed, they may continue to unintentionally drive up costs. 

Ask the surgeons if the new product they are requesting will create a better outcome. Let them know what the vendor is asking for in price and how this compares to the expected reimbursement for the case. Make it a habit to have these conversations with the physicians. Transparency is critical. For example, we recently had a product introduced to some of our surgeons that would have added a minimum of $1,530 per case, creating a loss to the center of approximately $900 per case for a particular procedure. The technology is new and the vendor uses this as a reason to drive up the price.

Thankfully, our surgeons are informed and refer vendors to the surgery center management to negotiate terms and pricing before they use a new device or implant. The questions I ask are simple: does this product increase value? Is there a similar product currently on the market? Is it already on our shelves? Is the outcome that this product can create worth the added cost? Is there literature that supports this product and stated outcomes? Will the payer pay the increased amount for the new product? Can the ASC continue to provide for the particular procedure by introducing the new product? Will the vendor work with us on the price? In my example, the answers led to "no." Our physicians agreed not to introduce the product. With data and cost analysis, physicians will make informed decisions and may even help with the negotiating process. I feel it is the administrator's responsibility to know and communicate the data with the physicians.

Another initiative for ASCs to consider is the management and closing of gaps in the OR schedule. This will result in better utilization of expensive OR time and better management of staffing time and costs. Many centers are experiencing the physician's shift from private practice to the hospital-employed role. ASC volumes decline in these situations and OR time needs to be managed more actively. If morning block time surgeons are not using their entire block time, ask them to start a little later in order to close the gap between the morning and afternoon block schedules, allowing the center to better manage time and costs.  

Reduce waste anywhere you can. Always teach staff the value of reducing waste. Your staff is a critical factor in reducing costs and instilling efficiencies. Listen to their ideas. Make sure they are reminded of ways to reduce waste; it's a team effort. Department leads such as charge nurses or managers need to be responsible to help lead the culture, but it must start with the administrator. Reduce all types of waste and you will reduce costs.  

Q: How important will ideas, such as bundled payments, become as healthcare reform moves forward?

GW: Concepts like bundled payment will become an increasingly important tool to create a paradigm shift in how providers are paid and how they make decisions. By paying in this fashion, you induce alignment between all who are responsible for care during a given episode. The current fee for service model results in care silos and is opaque. This results in a total cost of care that is unpredictable for all, even for those in healthcare.

People need access to information such as quality and cost data in order to make better decisions. This information will ultimately improve care and steer patients and payers to the higher quality, higher value centers. The best ASCs will improve their quality metrics to be at or better than the national averages. These ASCs will typically be the highest value when cost is factored in as well. High volume providers often have better outcomes and in the long-term care cycle, a better outcome costs less than a poor one.

Q: What challenges do ASC leaders face when implementing new efficiency initiatives?

GW: Communication is always the greatest challenge and is critical to great leadership. To create effective change, especially change in reimbursement such as the bundled payment model, a thorough understanding of what bundled payment means and how it works is critical in communicating this change. A well thought out plan and clear, concise communication with the key providers is needed.

The bundled payment model or other efficiency changes can be as simple or complex as you want it to be. Think about the bigger picture when introducing change. Virtually every change that you make doesn't just impact one area or one provider; instead, it has an impact on many. Consider, for example, the physicians' offices, the surgical schedulers, the facility registration and revenue cycle department, the professional providers and more. There is a domino effect and if managed well the changes will be a success and result in lower cost and greater patient and physician satisfaction.

More Articles on ASC Issues:
8 ASC Administrators on Surgery Centers Remaining Competitive Post-ObamaCare
4 Core Questions to Identify Future Organization Leaders
What Makes Hudson Valley ASC Standout Today: Q&A With Clinical Administrator Diane Smith


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