Lessons from Bundled Payment Initiatives for Anesthesiologists

A "bundled" payment covers a defined package of services delivered by two or more providers during a single episode of care or over a specific period of time. Nine out of nineteen provider-payer pairs studied by Bailit Health Purchasing, LLC have fully operationalized at least one bundled payment.  Two more pairs are conducting observational pilots and three others have embarked on developing a bundled payment program. 

The Healthcare Incentives Improvement Institute (HCI3) asked Bailit to examine the status of bundled payments in 2011, and then to update the results this year.  Overall, as reported in HCI3’s Issue Brief “Bundled Payments One Year Later: An Update on the Status of Implementations and Operational Findings—May 30, 2013,”  payer and provider pairs have successfully brought bundled payments online and are working toward making them a permanent health care financing change, although challenges remain. 

The Issue Brief illustrates both the achievements and the challenges through the example of two payers that are now expanding their bundled payment programs, Blue Cross Blue Shield of North Carolina (BCBSNC) and Horizon Healthcare Services, Inc. (Horizon) in New Jersey.  From the perspective of these health plans, the key issues are as follows:

1. Leadership commitment.  The plans’ leadership views bundled payments as creating a competitive advantage through strengthening provider alliances and lowering costs. Beyond  clinical integration, leadership seeks outcomes that include:
   1. providing a transparent methodology to compare performance across providers,
   2. better collaboration among and with all providers—within the bundled payment, and
   3. shifting performance risk to providers while the health plan retains the insurance risk. “Performance risk” is the risk that the procedure will be more difficult than usual, or the patient will experience excessive complications or require a greater intensity of services.  “Insurance risk” encompasses other potential causes of financial loss.
   
   Any bundled payment strategy will also require committed and engaged provider leadership to succeed.  Without physician buy-in, there will be no concerted effort at improving value, and without physician leaders, there will be no physician buy-in. 
   
   In the vanguard, the American Society of Anesthesiologists is developing the Perioperative Surgical Home model in which a coordinated team manages the care of surgical patients from pre-operative assessment through the post-discharge period.  “Through our work with every procedural service and patients of every age and co-morbidity, anesthesiologists are uniquely qualified to lead the PSH,” write Mike Schweitzer, MD, MBA and colleagues in The Perioperative Surgical Home Model appearing in this month’s ASA Newsletter.


2. Definition of “bundles.”  Both BCBSNC and Horizon started with episodes of care centered on knee and hip replacement surgery because those procedures are well-defined, high-volume and amenable to process redesign.  Knee and hip replacements are among the 21 conditions for which Evidence?Informed Case Rates (ECRs®) have been defined in the PROMETHEUS Payment Model.  An ECR ”is a budget for a comprehensive episode of medical care within a defined time period. It includes the prices of all covered services, bundled across all providers that would typically treat a patient for a given condition, adjusted for the severity and complexity of the patient's condition.” (HCI3.) 
   
   Eleven of the 21 ECRs are inpatient or outpatient procedures. Using the ECR Per Member Per Month Estimator on the HCI3 website for a hypothetical 60,000 covered lives, the costs of potentially avoidable complications (PACs) associated with the eleven procedures, relative to national benchmark data, exceed $700,000 per year.  (Table 1.)  
   
   PACs are the non-typical services that are paid under standard fee-for-service plans when "defects" in care occur, e.g., surgical infections. PAC rates can never be reduced to zero,  but by observing state and national PAC rate benchmarks, it is possible to identify lowest, highest and average PAC rates actually achieved, and use those as target PAC rates for potential reductions and, therefore, potential savings.
   
   Table 1.  Possible Savings from Reducing Rates (and Costs) of Potentially Avoidable Complications in a Population of 60,000 Patients.  (Data from  HCI3 ECR Per Member Per Month Estimator)

• Although anesthesiologists are responsible for only some of the potentially avoidable complications of surgery, they can use the Estimator to show other physicians, payers and hospitals the value in incentivizing improvements in care coordination.

3. Provider selection.  To achieve the greatest amount of savings, BCBSNC and Horizon seek to partner with high-volume providers.  They also use ECR Analytics software to identify practices with higher levels of potentially avoidable costs and concomitantly higher savings opportunities.
   
   Both payers, in their interviews with the Bailit research team, indicated that they assessed practices for innovative physician leaders who understood the importance of practice transformation to reducing costs


4. Data collection, analysis and sharing.  On the cost side, the payers analyzed several years’ worth of potentially avoidable claims data to develop budgets—flat-rate by procedure and practice for BCBSNC and risk-adjusted by patient for Horizon.
   
   The payers tracked quality through combinations of Joint Commission “Never Event,” readmission, Surgical Care Improvement Project (SCIP) and Hospital Consumer Assessment of Healthcare Providers (HCAHPS) data. Significantly, they both established advisory councils of participating physicians to identify and define performance measures that the plan would collect and report back to the practices. In the case of Horizon, the data collected serve as a “’toll gate’ meaning that it must be reported before any savings that results from the bundle is distributed to the providers.” BCBSNC uses appropriate CMS quality benchmarks such as the Hospital Compare rate of post-operative infection.  Additionally, BCBSNC uses PROMETHEUS Payment’s potentially avoidable complications calculations to rank providers in its tiered network product, placing providers with low PAC rates in a preferred tier.
   
   The Issue Brief makes many important points regarding data sharing:
   
   

   Both plans emphasize the importance of transparent data sharing to obtain provider buy-in, build trust, and motivate transformation. Data sharing is essential during the contracting process to demonstrate to the providers the logic and fairness of the bundle definition, the appropriateness of the budget and the opportunities for cost savings. Plan representatives report that physicians are often surprised at the total cost of care and find the data to be eye-opening. Both plans hold monthly meetings with providers to keep them abreast of claims data for contracted bundles. The data sharing has helped providers begin to build a better understanding of care provided by downstream providers and the cost of those services. Plans indicated that these monthly sessions offer participants the opportunity to discuss new practice improvement ideas and ways to better coordinate with other providers. BCBSNC’s monthly meetings focus on analyzing where care was rendered, and looking for leakage (services provided by providers not part of the bundle). The plan shares data to providers at an aggregate level and not at the CPT code level.

   
   One area on which several of the original 19 bundled payment initiatives foundered was the capability to perform sophisticated data analyses, because of the cost and difficulty of developing the necessary systems.  Horizon and BCBSNC both developed internal capabilities to perform complex claims analysis to build budgets, analyze provider care patterns, identify opportunities for savings, report bundle activities and conduct reconciliations.  The cost is substantial, but having these capabilities is indispensable.


5. Contracting.  BCBSNC espouses the need for flexibility regarding which provider services are included, the financial model, the budget amount and the contracting structure.  The plan tailors its bundles according to the participants.  “For example, if anesthesiologists are at the table, the plan includes their services in the bundled payment; if anesthesiologists are not at the table, the plan develops a financial model that excludes their services.”
   
   Horizon’s approach, described as “also very collaborative,” reviews historical data with prospective providers and develops budgets by using the ECR Analytics software.


6. Reconciliation.  Both payers have a reconciliation process in which they, and the providers, review claims to determine whether the service was included in the bundle or whether it should be paid under the standard fee-for-service plan.  The manual process is time-consuming and expensive.  The payers are now working with a claims adjudicator to automate the reconciliation process. The claims adjudicator will re-price claims and assign them to the appropriate bundle using definitions established by the plans. It can implement bundled payments that are either prospectively paid or retrospectively reconciled.


7. Patient engagement.  The payers recognize that patient agreement to use the participating providers assures more coordinated and efficient care, and they are beginning to work on patient engagement strategies.

There are many other bundled payment arrangements in operation or in the works, and not all of them are payer-driven, although payers in many markets have been the first to seize the initiative. The California Integrated Healthcare Association is running a federal government-funded three-year bundled payment demonstration focusing on six episodes of care, primarily in orthopedics and cardiology.  Last January, CMS announced that 450 providers were accepted into the BPCI Bundled Payments for Care Improvement Initiative.  There are many issues to be considered from the physician’s and hospital or surgery center perspective that were not touched upon by the HCI3 Issue Brief.  We plan to provide our readers with information on those issues in future posts.