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Study: Bundled-payment system for joint replacements cut cost by 20%


A study in the Journal of the American Medical Association found that bundled payments for joint replacements  can cut costs by up to 20.8 percent without hurting patients’ medical outcomes.

Researchers used Medicare claims to analyze 3,924 lower-extremity-joint replacement procedures at San Antonio-based Baptist Health System between July 2008 and June 2015. The patients took part in CMS’s voluntary Acute Care Episodes and Bundled Payments for Care Improvement demonstration projects.Among the findings:

  • The system achieved on average $5,577 in savings per joint-replacement episode.
  • During a seven-year period, Baptist Health System cut average Medicare costs by 20.8 percent for 3,738 joint replacements without complications.
  • For 204 episodes with complications, Medicare episode outlays fell an average 13.8 percent.
  • Episodes that required prolonged lengths of stay fell 67 percent.
  • Study researchers projected that if every hospital used the Baptist bundled-payment model, Medicare could save $2 billion a year.

For the study, researchers used Medicare claims to analyze 3,924 lower-extremity-joint-replacement procedures at San Antonio-based Baptist Health System between July 2008 and June 2015. The patients participated in CMS’s voluntary Acute Care Episodes and Bundled Payments for Care Improvement demonstration projects.

To read the JAMA article, please hit this link.

Trump’s HHS pick dislikes Medicare bundles program



Kaiser Health News

A recent change in how Medicare pays for joint replacements is saving millions of dollars annually — and could save billions — without impacting patient care, a new study has found. But the man whom Donald Trump has picked to be the secretary of  the Department of Health and Human Services has vocally opposed the new mandatory payment program and is likely to revoke it.

Under the new program, Medicare effectively agrees to pay hospitals a set fee — a bundled payment — for all care related to hip- or knee-replacement surgery, from the time of the surgery until 90 days after. Traditionally hospitals collect payments for many components of care and rehabilitation individually.

Tom Price, M.D., the president elect’s HHS nominee, a congressman from Georgia and a very affluent orthopedic surgeon, has actively opposed the idea of mandating bundled payments for these orthopedic operations, calling it “experimenting with Americans’ health,” in a letter to the Medicare agency just last September. In addition, the agency which designed and implemented the experiment, the Center for Medicare and Medicaid Innovation, was created by the Affordable Care Act to devise new methods for encouraging cost-effective care. It will disappear if the act is repealed, as President-elect Trump has promised to do.

The study appeared Jan. 3 in the Journal of the American Medical Association. Though one of its authors is Ezekiel Emanuel, M.D., a professor at the University of Pennsylvania who helped design the ACA, the research relies on Medicare claims data from 2008 through mid-2015, long before the presidential election.

Starting in April 2016, CMS required around 800 hospitals in 67 cities to use the bundled payment model for joint replacements and 90 days of care after the surgery as part of the Comprehensive Care for Joint Replacement program. The program had previously been road-tested on a smaller number of hospitals on a voluntary basis, which formed the focus of the research.

The study found that hospitals saved an average of 8 percent under the program, and some saved much more. Price has been skeptical that bundled payments did save money, but the researchers estimate that if every hospital used this model, it would save Medicare $2 billion annually.

The bundled payment program works like this: For some specific kinds of medical procedures, including joint replacements or some heart surgeries, the Centers for Medicare & Medicaid Services will add up the costs for the entire episode, from the hospital stay and medical supplies to the rehabilitation afterwards. If the total costs are below a target set by CMS, the hospital gets to keep the savings. If not, the hospital has to pay Medicare the difference. It’s supposed to incentivize more efficient spending and better care coordination between providers, so they can lower costs.

In practice, it seems to be working. Baptist Health System, a network of five hospitals in San Antonio, saved an average of $5,577 on each joint replacement without sacrificing the quality of care, according to the study. Baptist was an early adopter of bundled payments; it began experimenting with them in 2008. Over seven years, the hospital system has cut Medicare’s costs on knee replacements by almost 21 percent.

The savings came without impacting quality. Patients at Baptist Health System were just as likely to be readmitted to the hospital or end up in the emergency room as patients nationally. There was some indication that quality of care may be better, fewer patients under bundled payments had long, extended hospital stays.

In Price’s letter from September, he said that Medicare had exceeded its powers in imposing such bundled payments, which he said took decisions out of the hands of doctors and patients.

That doesn’t seem to be the case, according to Amol Navathe, M.D., an assistant professor of medicine and health policy at the University of Pennsylvania, and one of the authors of the JAMA study. Instead, Navathe and his colleagues suggest that the bundled payments actually fostered greater collaboration between surgeons, administrators and patients because programs could only succeed in saving money if physicians were engaged in creating standardized pathways for care.

For example, the Baptist Health System saved about 30 percent on implant costs, around $2,000 on each artificial joint, by using the least expensive medically equivalent implants as determined by the hospitals’ surgeons.

Usually, physicians are prevented from benefitting when hospitals save money because of anti-kickback laws. Waivers under bundled-payment models mean that surgeons can put in the time to find the best, most cost-effective implants, and share in some of that savings.

“It takes that extra level of effort and coordination, and proactively communicate with [patients],” Navathe said. “Preplanning, setting of expectations and communicating up-front is resource intensive, when they have the incentive to do that they were willing to expend the extra resources to make that happen.”

When bundles included care after a patient’s hospital stay, spending on rehabilitation went down 54 percent. That’s because hospitals took the time to match patients to the right level of care, Navathe said.

Patients who didn’t need to stay in a nursing home or rehab center were set up with home health care or physical therapy.

Price has objected to CMS making bundled payments mandatory, calling it an instance of federal overreach. But bundled payments only work if everyone has to participate, according to Darshak Sanghavi, M.D., the former director of prevention and population health at the Center for Medicare and Medicaid Innovation.

If hospitals can choose whether or not to participate, only the ones that are already delivering care efficiently –and coming in under CMS’s cost target — will use bundles and Medicare will constantly be paying out bonuses. The system needs to be mandatory, Sanghavi said, to pull in less efficient hospitals and give them incentive to change.

“Stopping the programs for ideological reasons I think impedes innovation in a way that is going to consign us to having really, really high costs of care that’s going to continue in the future,” Sanghavi said.

Bundled payments aren’t just for hip and knee replacements. On Dec. 20, CMS announced it would expand mandatory bundled payments to treatments for heart attacks, bypass surgery and cardiac rehab beginning in July 2017. In its waning days, the Obama administration is effectively throwing down the gauntlet to the incoming administration on bundled payments, one of its signature reforms.

An ACA payment reform success story

By JAY HANCOCK for Kaiser Health News


To understand how the health law is supposed to fix the mediocre, overpriced, absurd medical system, you could read wonky research papers on bundled payments and accountable care organizations.

Or you could look at what’s going on at Baptist Health System in San Antonio.

Under the potent lure of profit, doctors, nurses and managers at Baptist’s five hospitals have joined forces to cut costs for hip and knee replacements, getting patients on their feet sooner and saving taxpayers money.

“Everybody was aligned on this,” said Michael Zucker, Baptist’s chief development officer. “What we’ve seen is just incredible from a cost savings standpoint.”

Baptist made money doing what used to be industry heresy: reducing patients’ use of the medical system.

The hospital group made a deal with Medicare as part of an ambitious array of experiments authorized by the Affordable Care Act.

Medicare let Baptist take responsibility for the whole process of replacing knees and hips, from admission to surgery to rehab and anything else that happened within a month. (Traditionally the system, essentially tied with Methodist Health System as the region’s biggest, managed only what happens within its doors.)

Then Medicare lowered the average amount of what it pays for all that care by 3 percent, giving Baptist a lump sum for each patient getting the procedures. If the system and its orthopedic surgeons reduced costs below that price, they could keep the difference and divvy it up so long as quality didn’t suffer. If costs went up, Baptist was on the hook.

This is a purified form of the health law’s recipe to save healthcare: Get hospitals, doctors and other providers to work together. Cap their costs. Offer incentives to save and penalties for breaking the budget. Repeat.

A preliminary study of the tests at Baptist and elsewhere, overseen by the health law’s Center for Medicare & Medicaid Innovation, found substantial savings along with shorter patient stays in the hospital and lower use of expensive nursing facilities afterward.

Experts caution that even the focused program at Baptist may be hard to reproduce elsewhere. Successfully applying the model to other diseases and the entire healthcare system is an even longer shot.

Even so, policymakers have bet heavily on such arrangements as the solution to the medical-cost spiral. Medicare aims to make half its reimbursements through such “alternative payment” methods by 2018, officials said this year.

At Baptist, which is owned by Tenet Healthcare, the first step was basic financial education. Doctors are famously clueless about what taxpayers, employers and consumers have to pay for the care they prescribe.

“The public is like, ‘Wow, you guys have no idea what that costs.’ We never really did,” admitted Dr. Sergio Viroslav, a participating orthopedic surgeon.

Baptist surgeons, who select which artificial joint to use, were shocked to find out how much more some devices cost than others. Once they had a stake in the total bill, they became more discriminating shoppers.

Metal hip and knee prices started plummeting “the second the flashlight got lit on the implant makers,” Viroslav said. No manufacturer wanted to be the most expensive.

Surgeons were also surprised to learn that almost half the expense of joint replacement can come from physical therapy, home nurse visits and temporary nursing home stays after the surgery.

Dr. David Fox never paid much notice to the birthday cards that rehab nursing homes sent him. Now that the knee-and-hip surgeon knows what they were making on his referrals, “it’s no damn wonder” they were so nice, he said.

These days, Baptist doctors are likely to order home therapy rather than a nursing home stay unless it’s clearly needed. For the nursing homes they do use, they’re more likely to stay in touch, coordinate care and reduce expensive readmissions, they say.

Simply getting independent surgeons to work with their own hospital system and give it financial control took some doing.

“Hospitals and doctors don’t trust each other,” said Fox. “There’s not an orthopedic surgeon out there that trusts his hospital. You can’t find one. If you do, he’s lying.”

But at Baptist the parties met, sometimes reluctantly, to discuss how to cut costs, help patients recover quickly and apply science-based rules to recuperation.

Is Warfarin the best blood thinner for a particular patient? How much? What kind of compression stockings should be ordered to stop swelling and clots? Is a cane needed? One rubber tip? Or four?

Doctors and nurses had always asked those questions but never in such a disciplined way.

Compensating diverse caregivers to work together on an episode of treatment such as knee replacement is called bundled payment. Baptist has been through two bundled-payment experiments with Medicare.

One began before the health law was passed and focused only on costs inside the hospital, not on what happened later. That saved $284 per patient.

Zucker declined to give detailed figures on the new test. But adding savings incentives for joint-replacement and post-hospital care saved more than $1 million the first year, he said. At the same time, patients recovered more quickly, with fewer complications and resulting readmissions to the hospital, he added.

Such results mean hospitals and doctors “are thinking much more holistically” about care, not just focusing on their own roles, said Rob Lazerow, a practice manager at the Advisory Board Company who consults with hospitals on payment reform.

Baptist keeps part of the savings and shares part with the orthopedic surgeons — a bonus of up to half their surgery fee if they maintain the highest quality measures and their patients do well. The loss to the nursing homes and other post-discharge providers was their gain.

A typical surgery fee is $1,200 per knee, so hitting all the goals could generate as much as $600 more for a doctor.

“If I do 35 patients a month, all of a sudden it’s real money to me,” said Fox — potentially $21,000 a month, although no doctor maxes out the incentive on every patient.

Such “shared savings” with medical providers who were once oblivious to costs are key, said Dr. David Nash, dean of Thomas Jefferson University’s School of Population Health.

“If you change the economic incentives you will change physicians’ practice behavior,” he said.

Knee and hip replacements are relatively easy to manage. They can be scheduled. Doctors have a pretty good idea of what will happen. A more ambitious attempt at reform is trying capped, bundled payments with heart attacks, pneumonia and other conditions that might come with more wild cards.

Even more aspiring is the accountable care organization. Providers in ACO’s receive incentives — from Medicare, commercial insurers or perhaps employers — to keep large populations healthy and reduce the cost of care for every kind of ailment.

That’s a much taller order, and results have been mixed.

But what’s going on at Baptist shows what might be possible, experts said.

Standardizing procedures, avoiding overpriced hardware and coordinating care always did make sense for hip and knee replacements. Now, four decades after such surgery became routine, some hospitals and doctors seem to agree.

“That was really good that we did that,” said Viroslav. “It really helps doctors get better. It kind of forced them to look at their practice.”

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