How do spine and hips surgeons fare under a bundled payment system?
A recent study published in Health Affairs was the first detailed study to specifically look at back and hip surgeries and answer that question.
The authors of the study (Large Variations In Medicare Payments For Surgery Highlight Savings Potential From Bundled Payment Programs Health Affairs, 30, no.11 (2011):2107-2115), looked at variations between high and low cost hospitals for a full episode of back and hip surgical care and determined that current Medicare episode payments for certain inpatient procedures varied by 49% to 130% across the hospitals.
It is in these variations that the authors believe bundled payments can realize the biggest cost savings and which could also affect hip and back surgeons.
It turns out that it wasn’t surgeon payments that varied widely, but pre-op and post-op care. As Kevin Bozic, M.D., MBA, told us on November 16, this is an opportunity for physicians to have an impact on costs because they have substantial influence over roughly 80-90% of decisions around an entire episode of care.
Bundled Payments: Past, Present and Future
Before diving into the specifics of the bundled payment study, we need a little history and background on the subject.
Bundled payments, also known as episode-based payments, reimburse health care providers (such as hospitals and physicians) on the basis of expected costs for episodes of care. It has been described as a middle ground between fee-for-service reimbursement (in which providers are paid for each service delivered to a patient) and capitation (in which providers are paid a lump sum per patient regardless of how many services the patient receives).
The fee-for-service system has been blamed for rewarding volume of care instead of quality.
The idea of bundled payment reaches back to the mid-1980s when Medicare’s hospital prospective payment system using diagnosis-related groups was put into place. Some believed the new payment system caused hospitals to dump patients into skilled nursing facilities more quickly than appropriate to save money. It was then suggested that Medicare bundle payments for hospital and post hospital care. But that was never done.
In 1984 The Texas Heart Institute began to charge flat fees for both hospital and physician services for cardiovascular surgeries. The Institute claimed that it was able to maintain quality care while lowering costs. The Institute’s flat fee for surgery was significantly lower than the average Medicare payment for the procedure.
Currently, the Centers for Medicare and Medicaid Services (CMS) has initiated the Medicare Acute Care Episode demonstration project, which involves a single payment for both Part A and Part B services for beneficiaries undergoing a variety of orthopedic and cardiac inpatient procedures. The project is scheduled to begin next year.
Under one model of the pilot project, physicians and hospitals would split a single payment—determined prospectively—for an inpatient episode, such as a hip replacement, that would include post discharge services. The hope is that hospitals and physicians will work together more closely to coordinate a patient’s care after discharge so that the patient will not bounce back as a readmission several weeks later.
The results of the study published in Health Affairs indicate that this model offers the best opportunity to save costs. Two of the CMS bundled payment models focus on inpatient stays, a third involves postdischarge services only, and a fourth combines inpatient and postdischarge services. The earliest a group participating in the project could get started with the first inpatient-only model in January 2012, said Richard Gilfillan, M.D., acting director of the CMS Innovation Center. The other three models require more analysis and would not become active until later in 2012.
In the future, The Affordable Care Act requires a plan to reform Medicare payments for post-acute services, including bundled payments.
Miller Study
Now back to the study led by David Miller, M.D., MPH, an assistant professor of urology at the University of Michigan Medical School.
Miller and five coauthors found that post-discharge care was the leading cause of payment differences among patients receiving hip replacement surgery or back surgery, accounting for 40.7% to 85.2% of the variation, depending on the kind of surgery. Physician services only accounted for 8.6% to 12.8% of the variation among surgeries.
Data Source: Study led by David Miller, M.D., MPH / Graphic created by RRY Publications, LLCThe authors studied Medicare claims for four surgeries (back, hip, colectomy and coronary artery bypass grafting) from January 2005 through November 2007. They tallied payments for hospital, physician, and postdischarge care from the date of admission to 30 days after discharge. Excluded from the analysis were patients enrolled in Medicare managed care plans, those younger than age 65 years or older than age 99 years, and patients not enrolled in both Part A and Part B of Medicare at the time of the procedure.
The average Medicare payments were $20, 807 for elective hip replacement and $26, 540 for back surgery.
David J. Miller M.D., Ph.D.
Source: www.med.umich.eduHospitals were ranked according to total episode payments and assigned to five groups, or quintiles, adjusting the results for price, differences in demographic characteristics, comorbidity, and illness severity. After these adjustments, payments for hospitals in the highest-cost quintile were still 10% to 40% higher than those for hospitals in the lowest quintile, depending on the procedure. The biggest difference dollar-wise between the top and bottom hospitals was $7, 759 for back surgery.
“Intentional differences in payments attributable to such factors as geography or illness severity explained much of this variation, ” wrote the authors.
“But after adjustment for these differences, per episode payments to the highest-cost hospitals were higher than those to the lowest-cost facilities…. Postdischarge care accounted for a large proportion of the variation in payments, as did discretionary physician services, which may be driven in turn by variations in surgeons’ practice styles.”
Postdischarge care for hip replacement accounted for a greater share—85%—of the difference in total payments to hospitals in the first and fifth payment quintiles than for any of the other procedures, according to the Miller study. Physician services variations ranged from 9% for hip replacement to 13% for back surgery.
“Sizable Savings for Payers”
“Our study suggests that bundled payments could yield sizable savings for payers, although the effect on individual institutions will vary because hospitals that were relatively expensive for one procedure were often relatively inexpensive for others. More broadly, our data suggest that many hospitals have considerable room to improve their cost efficiency for inpatient surgery and should look for patterns of excess utilization, particularly among surgical specialties, other inpatient specialist consultations, and various types of postdischarge care.”
Kevin Bozic, M.D., MBA
Bozic, Chair of the American Academy of Orthopaedic Surgeons Healthcare Systems Committee, told Medscape Medical News that the Miller study shows that there is “significant variability in the types of resources that patients utilize…. Some are under the control of the physician, and some are under control of the patient.”
He said factoring a surgery patient’s living status into discharge plans is critical for both quality of care and cost control.
“Let’s say a patient lives alone in a walk-up apartment where there is no elevator. If you can come up with a plan to get him or her up and down the stairs, and have someone provide meals, and other home services, you might be able to keep the patient out of a post–acute-care facility, which would drive up costs, ” he told Medscape.
He said physicians should look at every step of patient care to determine whether it adds value.
“If we routinely order a lab test, and it doesn’t change how we manage the patient, we should eliminate it, ” he said. “But don’t eliminate it just on the basis of cost. You’ll end up cutting corners and potentially compromising outcomes.”
Shifting Power
Cutting corners or skimping on care to save money is a concern raised as physicians and hospitals stand to gain financially from the cost savings associated with a bundled payment. That’s where defining best practices comes in, Bozic told OTW.
The University of Minnesota’s spine chief, David Polly, M.D. told OTW that physicians in this system will no longer be looking at what’s best for a particular patient, but will be making decisions about a patient group. Bozic agreed with that assessment.
Polly and Bozic also agree that the bundled payment system shifts risk from payers to providers for managing the costs associated with an episode of care for specific procedures. But they see the trade-off of more control over managing the care of the patient.
“Episode of care payments offer orthopaedic surgeons a tremendous opportunity to control their own destiny in terms of their future reimbursement, ” said Bozic.
Having more power to manage a patient’s care within economic realities is the carrot in a health care system that is increasingly using the stick to impact physician practice. But as the Miller study shows, the cost savings in a bundled pay system that looks to close the gap in variances between high cost and low cost hospitals are likely to come from post-op care.
