In 2010, the Integrated Health Association launched a bundled payment program for orthopedic procedures in the state that would cover commercially-insured individuals younger than 65. At the time, the program was widely accepted at hospitals across the state and stakeholders hoped it would improve quality and lower costs.
However, it didn't take long for the program to fall on its face with hospitals and health plans dropping out. The Agency for Research and Quality supported a study of the program, and concluded it there wasn't enough data gathered to determine whether the program made an impact on quality or cost.
There were several issues with the program, including regulatory delays to approve contracts and a lack of consensus about which procedures to bundle. However, the report also noted stakeholders were still interested in pursuing bundled payments. So how can they make this new model work?
That's where the experts come in — and a few of them aren't far from the large hospitals and health systems who pursued the 2010 bundled payments in California.
Hoag Orthopedic Institute in Irvine, Calif., has been offering bundled payments since 2008 to attract medical tourists and self-pay individuals, according to an article published in Becker's Spine Review. Bundled payments at the orthopedic-specialty hospital were led by James Caillouette, MD, surgeon-in-chief, and are largely considered successful. He also sat on the advisory board for the Integrated Healthcare Association's pilot project in involving several payers and was instrumental in creating an agreement between HOI, Aetna and McKesson for bundling knee and hip replacements.
"I think bundled payment could become the standard in the future," says Dr. Caillouette said in the report. "It will take some time, but there is opportunity for specialties with high volume procedures, such as knee and hip replacements, to establish bundled payments."
So how was HOI's bundled payment efforts different from the other, less successful attempts at hospitals around the state? Here are a few key differences:
• HOI is an orthopedic specialty hospital and does a high volume of orthopedic procedures; some of the hospitals participating in the IHA bundled payment initiative had a low volume of orthopedic procedures, and even fewer were a good match for the bundle.
• Patient selection was a key focus at HOI and the surgeons were able to develop a reasonable protocol for inclusion. Haggling over who would be included took a great deal of time and effort for the IHA participants, which made it difficult for specialists to proceed with enrollment.
• Dr. Caillouette and his team were able to negotiate terms with payers successfully by thinking like payers — focusing on outcome predictability with proof in the literature. The initial IHA project included six of the state's largest health plans, but three eventually dropped out.
• HOI provides staff incentives for efficiency and quality of care.
"You really need to look at procedure-specific data and understand what the highest risk factors are for postoperative complications," said Dr. Caillouette. "This should be national data — that's what payers are looking at. Everyone is mining the data and trying to offset their risk. That's what people really need to understand when they are getting into this kind of payment system."
The AHRQ report also noted ambulatory surgery centers participating in the program were high-volume centers and met the high quality, low cost goals, but payers were reluctant to send cases their way.
However, the biggest miscue in bundled payment programs may be the lack of patient engagement, according to a Health Affairs report Dr. Caillouette penned with James C. Robinson. Insurance companies have traditionally taken on the bulk of payment and outcomes risk, but now are asking physicians and hospitals to put skin in the game. While there are ways healthcare providers can control quality and cost, the patient also has significant responsibility in their medical experience.
"No one will ever reform the U.S. healthcare system without bringing the consumer along and, indeed, placing consumer choice and accountability at the very center of the reform initiative," said the Health Affairs report authors. Surgeons can perform an excellent knee replacement and hospitals provide an infection-free environment, but if the patient doesn't go to physical therapy afterwards and has poor personal health habits, the procedure may not succeed.
Aligning incentives between the payer, hospital, physician and patient is critical to bundled payment success and will become the pillars of payment models in the future. Dr. Caillouette discusses the specifics of orthopedic bundled payment development in a 2012 article, which outlines how HOI overcame several challenges in the process.
Other healthcare providers around the country are also experimenting with bundled payments with varying degrees of success. The Connecticut Joint Replacement Institute at Saint Francis Hospital and Medical Center is one example, led by Steven Schutzer, MD. The bundled payment program began five years ago to attract medical tourists, but also struggle to achieve payer partnerships. CJRI is under contract with the state-wide payer ConnectiCare for bundled payments and hopes the program will grow in the future.
"I think bundled payments are heating up as a preferable payment model for total joint replacements," said Dr. Schutzer in a Becker's Review article. "This is being fueled primarily by the large, self-funded employer groups, and, more recently, the payer community." Dr. Schutzer presented at the American Academy of Orthopaedic Surgeons annual meeting about CJRI's bundled payment program, discussing lessons learned and where he sees bundled payments heading in the future.
From the beginning, CJRI leaders had the vision to establish a registry to collect patient information and outcomes. This registry has evolved to one of the largest in the nation and is, "our principal vehicle that drives continued quality improvement, patient safety and outstanding clinical outcomes for our patients while providing the tools to run an efficient and profitable business," says Dr. Schutzer. "This data allows us to benchmark against hospitals at both the local and national levels."