Taking Shape

Are bundled payments an indicator of things to come?

Many Journal of Healthcare Contracting readers – as well as members of the public – have long defined “episode of care” as the inpatient hospital stay. But the federal government is trying to nudge providers into thinking of the term differently, so that it includes pre-hospital workup, in-hospital stay (including OR), and post-acute care (including skilled nursing facility, physician office, home health, etc.).

The feds are seeking high-quality, coordinated care…at a lower cost to Medicare. And they think that the traditional approach to healthcare – what many call the “siloed” approach, in which each caregiver operates independently of the others – can’t deliver that. They want to replace it with bundled payment programs.

It’s true that current HHS Secretary Tom Price has voiced displeasure with bundled payment. Yet the concept of “coordination of care,” that is, care that spans the acute- and non-acute-care sectors, may very well be a permanent part of the healthcare picture. Bundled payment is a natural corollary.

JHC readers whose hospitals or IDNs are already involved with bundled payments have discovered that the skills they have developed to be successful – e.g., relationship-building with clinicians and department heads, product standardization, data analysis, and the willingness to address the tough issue of product utilization – are serving them well in the new environment.

What is bundled payment?
The Bundled Payments for Care Improvement (BPCI) initiative consists of four models of care under which acute-care and non-acute-care providers are incentivized to work together to efficiently provide high-quality care to Medicare beneficiaries, according to the Association of American Medical Colleges.

The Comprehensive Care for Joint Replacement (CJR) model is a mandatory bundled payment program for hospitals located in a number of metropolitan statistical areas. Hospitals that meet quality and cost thresholds for their Medicare lower-extremity joint replacement patients are eligible to receive savings. Episodes begin with a hospital admission and extend 90 days post-discharge.

On December 20, 2016, the Centers for Medicare & Medicaid Services (CMS) finalized four new models that further the government’s intention to shift Medicare payments from rewarding quantity to rewarding quality. Three of those models are intended to support providers caring for patients who receive treatment for heart attacks, heart surgery to bypass blocked coronary arteries, or cardiac rehabilitation following a heart attack or heart surgery. In addition, one new model will support clinicians in providing care to patients who receive surgery after a hip fracture, other than hip replacement.

These new payment models and an updated Comprehensive Care for Joint Replacement Model give clinicians additional opportunities to qualify for a 5 percent incentive payment through the Advanced Alternative Payment Model (APM) path under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Quality Payment Program.

(Editor’s note: In mid-March, CMS delayed the applicable date from July 1 to Oct. 1 for the expansion of the Comprehensive Care for Joint Replacement model, new bundled payment programs for heart attack and cardiac bypass surgery services, and a new cardiac rehabilitation incentive program. The agency was also seeking comments on the appropriateness of a further delay to Jan. 1, 2018.)

Vanderbilt University Medical Center has been involved in a number of bundled payment programs, including heart valve and total joint replacement, says Teresa Dail, RN, BSN, CMRP, chief supply chain officer. At press time, the medical center was preparing to embark on similar programs for spinal procedures, cardiac bypass surgery and hip fracture.

“We have had a very integrated model as to how we make decisions around contracting and product choices dating back to 2008,” she says. It helps that all of the physicians who practice at the medical center are employees. “That [integrated] strategy, as well as our attempts to get physicians to lead their peers in conversations around the clinical evidence surrounding product usage, have positioned us very well for the environment in which we find ourselves today.”

Physicians and supply chain at Vanderbilt have gotten accustomed to reviewing data about product and pharmaceutical usage, length of stay, OR anesthesia time and other performance indicators, Dail points out. “We approach all these initiatives – which are things you typically see in a bundled program – jointly. The bundled environment has affirmed the fact that we have been on the right path as to how we were approaching conversations and working within the organization.”

Dail believes that supply chain’s experience contracting on behalf of close to 40 hospitals in the Vanderbilt Purchasing Collaborative has helped supply chain take a broader view of contracting. “It is our goal to work with suppliers so that they think not just about what we’re contracting for inside our four walls, but also about how we can extend [our contracting efforts] into other environments, for example, home care or long-term-care facilities with which we might be associated. When we contract with suppliers, we are very focused on that whole continuum of care.”

For supply chain executives whose organizations might be new to bundled payments, Dail advises them to work in a multidisciplinary manner. “You have to bring your talent and expertise to the table [with the goal being to] complement the talent and expertise of everyone else’s,” she says. “If you try to tackle this on your own, you’ll find it’s impossible. You will end up focusing on product cost only.

“It’s about expanding relationships in the organization, and finding the clinical champions to work with. One of our goals in supply chain is to work with the organization to look at clinical variation and utilization.”

Minimize clinical variation
Advocate Health Care has yet to jump into bundled payment, but the Chicago-based IDN’s experience with shared-savings and full-risk programs should position it well for what lies ahead, says Tom Lubotsky, chief supply chain officer. “We’ve learned a tremendous amount from these programs, and from a supply chain perspective, they carry the same implications as bundled payment.”

Risk-based programs demand that supply chain – and everyone else at Advocate –identify and collaboratively manage high-expense areas, says Lubotsky, a member of Strategic Marketplace Initiative. For example, in the case of care for the diabetic population, “We have to ask, ‘Are the products and services we’re buying delivering the kind of value to help us more effectively coordinate and manage care for this population?’”

To succeed with risk-based programs – as with bundled payment – the IDN has to identify and minimize clinical variation, he continues. Supply chain is part of that process. “Our role is to provide insight and knowledge around the variation of products and services used on a set of the population, and to bring that forward to clinicians to help them evaluate that variation,” he says.

Advocate started down this road four or five years ago, says Lubotsky, and is still evolving. That said, Advocate’s culture today is such that supply chain can address such questions with clinicians, and talk about product preferences and the impact they have on risk-based arrangements with payers. Within the last few months, the IDN has moved from 27 spine suppliers to six. “It’s led by strong physician champions who understand economic stewardship,” he says.

‘Burning platforms’ for savings
Bundled payment programs will add a bit more accelerant to the “burning platforms” that exist today associated with driving cost-savings and value, says Gary Fennessy, vice president corporate supply chain, Northwestern Medicine. “Increasingly, supply chain will be asked to manage cost on a more longitudinal basis across the entire continuum of care,” he says.

Bundled payments are one more step toward increasing levels of consumerism in healthcare, says Fennessy. Transparency on price will naturally occur, as payers and patients will be provided pricing at one fee that covers the cost of pre-surgery workups to post-surgical care. “Bundled payments will increase the already competitive marketplace,” and with it, more pressure to reduce costs to remain competitive, he says.

For supply chain executives, these changes mean three things, says Fennessy:

  • An emphasis on gathering and analyzing data. Information on product usage and cost – not just that incurred in the hospital, but in outpatient facilities and home care – will become more important than ever.
  • Improved communication across the care continuum. “Supply chain will be far more engaged with the caregiver teams across sites,” he says.
  • A broader view of product selection. No longer will it be sufficient to analyze the cost of a product or piece of equipment in the hospital, but it will become necessary to analyze its impact on cost across the system.