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Doctors Can Still Win

Medicare rolls out new bundled payments
By Bruce Japsen

The Obama administration is shifting more Medicare dollars away from fee-for-service medicine when it comes to paying for knee and hip replacements. This puts more reimbursement at risk for doctors and hospitals.

The U.S. Secretary of Health and Human Services has proposed moving doctors and hospitals in 75 geographic areas to bundled payments including parts of Illinois. Under the plan, the hospital where the surgery takes place will be “accountable for the quality and costs of care for the entire episode of care—from the time of the surgery through 90 days after discharge.”

“By focusing on episodes of care, rather than a piecemeal system, hospitals and physicians have an incentive to work together to deliver more effective and efficient care,” HHS Secretary Sylvia Burwell said in announcing the five-year Medicare payment model for knee and hip replacements. “This model will incentivize providing patients with the right care the first time and finding better ways to help them recover successfully.”

But does this mean the doctor’s reimbursement is squeezed? Not necessarily, according to early adopters of bundled payment. If physicians and hospitals, working together, can find other ways to reduce costs and improve quality, it leaves more money for the providers depending on the hospital’s quality and cost during the “episode of care.” “It will reward providers and doctors for helping patients get and stay healthy,” Burwell said.

Those who have tested similar models, including those instituted by private insurers in the Chicago area, say doctors can win more reimbursement than in the traditional fee-for-service system. In Wisconsin, a Robert Wood Johnson Foundation-funded initiative brought costs down and left more money for surgeons essentially by going out for bid on artificial knees, making the device makers more competitive.

“Could they get all the device manufacturers together to negotiate prices?” asks

Karen Timberlake, director of Wisconsin’s Partnership for Healthcare Payment Reform and director of the Population Health Institute at the University of Wisconsin. “When you start to shift the payments, there is some money at risk and it causes different questions to be asked and causes organizations to think differently.”

The Wisconsin Partnership for Healthcare Payment worked with surgeons on ways to lower costs and improve quality for total knee replacements from the first day the patient enters the hospital for surgery to 90 days after the patient is discharged. In the Medicare proposal, the bundled payment will cover similar services 90 days after the patient is discharged.

Wisconsin providers began to save money when participating surgeons and hospitals went to all their device manufacturers, telling them that bundled payment was coming. “Many didn’t bring their manufacturers together until part of their reimbursement was at risk,” she added. “Bundled payment was a new catalyst of conversation. It prepares for bigger changes that they all need to make.”

In such a shared savings arrangement, surgeons and the hospital where the procedure is located can get extra payment from Medicare if prices go down on the devices used in the procedures. Private health insurance companies in Chicago and across the country are already moving doctors and hospitals to bundled payments with everything from knee and hip replacement to cancer care. “While we at Blue Cross and Blue Shield of Illinois do not currently have bundled payment arrangements in place, we are actively pursuing that model as part of our push toward alternative payment models, ones that align incentives with improved health outcomes, lower costs and overall better patient experience,” Opella Ernest, MD, senior vice president, chief medical officer and health care delivery at BCBSIL Chicago Medicine.

In the new Medicare model, anyone can voice support, opposition and ideas.

There is a public comment period that began July 14 and runs through mid-September. Go to:

It’s then expected that the so-called “Comprehensive Care for Joint Replacement” payment model will begin in January 2016. Among the 75 markets involved are the Illinois metropolitan statistical areas of Rockford and Decatur.

But commercial insurers say it’s only a matter of time before they go statewide with bundled payments given the significant variation they see in costs and outcomes of certain episodes of care such as hip and knee replacements. “There are many drivers of that variation, one being the fragmented, multiple providers who participate in a care episode; the referring physician, radiologist, surgeon, anesthesiologist, physical therapists, and so on,” Dr. Ernest said. “Then, there’s the broad choice of device manufacturers, types of implants from which to choose, the hospital and surgical suite costs, as well as the post-acute rehab settings and the nurses. An appropriately designed bundled payment model will align those incentives and drive accountability for improved quality, greater value and patient satisfaction.”

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