NJ Bundled Payment Approach Better for Physicians than Mandatory Federal Program

New Jersey's Blue Cross Blue Shield affiliate is taking a cooperative approach to episodes-of-care contracting with orthopedic surgeons and other medical service lines, generating care benefits for patients and sustainable financing for healthcare providers.

With Medicare making many hip and knee replacement procedures subject to mandatory bundled-payment contracting, Horizon Blue Cross Blue Shield of New Jersey has created a bundled-payment offer that is far more attractive to physicians.

"Horizon actively engaged the physicians first—before initiating the program," says Stephen Zabinski, MD, a practicing surgeon at Shore Orthopaedic University Associates and co-author of a January 2015 bundled-payments report in The Journal of Arthroplasty.

"It's been a positive experience working with them," he told me.

Zabinski's Somers Point, NJ-based practice is one of five charter members of the bundled-payments program for hip and knee replacements that began at Horizon about five years ago, according to Lili Brillstein, Horizon's episodes of care program director. "It has changed the nature of the relationship. I've heard a lot of doctors say they have a lot of satisfaction with the Horizon program," she says.

She says Horizon has one of the widest arrays of bundled-payment models nationwide, including contracts for cardiology, colonoscopy, obstetrics, oncology, and orthopedics. Bundled payment for congestive heart failure (CHF) and oncology services are the newest models at Horizon. "They're all growth programs," Brillstein says.

In the journal report, Zabinski and co-author James Doran concluded: "We have been able to successfully decrease the cost of the [hip and knee replacement] episode of care in comparison to our historical averages prior to 2011. This cost reduction has primarily occurred through decreased length of inpatient stay, increased discharge to home rather than to a skilled nursing or inpatient rehabilitation facility, reduction in implant cost, improvement in readmission rate, and migration of cases to lower cost sites of service.

"Participation in the bundled payment program has resulted in higher practice reimbursement through shared savings payments. Our practice's total joint volume during this time has grown and patient satisfaction and functional outcomes have remained strongly positive."

Surgeon's Critique of CMS Bundled Payments

Flexibility is one of many advantages of working with Horizon as opposed to the Centers for Medicare & Medicaid Services (CMS), Zabinski says. "Horizon New Jersey is a smaller entity than the federal government, so it's much easier to work with them and request modifications of the program."

In particular, the surgeon says, financial components of the Horizon hip and knee replacement program are more flexible than CMS' Comprehensive Care for Joint Replacement (CCJR) model, which is set to take effect Jan. 1, 2016.

A crucial consideration for physician practices is that Horizon's bundled payment contracts cushion the financial blow of cost-outlier cases, he says. In stark contrast to CCJR, the Horizon contracts also exclude complete joint replacement for the most costly acute episodes of care, such as fall-related broken hips and bundle-budget-busting "revision" knee replacements that require implants and lengthy recovery times.

"Dealing with outliers is not addressed in the Medicare model. If you don't throw out the outliers, the government wins. … The Medicare model doesn't allow for ambulatory surgery center procedures. … The Medicare population is a bunch of different patient populations," Zabinski says, noting that an active 67-year-old with no chronic conditions is a far cry from an 87-year-old with multiple chronic conditions who needs joint replacement to improve quality of life. "What one person needs is often not the same as what another person needs."

Zabinski has several other reservations over the proposed rules for CCJR:

• Benchmarking blemishes such as a two-year historical performance standard and inadequate allowance for practices that start bundled-payment contracting at high efficiency levels. "When Medicare comes in and applies that model to me, I have nowhere to go," says Zabinski. His practice has adopted the care-redesign elements of the Horizon bundled-payment program for all patients, including preoperative patient engagement to screen patients for risk factors such as obesity and diabetes, wellness interventions to limit risk factors, and empowering physicians to quarterback care management. "Ultimately, the physician is engaged in the care of the patient more than the hospital."
• CCJR's mandatory imposition in dozens of urban markets nationwide in January is too much too fast, he says. "I don't have much of an issue with this being a mandatory program, but I think it should be phased in. It's set to go into effect January 1, 2016, and many practices are not going to be ready for it."
• Putting hospitals in the administrative driver's seat for bundled payments is an "egregious error" in CCJR. "There must be a hospital-physician co-management structure in place."

Changing the Dynamic Between Provider and Payer

For bundled payments to be successful at physician practices, "there's real transformation that has to occur," Brillstein says. Horizon urges physician practices to embrace episode-of-care payment contracting, data-sharing, and best practices for quality and care management, and to post positive clinical outcomes. "It's quite remarkable. We really are changing the dynamics between two sparring partners."

Horizon's bundled-payment contracts feature upside risk only, quarterly retrospective reporting and reimbursements, patient stratification, and efficiency-promotion measures. "Invariably, there are savings to be found," she says, noting that standardization and optimization lower costs.

Horizon's oncology bundle has a sophisticated patient-stratification mechanism out of necessity, she says. "In cancer, it can be very different if you are Stage 1, Stage 2, or Stage 3. [Cost of care also] depends on the kind of the tumor. It's biomedical stratification."

Horizon is set to launch monthly respective reporting by the end of 2015. "We're very close to it."

Finding the Triple Aim in Bundled Payments

Horizon's bundled-payment contracts for hip and knee replacement exemplify how value-based payment models can be crafted economically and benefit patients, Zabinski says.

"Patient satisfaction and quality care is aligned with cost reduction. … The better a patient is prepared for surgery, the better the clinical outcome. There is improved surgery technique and decreased complications. You can increase quality, increase patient satisfaction, and decrease costs all at the same time."

Value-based payment models have the potential to improve the historical shortchanging of U.S. patients, he says. "Our health system has been tremendously wasteful. [The healthcare industry has provided] suboptimal care at high cost. In the cases of CHF and diabetes, these conditions have not been managed the way they should be managed."

Horizon views bundled-payment contracting as a step forward for the healthcare industry and patients alike, Brillstein says. "It's more like managed care was meant to be: collaborative."