JULY 12, 2012

Welcome to the Bundled Payment Update eNewsletter
This issue is sponsored by Bundled Payment Summit

Unintended Consequences of Steps to Cut Readmissions and Reform Payment May Threaten Care of Vulnerable Older Adults
The Health Affairs article suggests that the Hospital Readmissions Reduction Program; the National Pilot Program on Payment Bundling; and the Community-Based Care Transitions Program, which were designed to enhance care transitions for all adults, may have negative effects on patients who require long-term services. The authors recommend careful consideration of the needs of this subgroup. (Health Affairs, June 2012)

3 Considerations for Episode Length in Bundled Payments
Jonathan Pearce, Principal of Singletrack Analytics, provides a detailed analysis of the variables underlying a hospital's decision to participate in the Bundled Payments for Care Initiative (BPCI) using 30-day episodes or 90-day episodes. The analysis is helpful to anyone seeking an understanding of cost variability around episodes of care. (Becker's Hospital Review, June 15, 2012)

Physicians Should Have More Freedom to Coordinate Care, MedPAC Says
Glenn Hackbarth, Chairman of the Medicare Payment Advisory Commission, (MedPAC) said during a hearing of the House Ways and Means Committee, "To be successful, a program of care coordination has to be carefully woven into the practice environment where it occurs. It's not possible to achieve good care coordination by imposing it externally. It's not the sort of thing you can design from a distance and plug into a local health care system." These comments were directed at the fragmented fee-for-service model. "Some of the new payment models, such as the shared savings payment approach for accountable care organizations or bundled payment initiatives, can move the Medicare program toward these goals," he said, referring to a more coordinated care environment. (amednews.com, July 9, 2012)

Bundled Payments and Joint Replacement
This case study of 1,674-bed Baptist Health System in San Antonio, Texas, demonstrates the potential of both bundled payment and hospital-physician collaboration. "We had a major reduction of $2 million as a result of meetings with vendors and representatives from orthopedics and cardiology," said Michael Zucker, Senior Vice President and Chief Development Officer. Recommendations resulting from the experience at Baptist include 1) negotiate aggressively with vendors, 2) align physicians who will benefit from bundling, 3) use standardized order sets widely, and 4) lean on data registries. (HealthLeaders, June, 2012)

Former CMS Chiefs Propose SGR Overhaul that Offers Voluntary FFS Bundled Pay Option
Mark McClellan, Tom Scully, Gail Wilensky and Bruce Vladeck, all former CMS chief administrators working for Presidents from both parties, have recommended an alternative to fee-for-service physician services paid for from the savings resulting from efficiencies across all Medicare programs, not just Part B (physician services). All but McClellan replied to requests for specific recommendations. The four provided a joint letter describing the areas in which they agree. In this joint letter the four said, "Unlike current CMS demonstrations and pilots, these payment bundles should include only physician and related services, but the accounting for savings should include reduction in Part A and Part D utilization." (Inside Health Policy, July 10, 2012)

Spillover Benefits: The True Driver of Bundled Payment Profitability
The Medicare Acute Care Episode Demonstration (ACE) established that cost reduction is essential to financial profitability in bundled arrangements and that the majority of the savings are used to pay physician bonuses. The financial benefit to hospitals comes from the "...spillover effects of physicians' altered practice patterns for patients not covered under these contracts." (The Advisory Board, June 25, 2012)

In Health Care, À La Carte on Way Out: New Bundled Payments Offer Glimpse into Future
Anthem Blue Cross and Blue Shield of Wisconsin is working hard to change the way healthcare is delivered and paid for. "Think of a bundled payment like a restaurant offering a complete meal for $20 deal," said John Foley, regional vice president of Provider Engagement and Contracting for Anthem Blue Cross and Blue Shield of Wisconsin. "You know if you choose that option that you will get a great experience that includes an appetizer, entrée and dessert, and you know what it's going to cost before the bill hits your table. That's a bundled payment." According to Dr. Michael Jaeger, managing medical director for Anthem Blue Cross and Blue Shield of Wisconsin, "We're working with health care providers throughout Wisconsin to build the next generation health care system that invests in the doctor-patient relationship and promotes appropriate use of health resources. With bundled payments, the future of health care is unfolding before our eyes." (The Wheeler Report, June 27, 2012)

10 Steps to Negotiate Smart Bundled Payment Deals for Orthopedic Surgery
The Hoag Orthopedic Institute at Hoag Hospital in Newport Beach, California has enjoyed success in bundling orthopedic surgery services dating to 2008. The program currently has arrangements with Blue Cross, Blue Shield, Cigna, and Aetna. They also recently announced an agreement with Aetna and McKesson for the bundling of knee and hip replacements. This article outlines the top ten lessons they have learned from their experience to date. James Cailloutte, MD, says, "I think bundled payment could become the standard in the future." (Becker's Spine Review, June 11, 2012)

MedPAC's June 2012 Report to Congress

Medicare and the Healthcare Delivery System, MedPAC's June Report to Congress, reported positive financial results from three major Medicare care coordination demonstrations. The graphic below is a recasting by amednews.com of the chart on p. 45 of the Report. The entire 237 page Report is worth reviewing.

To update or remove your address, please click the "Unsubscribe/Manage" link below or email your request to: listmgr@HealthcareeNewsletters.com.

Bundled Payment Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, patient safety, pay for performance, comparative effectiveness, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

Keynote Address: Geisinger's Innovations and Strategies for Bundled Payments

Glenn Steele, Jr, MD, PhD
President & CEO, Geisinger Health System