Bundled Payments Robert W. Kottman, MD, FACEP The Future of Physician Reimbursements in an Era of Reduced Payments by Nearly Everyone

Reason for Bundled Payments Bundled payments Global payments for a given episode of care Allows for “gainsharing” of savings among Payer, Patient, Hospital & Physicians (Providers) Alleged reason “To provide more efficient, higher quality care” Real reason Save money for third party payers

Medicare ACE Demonstration Jan CMS announces 3 year “acute care episode” demonstration project 5 sites in Texas, Oklahoma, New Mexico and Colorado Global payments (to Hospital) for certain cardiovascular and orthopedic services Hospital responsible to pay physicians and other providers

Selected Hospitals for ACE Texas—Baptist Health System –San Antonio Colorado—Exempla Saint Joseph Hospital— Denver Oklahoma—Hillcrest Medical Center-Tulsa New Mexico—Lovelace Health System-- Albuquerque

Details of ACE Project Hospitals and physicians jointly develop ”protocols” that reward efficiency and quality while standardizing care and reducing costs ACE Demonstration Project covers “acute care” while future demonstration projects to include “post-acute care”, i.e. rehab, physician office visits, etc.

ACE Project Hospitals convince physicians to “partner” with Hospital in achieving Medicare quality and cost goals Development of “care protocols” is key Medicare receives 50% of any “cost savings” while other 50% is divided according to an agreement between hospital and physicians

ACE Project Example from Hillcrest Medical Center in Tulsa Physicians receive a “bonus payment” of up to 25% of their fee-for-service payment rates if they follow “clinical protocol” in at least 98% of their cases Physicians still receive their standard payment from Medicare—but Hospital is Payer rather than Medicare

Specifics of ACE Competitive bidding by hospitals 28 Cardiac and 9 orthopedic DRGs “Gainsharing” to incentivize providers Medicare receives 50% of “savings” Medicare beneficiaries to receive 50% of Medicare portion of “savings” Other half of “savings” goes to hospital to distribute to “providers” as well as hospital

Example of “Gainsharing” DRG 470 Major Joint Replacement of Lower Extremity (Medicare Payments) Before ACE: Surgeon: (Includes 20% Co-Pay) $1500 Hospital: $10,400 Patient: $0

“Gainsharing” -- DRG 470 With ACE: Surgeon: $ up to $ 375 (25%) from lower cost Hospital: $10,400 –($600 to CMS) + rest of cost savings after MD share Patient: $300 (up to 50% of CMS savings) Medicare: $300 (50 % of Medicare savings)

Example of Gainsharing $2,000 in cost savings achieved CMS gets $1,000 Patient receives up to $500 out of CMS share Hospital splits $1,000 with surgeon according to agreement (25% to Doc and 75% to Hospital) Doc gets $250 and Hospital gets $750.

Physician Benefits Exempla Saint Joseph Hospital in Denver encourages physicians to participate in ACE project through: Bonus payments—agreed upon by both parties Hospital pays physician claims within 15 days vs. average 45 days for Medicare

Ways to Save $ in ACE Hospitals working with physicians to reduce costs through: Use of “clinical protocols” Reducing Length of Stay Reducing costs of “devices”, i.e., orthopedic prosthetics, cardiac stents, etc. Reduce surgical supply costs of other products

Ultimate Cost Reduction Goal In second demonstration project, cost savings to be achieved not only from reduced hospital and physician costs but by “Better coordinating care across multiple providers and sites” Coordination of Care requires an “Integrated Delivery System”—in which data from acute care and post-acute care providers is key

Integrated Care Delivery Promoted by “Patient Protection and Affordable Care Act” (Obamacare) PPACA desires “arrangements that hold providers accountable for managing care of an entire population”

ObamaCare Creates a 5 year Medicare pilot to test bundled payments for a wider array of services than just orthopedic and cardiovascular “selected services” Includes acute care and post-acute care Providers must bid to participate—offering Medicare percentage discounts from fee-for-service pricing Pilot to begin January, 2013

Bundled Payments and Hospital- Based Physicians In the future, bundled payments will likely involve all hospital –based physicians as well as inpatient physicians Possible bundled payments for hospital outpatient services alone Commercial insurance companies expected to experiment with bundled payments

Keys for Emergency Physicians In order to negotiate successfully with hospitals under a “bundled payment” system: Doctors must know their costs Costs of physician services, costs of lab tests, imaging studies and pharmaceuticals ED physician groups must have someone designated to help develop “clinical protocols” in coordination with hospitals and also skilled in payment negotiation—i.e. possessing financial “savvy” and knowing costs for your services