CALLING THE SHOTS Orthopedic surgeon Stephen Lucey, MD (far left) and his colleagues own a surgery center and oversee their own total joint bundled payments.

I'm not sure which idea scared and excited us more — opening our own surgical center, performing same-day joint replacements or forming our own management company in order to create and oversee bundled payments for our total joint cases. This was in 2015, when same-day joint replacement and the movement away from fee-for-service and toward value-based payment was just starting to take hold. Creating a system where the surgeons doing the procedures are the same ones overseeing the payments? That was almost unheard of. But the 4 of us orthopedic surgeons, Frank Aluisio, MD, Frank Rowan, MD, Matt Olin, MD, and I saw these megatrends looming on the horizon, and we wanted to get out in front of them. We formed Delta Joint Management and off we went.

Since Delta opened in August, we've performed 80 total joint surgeries. We expect to do 200 next year and keep doubling it after that.

Saving a bundle
I signed up for the BPCI (Bundled Payments for Care Improvement) initiative when it was introduced a couple of years ago. The experience gave me an insight into the world of bundled payments.

The concept of BPCI is relatively simple. Medicare sets up the fixed-price payment — also known as a bundle — that includes financial and performance accountability for episodes of care. The payment, which is based on the historic spending for the surgery, covers everything from the day of surgery through 90 days post-op. Setting up your own bundled payment system lets you and your surgeons oversee and negotiate everything, including the implant cost.

Say a patient comes in for knee surgery and Medicare offers a bundled payment of $20,000. Expenses would be paid out of that bundle — including physical therapy, the implant, the cost of surgery and more. The orthopedic group hires an outside company to "convene" the bundle, which means it would keep track of all of the spending for the bundle, including any complications that occurred following the surgery.

At the end of 90 days, if money was saved, it would be split between the orthopedic group and the company, with us — the surgeons — receiving 65% and the convener group receiving 35%.

That threw me. Why, I wondered, was I giving away 35% of that profit to a company that was doing the work I could be doing? That's when a light bulb went off. I knew how to do cost-effective total joint surgery and so did a handful of surgeons at the Surgical Center of Greensboro, which we were building at the time.

Back then, it was just a surgery center. But what if we implemented total joints? What if, for those total joints, we created our own bundled payment system that we could offer to private payers like Blue Cross Blue Shield or Aetna?

That led us to form Delta Joint Management — a relatively easy task itself — that involved only registering for an LLC. The group lets us control the bundle and negotiate all of the payments from it, including the surgery center fee, the implant cost, the surgeon fee, the anesthesia fee, home health and physical therapy.

In order to work with our surgery center, we had to find alignment with them and make sure they were on board with the bundled payment idea. This, too, was easy because we're shareholders in the center, which is owned by more than 50 surgeons and Surgical Care Affiliates. We were lucky enough to find that our surgery center, especially Jenny Graham, RN, the director of the center, worked hard to accommodate and plan our program with us. That alignment would be the biggest key to our success.

Building bundled payments
Alignment was a twofold process for our company. Apart from getting the center on board, we knew we had to get private payers to accept our suggested bundled payments, too. The way we could do that was through offering them a 10 to 20% discount on the average amount the payer spends on an episode of care for each procedure.

For example, in an inpatient setting, which is where many total joint procedures are performed, the cost of hospital fees alone — including implant costs — might be anywhere from $25,000 to $40,000. In an outpatient setting, the surgery centers fees only amount to $10,000 to $20,000. That, combined with more efficient post-operative protocols, let us offer payers a lower bundle cost.

After we determined that we wanted to offer a 10 to 20% discount for payers, we started building our bundles. Say their bundle to a hospital cost $40,000 total, including the payments for the hospital fees, surgeon, anesthesia, home health care and outpatient physical therapy. That meant we could offer the payer a bundle option worth only $32,000. That's a 20% price reduction that would still cover the cost of what their bundle with the hospital covered.

However, we also knew we had to cover our risk of post-op complications, such as DVT, stiffness or, in rare cases, infection. For a bundle that size, we could put aside around $8,000. Whatever was left over following the 90 days would be ours to run the business. We also decided to create a data analytics platform to track patient outcomes. That platform gives us a way to show payers exactly how our new system is valuable.

Negotiating the bundles with private payers has been an eye-opening experience. Once we knew what we were offering and got a lawyer, we went to some payers who looked at us like we were crazy. Frankly, they'd never had a group of surgeons offer them not only a bundled payment plan, but for outpatient total joints, no less.

We eventually signed with Blue Cross Blue Shield, who, after negotiations, liked the idea of spending less on bundled payments for outpatient care. We've agreed to terms with Aetna and we're negotiating with Cigna and United Health Care.

Getting started with total joints
The financial aspect was only one half of embarking on our outpatient total joint journey. Once we had figured out the bundles and signed on to partner with one private payer, we needed to focus on getting our center physically ready to execute total joints. When looking to implement total joints, we first had to decide what we wanted to offer. We landed on "everything" — total knee, total hip and total shoulder.

Then we had to assess our center and see what tools or devices would better help us execute total joints. For us that meant buying a Hana Bed, worth about $100,000, in order to do anterior hips. The bed helps you rotate the patient's leg, hyperextend it and support it during total hip surgery. It was a costly purchase but one that would be an investment and would make our center more appealing to patients and surgeons.

As you look at investing in devices, you also need to streamline the process. For example, in a total joint procedure in a hospital, a rep might bring 6 trays of instruments. That's not feasible in an outpatient setting, so ask the rep to bring fewer trays.

The final step for implementing outpatient total joints is forming a routine for the period of care. When a patient first comes to our facility looking for a total joint replacement, a case manager goes through a 17-question quiz with them checking for a high BMI, a history of smoking, diabetes and heart disease. All of these can be a reason to reject their request for an outpatient surgery. It's important that you remain highly selective early on in the process in order to make the transition easier on your staff and surgeons.

Much of the surgery itself is similar to the surgery in an outpatient setting, but your post-op routine will be different. In our center, the patient generally shows up about 2 hours before surgery and the operation itself lasts for 1 hour. Immediately following surgery, we send a patient to a very brief stay in recovery — about 30 minutes — then to in-house physical therapy for 1 to 2 hours. The rest of the day involves some exercises and use of the CPM machine, and the patient is generally up within 6 hours of the surgery.

The long-term goal is to send them home the same day. For now, we put them up in our overnight facility at the surgical center or, if they are from a long distance away, they and their families can stay at a beautiful hotel across the street from our center. The hotel offers various amenities for patients, like 25% off of food, $100 off of their room and a taxi service. OSM