Becker's Hospital Review

47 Executive Briefing: Practicing Orthopedics in a Bundled World Sponsored by: F rom the vantage of an orthopedic surgeon, healthcare in the U.S. has seemingly been experiencing some volatile shifts over the past five to 10 years as it relates to three large ar- eas: practice overhead (Meaningful Use, medical liability costs, Stark Law, etc.), physician reimbursement trends (30 percent drop from 1992 to 2010, or 68 percent when factoring the inflation differential), and most importantly the Patient Protection and Affordable Care Act. In taking a deeper look at the PPACA, one can see it has four key components. First, it extends coverage to Americans with- out healthcare coverage with associated mandates and employ- er penalties if the coverage is not offered to employees. Second, exchanges are utilized in states to achieve expanded coverage. Third, the costs of this extended healthcare coverage are basically subsidized by increased taxes and decreased payments to provid- ers. Fourth, financing these additional expenses occur secondary to the increased taxes and reduced provider payments as a result of the PPACA. Obama's 2016 budget results in a decrease of $400 billion to Medicare and Medicaid over the next 10 years with an in- crease in Medicare premiums beginning in 2019. As Sylvia Burwell, the Health and Human Services Secretary stated in late January, 30 percent of Medicare payments must be made through alterna- tive payment models by 2016 and 50 percent by 2018. Eventu- ally, by 2020, 100 percent of all Medicare payments will be made through either ACOs or bundled payments. Currently, there are approximately 68 million Medicare and Med- icaid enrollees, which account for approximately 22 percent of the U.S. population. This dramatic shift in funding will drive the need for changes in behavior for orthopedic surgeon practices to remain successful. Clearly, patient-centered care, along with value-based contracting, will become the standard of patient care delivery over the next decade. Furthermore, insurers will, and are, defining quality as "outcomes divided by cost," so it will be critical for orthopedic surgeons to understand that they must begin col- lecting outcomes and reducing cost of care so the payers can determine "quality." Winds of change As Charles Darwin once said, "It's not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change." It's not easy for an orthopedic surgeon to embrace change — it's simply not in our nature to do so — but those who do become very successful, both clinically and financially. "Disruptive innovation" is a change that creates a different market or value that disturbs an existing market or value. This "disruption" may eventually displace the previous market for a product or tech- nology. Prior disruption included traditional ancillary services, such as ambulatory surgery centers, specialty hospitals prior to 2011, MRI ownership, physical therapy and durable medical equipment. More recent disruption includes participating in bundled payment initiatives with or without a hospital partner, developing gain-sharing agreements with the hospital, physician-hospital joint ventures and co-management agreements, and formation of umbrella mergers to foster accomplishment of all of the above. Bundled payments and episode of care: A new view Bundled payments are defined as a single payment to a provider organization without contingency payments, which include the hospital length of stay (facility fee plus readmissions), profes- sional fee, post-discharge services and implant costs. Bundled payments date back to 1984 when a group of cardiologists of- fered a global fee for coronary artery bypass. Since then, the "Pro- metheus" project, the Acute-Care Episode project, the Bundled Payment Care Improvement Initiative and the Medicare Shared Savings Program have all illustrated methods of cost containment for a single episode of care without reducing quality. In taking a deeper look at the BPCI, there are four distinct models: • Model 1 is a retrospective payment model for the acute inpa- tient hospital stay. • Model 2 is a retrospective bundled payment model for the inpatient stay plus 30 days following discharge, including those hospital services related to the episode anchor such as readmission services, long-term care services, physical therapy, DME and other applicable services. • Model 3 is a retrospective bundled payment model for post- acute care without the acute inpatient hospital stay. The epi- sode begins on the date post-acute services are initiated and the episode continues through at least 30 days. • Model 4 is the prospectively administered bundled payment for hospitals and physicians for the acute inpatient hospital stay only. Thus, CMS makes a single bundled payment to the hospi- tal covering all furnished services. Physicians and surgeons are paid by the hospital out of the prospective bundled payment. Bundled payment programs: A brief "how to" Specific elements are important to initiate a successful bundled payment program. First, propose an improved value proposition, which is basically the successful delivery of a solution for a painful joint. Second, define who the market is by attempting to standardize the process of care. Surviving the 'New Normal' for Orthopedic Practice in 2015 By Jack M. Bert, MD, Orthopedic Surgeon with Minnesota Bone & Joint Specialists

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