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Bundled Payment
Methodology :
Regaining control of your specialty practice
Louis McIntyre, MD
Becker Spine and Orthopedic Conference
June 14 , 2014
Chicago, Ill
The Challenges…
Challenges….
Decreasing reimbursements
Increased regulatory burdens
Mandated IT
Auditing liability
Provider consolidation and employment/
Loss of referrals
Clinical Practice Guidelines limiting MD
decision making
LOSS OF AUTONOMY!
How to deal with the challenges
..
#1:Code properly to obtain the highest
reimbursement for what we do, both E&M and
surgical coding!
(Remember that with RAC’
RAC’s and ZPIC’
ZPIC’s around
the corner, you need to get your own “house in
order”
order” to survive audit)
How to deal
with the challenges ..
#2:Configure your group or solo practice
be efficient and attempt to control the
marketplace as best as possible
to
(Attempt to merge with other groups in your marketplace
as an “umbrella merger”
merger” to see how it goes. Only need a
common provider # and common pension plan to be
considered a merged entity for billing & collection
purposes)
How to deal
with the challenges ...
#3: Become “uniquely necessary”
necessary” as an
orthopedist perhaps being the “best”
best”
arthroscopic shoulder specialist, the best TJA
specialist or the only hip arthroscopist in your
area
Learn unique technology to
remain as a
“superspecialist”
superspecialist” in your community
How to deal with the challenges
....
....
#4: Add services unrelated to the “handshandson”
on”practice of orthopedics
Traditional ancillaries w ASC, PT, DME, MRI, OUCC
These are what have allowed orthopedic surgeons to increase
their income the last decade despite decreasing
reimbursement and can represent up to 75% of income for
some groups!
How to deal with the challenges
...
...
#5:Diversify: Try to develop some other source of
income IF we have massive reductions in our
reimbursements from routine clinical revenue and
surgical revenue e.g.
Do
IME’
IME’s, medical record reviews
insurance company referrals and service them
them
Encourage attorney and
well
Consider speaking to chiropractors. They are a great referral source
source
Try to get on the monthly calendars of your FPs meetings and let them
know what you do!
How to deal
with the challenges ...
#6: If a hospital employee,
employee, figure out a way to
negotiate your contract in order to avoid being
terminated without cause if the hospital decides you
are making too much money
Attempt to negotiate a long term,“
term,“no cut”
cut” contract
Attempt to be reimbursed on a productivity basis
(remember the average orthopedist produces 5x his salary
[net] for the hospital)
How to deal with the challenges
...
...
#7: If a hospital employee,
employee, remember that you
are the one bringing in the ancillary revenue
(ave. nationally is $2.4 million net/orthopod)
Mike McCaslin, Western Orthopedic Forum, 2011
survey
Ask for ancillary help arguing that you will be able to
increase throughput with a PAPA-C, scribe and a med
tech to enter data and do minor procedures
How to deal with the challenges
....
....
#8:Physician Hospital Collaboration: Hospitals
and Physicians are coco-dependent for clinical and
financial success. Most MD’
MD’s believe that
administrators and insurers have no clue as to the
problems that they face on a daily basis and
administrators and insurers feel the same way about
physicians.(Healthleaders 2/23/13).
Hospitals must lead with resources & all “players”
players” must
review operational and clinical programs regularly plus the
financial metrics associated with those programs
How to deal with the challenges
...
...
#9:Collect Outcome Data: Payment “shared risk”
risk”
models will be here within the next few years and
whether this is done with single large groups,
vertically integrated groups with or without
hospital association is still unknown.
Reducing cost, increasing efficiency without sacrificing
quality care as evidenced by collecting outcome data will
be critical in the future to define QUALITY…
QUALITY…..
#10: Consider “Disruptive
Innovation”
Innovation”:
..
What are the insurer’
insurer’s
thinking?
They want to form “high value networks”
networks”
which basically means good care/low cost..
Insurers are changing benefit designs to
attract employers…
employers…good care/low cost
Byproduct of ACA is that employers are
saying “you want insurance, you go to who
we tell you to go to”
to”
Thus, insurers are changing their networks
Results of this thinking is:
If you are in a private group, you
want to be at the negotiating table
with the insurers
If you are not invited & seated at the
table, “you may be on the menu”
menu”
If you are hospital employed, you
want to be as “indispensible”
indispensible” as
possible i.e. unique in what you can
do!
“Disruptive Innovation”
Innovation”:
what are private groups
doing now..
Specialty physician directed bundled
payments
PhysicianPhysician-Hospital JV’
JV’s: coco-management
agreements that make sense
Developing a hospital beyond 2010..
Bundled Payment
Define an episode
of medical care
Price the episode;
all inclusive
Mitigate risk
Control cost in the
episode/bundle
Measure outcomes
with economic and
clinical metrics
Bundled Payments
Orthopedics is well positioned to take
advantage of bundled pricing !
Elective
Procedures
Broad, predictable cost and outcomes
experience
Low complication rates
Definitive start and endpoints of patientpatientcentered outcomes: pain resolution and
functional improvement
Wide
variation in cost indicating huge
potential for savings!
Current Economics of TKA
Medicare Database
270,000 TKA in 2011
Will increase 673% in next decade
Cost varies from $20,000 to
$60,000+
Current Economics of TKA
Luft CORR 2009
Mean Episode Cost $22,545
$18,596 Inpatient
$3688 Outpatient services
$7852 Rehab inpatient
Ancillary Service Variability: 141%
Current Economics of
Surgery
Miller Health Affairs 2011
Total Procedural Cost vary 4949-130%
Greatest variability was in post acute
85% in THA
Concluded that BP methodology could
significantly reduce costs
Specialist Directed Bundled
Payments
“The treating specialist is the ONLY person
qualified to control costs”
costs”
Specialists initiate 85% of cost but only receive 6%
of payment
As of 3/31/13, 3,490 TJAs have been performed
by 21 orthopedists using bundled payments with a
commercial payer
Personal comm, SH Care Grp., 4/25/2013
Specialty MD direct bundled
payments
Several groups doing this with TJA; California,
Wisconsin, Illinois, Missouri & Minnesota
The amount is 35 to 47% < the hospital
reimbursement for the same procedure AND
ALSO includes 60 to 90 days of global care!!
MD group 100% at risk for ALL costs associated
with the procedure UNLESS negotiated with
private payer otherwise the group can super
insure itself for costs >$50K
Specialty MD directed
bundled payments
Wisconsin
of postoperative recovery areas
overnight with staffing for 24 hour stay
Femoral or adductor nerve blocks for OP pain
control (liposomal DepoFoam long acting local anes.
inj.)
Utilization
MD
owned PT and local “fitness center”
center” referral
after 1 week of PT
Physician group getting preferential referrals
from insurers as a result of cost savings
Specialty MD directed
bundled payments
In Wisconsin, BCBS and state WC is preferentially
referring patients to this orthopedic group. Their
business has 25% over the past 2 years!!
In Illinois & Missouri, the payers are offering
$1,000 cash to patients to utilize the orthopods in
this large group for their TKA procedure
Specialty MD directed
bundled payments
If the physician group is in control of the
ancillary service costs, they can render care
more inexpensively similar to the Medicare
58% of HOPD reimbursement rate for
stand alone ASCs that is currently saving
Medicare millions of dollars for OP surgical
cases!
Specialty MD directed
bundled payments
OPMI CMCS Innovation Challenge 2013
TKA in ASC Setting
3 year pilot program with Medicare to
begin in 2nd quarter of 2014…
2014….
Groups representing 405 orthopedists
have agreed to participate IF the grant is
accepted by the Medicare Innovation
Project group which has $1 billion in grant
money
CMS Innovation Challenge
OPMI Round II
TKA (27447) in ASC setting
Bundle: Day of surgery, 23 hr
observation plus 90 day global
ASC, Surgeon, Anesthesia, Implants,
Rehab, Access related to procedure
Inclusion Criteria:
BMI <35
Hgb A1c <6.5
No psych meds
No anticoag Rx
Primary
No Hx DVT
No CVA or TIA
No EtOH dependency
CMS Innovation Challenge
OPMI Round II
TKA (27447) in ASC setting
400
Surgeons
TKA
8500 eligible for the bundle
Save $1800 per case (9%)
Total savings $15,000,000+
17,000
Bundled Payment Experience
Froimson J Arthroplasty 2013
ACE Demonstration
Tulsa
ACE Demonstration
San Antonio
(1000 cases)
10%
(500 cases)
cost savings
7% increase net
revenue per case
Increase in volume
MDs received 25%
bonus all cases
10%
1%
cost savings
decrease
revenue per case
Increase in volume
MDs received 25%
bonus all but one
case
Bundled Payment Experience
Nelson L, CBO, 1/2012
Cutler & Ghosh, NEJM, 3/2012
Episode based bundled payments would
save 82% if the 50th percentile standard
were used.
Bundled Payments
The nuts and bolts
Rigorously define the bundle and all
services included
Specifically exclude nonnon-covered
service
EvidenceEvidence-based inclusion criteria to
maximize outcomes and prevent
complications
Access historical cost data for
accurate pricing
Bundled Payments
The nuts and bolts
Mitigate risk through contractual
witholds, caps and/or insurance
Develop relationships with vendors
for price and referrals
Leverage low cost sites (ASCs)
Leverage process and volume with
suppliers; most important with
implants
Bundled Payments
The nuts and bolts
IT component essential for tracking
costs and measuring outcomes
Can’
Can’t negotiate without
demonstration of both economic and
clinical value
“Disruptive Innovation”
Innovation”:what
are private groups doing
now?
Specialty physician directed bundled
payments
PhysicianPhysician-Hospital JV’
JV’s: cocomanagement agreements that make
sense
Developing a hospital beyond 2010
Joint Venture (JV)
Equity Model
Contractual Model
Shared investment and
risk
Encourages longlong-term
relationship
Shared risk less
investment
Easier to establish and
terminate
Equity Model
Create Legal Entity
Ownership % by investment %
Investment can be cash, equipment,
value of existing business (ASC) or
other assets
Ability to buy or sell assets is strictly
controlled
Contractual Model
Relationship defined by contract
TimeTime-share lease
Based on Fair Market Value (FMV) of
services provided
No joint MDMD-hospital board
MDs can participate in governance
through advisory committee
Structural JV Options
Corporate Structure
Ownership Structure
Leadership and Management
Physician Participation
JV: Corporate Structure
Tax Implications
Shareholders
Complexity
Limited Liability
Company (LLC)
Pass through IRS
No restriction on
owners
Liability is limited
JV: Ownership Structure
Will hospital/MDs take a minority
position?
Will a management company have
ownership position?
ALL capital contributions valued at
FMV
Ownership proportionate to
contribution!
JV: Ownership Structure
Cash and property contributions NOT
taxable except:
Receipt
of assets causes recognition of
GAIN
payment BACK to a contributing
partner is taxable
A
JV: Leadership
TaxTax-exempt hospitals MUST maintain voting
control over actions that could affect that
status
Size and composition
Election/Appointment of Leadership
Issues requiring supermajority vote
Specific decisions left to owners?
Dissolution?
Specific provisions to protect taxtax-exempt
status?
JV: Physician Participation
Current medical staff
Others from competing facilities
Individual MD investors
New or existing MD entity
Any combination of above
JV: Physician Participation
Requirements of MD investors?
NonNon-compete required?
Fair, marketmarket-based, legally compliant
without alienating key MDs?
Identify key MDs
How will other medical staff react?
JV: Responsibilities
Management LLC
Need medical director(s), operations
director, outcomes measurement
director
Strategic
planning
equipment and supply management
Negotiations of contracts (payer and service)
Pathway/protocol development
Case management
Quality control/improvement
Staffing,
Management Services
Fixed Reimbursement
Reimbursed hourly, FMV rate for MD
management services
Reimbursed for other administrative
salaries and expenses
Overhead allowance
Management Services
Performance Reimbursement
Patient satisfaction
Medical records compliance
Medication reconciliation
Systems measures (throughput time)
Complication reduction
Readmission reduction
Outcomes collection/measurement
Hospital Board
Management fee
Group
A
Group
B
$$
Hospital
Management Co LLC
$$
Indies
Service Line
Management Fee:
% fixed, % performance
References
1.
2.
3.
Wofford, D Messinger, S The new hospital physician
enterprise: meeting the challenge of valuevalue-based care.
Health Administration Press Chicago, Ill. 2013
Tayon, K WhiteWhite-Boggs, F Joint ventures with physicians to
provide healthcare services. In Managing healthcare
transactions. Aspatore ThompsonThompson-reuters 2012
Office of Inspector General (OIG) Department of Health and
Human Services 2012 OIG Advisory Opinion No. 1212-22
http://oig.hhs.gov/fraud/docs/advisoryopinion/2012/AdvOp
n12n12-22.pdf.
22.pdf. Accessed October 22, 2013
Bottom Line!
• Gain sharing is a program through CMS that
allow physicians and hospitals to share in cost
reduction (not revenue). After a certain threshold
is attained, the cost reduction from a base can be
shared.
• c.f. “Bundled payments for Care Improvement:
Implementation Protocol & Gain Sharing List”,
Center for Medicare and Medicaid Innovation,
August, 2013 (CMS.gov)
.
Physician Reimbursement
Possibilities
.
% of dollar savings
Payment for time worked
Payment for specific work completed
Benefits in lieu of payment :
Increased hospital space
New equipment & supplies
Hospital assistance in the form of MD
assts, NPs, ortho techs.
Recruiting costs for new MDs
“Disruptive Innovation”
Innovation”:
what are private groups
doing now?
Specialty
physician directed bundled
payments
PhysicianPhysician-Hospital JV’
JV’s: coco-management
agreements that make sense
Developing a hospital beyond 2010
Can physicians build a new
hospital under the new federal
guidelines?
Under the Health Care Reform Act of 2010, MDs
can NOT own any part of the operations
company BUT they can own;
own;
The Management Company which:
*Employs administrators, CFO, Nsg. Director.
*Physicians thus have control of fxn of hospital.
*Gets a fixed percentage of the net revenue
The Billing Company which:
Gets a fixed percentage of net revenue
Can physicians build a new
hospital under the new federal
guidelines?
Land & Building Relationship:
The operations company rents from the MDs
or an investor network purchases the
facility from the physician group.
The operations company has 100% financing
in place at 4%.
Equipment
The operations company leases from the
physicians
Can physicians build a new
hospital under the new federal
guidelines?
There is a significant “return on investment”
investment” for
the docs who enter into this relationship
Ideally, best to include primary care providers
(PCPs) as owners.
Hospital must have an emergency room to be
qualified as a non specialty hospital
(in 3 cases staffed by NP or PAC)
“Usually”
Usually” can be done in a CON or nonnon-CON
state
Conclusions
Bundled payments are being done
with commercial payers and soon
with Medicare.
Medicare’
Medicare’s goal is to abolish fee for
service in 5 years
Only real question is, will the bundle
go to the hospital or to the private
specialty group, or both?
Conclusions
Hospital/MD JV’
JV’s with orthopedists are
currently being done in multiple
communities with the blessing of both
physician and hospital attorneys without
violation of Stark II & III.
Conclusions
MD’
MD’s can become part of a management company of
a hospital owned primarily by private investors where
they will see a ROI based upon the results of the
management company.
The income derived CANNOT be tied to referrals and
thus the mgt. of the land, building, ownership of
billing co. MUST be a fixed return
Same rule applies to equipment leasing, land &
building lease, billing and mgmt. fee of employees.
Conclusions
These are all operational concepts that are
being employed in both CON and non CON
states
Conclusions
Health care spending is clearly a
major issue that must be addressed
Bundled payment mechanisms to the
physician groups must be explored as
a method to reduce expenses and
restore economic and clinical control
to the true experts in healthcare:
Physicians!
Thank You!