How to develop a Bundled Payment program: The essentials Steven F. Schutzer, MD Medical Director CT Joint Replacement Institute Hartford, CT CJRI management model CJRS, LLC established 2006 12 Private practice Arthroplasty surgeons Consultant Agreement signed with St. Francis Hospital July, 2007 Manage the Arthroplasty service line (CJRI) CJRS,LLC Consulting Agreement “identify cost saving opportunities in the provision of Arthroplasty services within the Dedicated Space, and monitoring costs with respect to the Managed Services, seeking to achieve efficiencies…where consistent with the provision of high quality care.” CJRI management model: contract implications Shared risk is looked upon favorably by the OIG, but, in our model, not necessarily shared savings… e.g. if we (LLC) save SFH $$ by reducing their costs, it can be argued that we are already being paid to do so as a contractual obligation. Bundled Payment: Five essential elements Bundled Payment: Five essential elements 1. CEO that “gets it” Chris Dadlez, President and CEO, St. Francis Hospital and Medical Center Bundled Payment: Five essential elements 1. 2. 3. 4. 5. CEO that “gets it” Surgeons willing to “get it” Trust and transparency Savvy Legal Counsel Data…data…data! Bundled Payment: Other factors to consider 6. Mature service line 7. Adequate case volume 8. Medical Leadership 9. Robust quality and cost monitoring system ….clean data! What are the critical data necessary? Hospital cost/case Surgeon’s cost for service Cost data Anesthesia cost for services Cost/case for re‐admissions Re‐admission rate (30, 60 90 day) Complications (30, 60, 90 day) Outcome data Bundled Payment: how to start Detailed key definitions: initial 1. which parties involved 2. duties of each party 3. define the “bundle” or “basket of care” 4. define the time frame (EOC) Bundled Payment: how to start Detailed key definitions: secondary 5. warranty 6. cost over runs 7. best practices and EBM Bundled Payment: how to start The “Basket of Care” program at CJRI will be offered to patients under the age of 65, who are ASA class I or II (none or minimal systemic disease) and will cover all in‐patient Hospital, Surgeon and Anesthesia services including a (negotiable) 90 day warranty for surgical site complications. “Cost loss” vs. “Revenue Loss” Under traditional FFS, for surgical re‐ admissions, hospitals get paid again for filling a bed and for use of the OR (facility and implants), and Surgeons get paid again for performing a service. “Cost loss” vs. “Revenue Loss” Under risk sharing model, in contrast to traditional FFS, for surgical re‐admissions, hospital therefore lose on cost and revenue, Surgeons lose only on revenue… “Cost loss” vs. “Revenue Loss” Under risk sharing model, in contrast to traditional FFS, for surgical re‐admissions, hospital therefore lose on cost and revenue, Surgeons lose only on revenue…but not so. “Cost loss” vs. “Revenue Loss” ...need to determine COST LOSS to the surgeon for providing service for re‐admissions that would NOT be reimbursed under this new payment model. …for the Surgeon, this is our time. Surgeon’s cost First, calculate your office overhead cost/hour. Second, add cost of private Mid‐level practitioner and private case coordinator Determine your cost/hour to manage your business Surgeon’s time Initial evaluation Preoperative teaching Preoperative surgical planning Performance of procedure Post‐operative rounds Surgeon’s time Discharge planning Post‐operative office visit Post‐operative radiograph 90 day follow up care Surgeon’s cost/hour x Surgeon’s total time in hours for delivery of services for primary THA and TKA = surgeon’s base component of the package price Our Anesthesiologists were asked to undertake the same analysis to determine their base component of the package price. Cost per case: hospital History and Physical Laboratory Medical supplies (including prosthetic implants) Nursing DME Pharmacy Radiology (hips only) Physical Therapy Surgical supplies Total Bundled Payment for Primary THA and TKA Hospital cost + percent profit* PLUS Surgeon’s cost + percent profit* PLUS Anesthesia cost + percent profit* = total package price for services *same fixed percent profit for all parties Total Bundled Payment for Primary THA and TKA % of total package Hospital cost + percent profit 78% Surgeon’s cost + percent profit 16.5% Anesthesia cost + percent profit 5.5% % of total package equal to the % shared risk for cost over runs for each party “Fair market value” Based on: 1.Time and resources 2.The warranty provided to the patient or purchaser 3.The financial risk assumed by the Party 4.Current “market” reimbursement rates “Basket of Care” Agreement Highlights THIS BASKETS OF CARE AGREEMENT (this “Agreement”) is made and entered into as of the 13th day of August, 2010 by and among SAINT FRANCIS HOSPITAL AND MEDICAL CENTER, a Connecticut nonstock corporation (“Saint Francis”), THE CONNECTICUT JOINT REPLACEMENT SURGEONS, LLC, a Connecticut limited liability company (“CJRS”), and WOODLAND ANESTHESIOLOGY ASSOCIATES, P.C., a Connecticut professional services corporation (“Woodland”). BOCA: “recitals” Emphasizes the creation of new healthcare model Emphasis NOT on fees and $$ Value to patient and the HC system Switch focus from pricing to clinical integration BOCA: demonstrate clinical integration Standard/consistent clinical protocols Shared IT Shared financial risk Performance/utilization review, quality improvement…timely feedback BOCA: demonstrate clinical integration Standard/consistent clinical protocols Shared IT Shared financial risk Performance/utilization review, quality improvement…timely feedback Enhanced operational efficiencies Increased patient satisfaction/clinical outcomes Article II Utilization Review 1. 2. 3. 4. adopt/review clinical protocols Monitor compliance QI data review Annual review of cost of services and opportunities for savings 5. Utilization of shared IT for analysis of quality and cost. Article III: Authority of Parties “Joint Governing Committee” “The Parties shall establish a Joint Governing Committee which will meet monthly to review, manage and administer the “baskets of care” arrangements established by this Agreement.” Program Director‐ oversees day‐day administrative activities Article II Cash reserves (a) Operating reserve: to cover common expenses; on‐going funding by a % of total package fee (b) Claim reserve: self funded insurance pool to reimburse for cost over runs from a High Claim; on‐going funding by a % of total package fee Article II “Excess Costs” (a) Shared: allocation of cost over runs proportional to the size of the portion of package fee for such services for each party Article II “Excess Costs” (b) Not Shared: excess costs related to a Party’s failure to comply with, or deviate from, BOCA established protocols or best practices * *unless reasonable clinical appropriateness for such deviation Article II “Excess Costs” Low Claim: cost over runs less than $5000 will reduce the package fee by this amount and the allocation adjusted according to respective percent of total package. High Claim: cost over runs more than $5000 will not reduce the total package fee, but deducted from the “Claim Reserve” Article II Stop Loss Insurance Our greatest concern: a potentially devastating problem… Article II Stop Loss Insurance Our greatest concern: a potentially devastating problem… the dreaded Peri‐prosthetic infection…mandates STOP LOSS coverage for this catastrophic warrantied claim. Stop Loss coverage for catastrophic High Claims Commercial Insurers: “never heard of it” Risk Re‐insurers: “interesting but don’t know how to price it.” Premiums high. CMIC: currently negotiating a reasonable proposal. We believe this is a huge opportunity for this industry. Begs for data. Article II Duties of Parties St. Francis Hospital: mirrors those outlined in our Consulting Agreement (facilities, staff, support services, marketing, B & C etc.) Article II Duties of Parties CJRS, LLC: 1.Appropriateness for surgery 2.Perform surgery 3.Routine post‐op in‐patient care 4.Adhere to any and all guidelines and protocols Article II Duties of Parties Woodland Anesthesia Associates, PC: 1.Initial pre‐op patient review to determine eligibility for services (ASA I or II) 2.Customary Anesthesia services 3.Adhere to best practice and protocols 4.Post‐op pain management Article II: Patient Agreement and Acknowledgement Form BOC patients will execute a form which discloses clearly that services are being rendered by three separate participants but with a single package fee. Article II: Patient Agreement and Acknowledgement Form Patient responsibilities: 1. follow post‐op instructions 2. report complications to surgeon 3. seek emergency care at CJRI Article II: Patient Agreement and Acknowledgement Form Failure to comply with terms of the Patient Agreement may result in additional costs that the patient will bear… Post‐op care by non‐LLC professionals or care at other than SFH…patient may bear this additional cost. Surgeon Acknowledgement Agreement Each LLC surgeon that performs BOC surgery will participate in an in‐service that outlines in detail their specific responsibilities, the protocols/best practices, and their own personal financial risks for non‐compliance. Schedule A Clinical protocols and best practices 1. pre‐op documentation (5) 2. Intra‐op documentation (6) *approved prosthetic implant selected 3. Post‐op In‐patient documentation (4) 4. Discharge documentation (4) 5. Post‐discharge documentation (3) The “Step Ahead” Plan at CJRI To date, 5 LLC Surgeons have taken the “In‐ service,” signed the Acknowledgement Form and 5 patients have had surgery under our “Step Ahead” Plan… …four have been under insured …one is from a foreign market Schedule A Emergency Department protocols Sets forth: Within 90 day post‐op period, establishes a mechanism to determine appropriateness of additional treatment or re‐admission. Our CJRI PAc is the designated point person. The “Step Ahead” Plan For CJRI, the end game has been a re‐ alignment of incentives amongst all three Providers toward delivering the highest quality of care at the lowest cost to the purchaser. This will allow us to compete in the new Healthcare market… The “Step Ahead” Plan For CJRI, the end game has been a re‐ alignment of incentives amongst all three Providers toward delivering the highest quality of care at the lowest cost to the purchaser. This will allow us to compete in the new Healthcare market…based on DATA and VALUE. Thanks to IHA for the invitation and privilege of participating in this Summit…and thanks for your attention!