Business Advisor: The Secret to Bundled Payment Success

Bundled payment models work wonders for facilities that perform predictable, repeatable surgeries such as total joint replacements. In an industry where payment terms are often so complex even the most skilled finance staff have trouble understanding how (and why) the payer came up with its reimbursement rate, a bundled payment arrangement is refreshingly straightforward: You negotiate a single fee with an insurer that encompasses every aspect of patient care from the moment the case is scheduled until a pre-determined post-op date (most commonly 90 days). For instance, we negotiated a single fee with insurers that encompasses every aspect of care from surgery, to rehabilitation and everything in-between, up to 90 days post-op. The cost is published on our website. A total knee replacement through our EXCEL program is $24,250.

Bundled payment models let you manage the entire episode of care and also offer the ability to, in a large part, dictate costs. That means you can share any financial savings that occur when you deliver a quality outcome for less than the agreed upon fee with surgeons and other providers. Of course, it also means your facility is on the hook whenever costs of care exceed the amount in the bundle.

Surgeons excel at identifying areas where clinical importance and cost savings intersect.

With so much riding on the delivery of repeatable outcomes and the mitigation of unexpected complications, you need to lean heavily on the expertise of surgeons when developing the terms of bundled payments. After all, there is no other person on the surgical or administrative team who has the training and experience to definitively assess which elements of the care package are of value to the patient and which elements add only cost. Here are a few ways surgeons can help you establish profitable bundled payments thanks to the unique perspective they bring to the negotiating table.

• Opportunities to scale back. Surgeons can spot cost-saving opportunities other staff cannot. Consider abduction pillows, for instance. These aids, which are placed between the patient's thighs and attached to their legs via straps, are commonly used to prevent hip dislocation in post-op. Administrators see the $150 cost of the pillow as a small price to pay for preventing a hip dislocation, a disastrous outcome for any facility. But a savvy surgeon who knows the data as well as their own proficiency understands that the chance of a dislocation occurring in PACU combined with the actual effectiveness of the pillow make the line item an unnecessary expense for many patients. That $150 can really add up, and this just one example. Imagine finding incremental opportunities like this for each unique patient. Surgeons excel at identifying areas where clinical importance and cost savings intersect.
• Efficient pain control. When we started putting together our joint replacement bundle, we considered the pre- and post-op opioid dosages our patients received. The overarching question we asked was: Does this add value to patient care? Data from an internal opioid study study showed we could safely and effectively reduce prescriptions for patients, thus creating another cost-saving opportunity. Again, this question can be answered only with input from surgeons who are intimately involved in procedures and know what amount of pain patients typically experience at each stage of their care.
• Sticking to standardization. Bundled payment models work best for facilities that standardize procedures as much as possible. Successful outcomes are always the top priority, but if surgeons are willing to set aside personal preferences to create efficiencies, they should do so. Of course, that can lead to some uncomfortable situations. For instance, if your anesthesia providers administer adductor canal blocks for all total knee cases under the bundled payment arrangement, and a new surgeon wants femoral nerve blocks placed, someone from your facility needs to share that information. The best person to handle this situation is the surgeon who helped structure the bundled payment arrangement. That surgeon can calmly explain why any changes to the standardization of the procedure must be based solely on science, not physician preference.

Demand for total joints is primed to explode over the next decade, especially with CMS approving knee replacements performed in the outpatient setting this year and its expected approval of outpatient hips in 2021. Your ability to provide cost-effective care has never been more important, and bundled payments present an ideal vehicle for using funds more wisely. To get the most out of this reimbursement option, you need to lean heavily on your surgeons.

Work with a surgeon who's willing to play a primary role during the entire decision-making process. When you're negotiating with insurers about pricing, surgeons are best positioned to make the case for what should be deemed a medical necessity. When we developed our total joints bundle, we included administrators, executive leadership and surgeons during every step of the process. We met at least monthly in the beginning, and the meetings could last for a long time, so this was a major time commitment for everyone. But without our surgeons right there to spell out exactly how we defined our bundle, we would've missed out on a lot of opportunities to cut costs and maximize profits. OSM