Laying the Foundation for Bundled Payments in Tennessee

January 14, 2014
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Earl Anderson, executive director of Tennessee Orthopaedic Clinics in Knoxville, discusses bundled-payment contracting development
Laying the Foundation for Bundled Payments in Tennessee

Last autumn, Earl Anderson, executive director of Tennessee Orthopaedic Clinics, a 23-orthopedic-surgeon group based in Knoxville, Tennessee, presented at an event held in Nashville, and sponsored by the Nashville-based Southwind Company, a division of The Advisory Board Company, based in Washington, D.C. Anderson presented on the very important emergent topic of bundled-payment contracts. He served as a panelist for a discussion entitled, “Inside the Medicare Bundled Payment Initiative.”

Anderson, who has more than 25 years’ experience working in the field of orthopedics, both as a clinician and as an administrator, has helped Tennessee Orthopaedic Clinics (TOC) more than double in size. He spoke late last fall with HCI Editor-in-Chief Mark Hagland regarding his organization’s path forward in the direction of bundled-payments contracting, which is expected to go live sometime in 2014. Below are excerpts from that interview.

Tell me a bit more about Tennessee Orthopaedic Clinics as an organization?

We’re an independent, single-specialty practice. We have 27 doctors, mostly orthopedists. We also have a full staff of mid-level practitioners and others.


Earl Anderson

How many are orthopedists?

In our group of doctors, 23 are orthopedic surgeons, and the rest include a few podiatrists, a family practice physician specializing in workers’ compensation, and a physiatrist. We have over 200 employees altogether.

What level of patient volume does your group have?

We have about 10,000 patient visits per month, and we do about 800-900 surgical procedures per month, so over 10,000 procedures per year.

With regard to the topic of the Advisory Board Company event, is your organization a participant in the Medicare bundled payments program?

We are not. We had applied with our hospital partner, but backed out at the last minute, primarily because we didn’t feel we had the data to make it work. That said, we’re involved in structuring some other projects now.

Do you have any live contracts yet?

Not yet; we probably will sign our first contract sometime in the first or second quarter of 2014. And that’s actually going to be through an initiative driven by the state of Tennessee, for their Medicaid population and some state employees. We’re signed on whether we wanted to be signed on or not. But we felt this would be a good project to start on. In a bundling project, as with any other change in structure in payment, you want to keep your volumes at a minimum just to get your processes in place at first, and then get your data aligned. In a bundling project, data is the key. If you don’t have your data across the continuum, obviously, you’re at significant risk.

 In general, with fairly few exceptions, by and large, we just don’t have the data corralled enough to look at the total cost structure of a bundle and what our risk is, if we take a bundle at a particular cost point. We’re working with a hospital partner to get all those things in line. And like many others, we’re working with consultants, and working with payers, to get the data. I think if you start a bundling project, there’s some low-hanging fruit. We’re looking at everything from the cost from pre-admit through discharge, for total joints, meaning total knees and total hips.

Is putting  claims and clinical data together a core challenge?

A lot of the challenge is taking the data from an independent practice like ours, marrying it up with the hospital data, and then incorporating things like post-acute care, which is very much a wild card in a bundle, and trying to put all that together. There are some hard points along the way there; for example, on the physician practice side, that data is pretty easy to get, because we have our claims data. But then you have to look at the implant cost; and then the more difficult thing is look at the total hospital costs, including the anesthesia care costs, the supply costs, and some of the overhead costs in the hospital; and that’s not even accounting for post-acute care. That’s something that is still a little bit of wild card, going forward.

Do you need a data warehouse to do this?

Will we need a data warehouse to develop a bundle for something as simple as joints? Probably not. But in moving forward towards more complex things? Yes. And let’s face it: the end point on all this is capitation. And so ultimately, I would think we would need a data warehouse; and that’s probably something you’ll hear from other people when you talk about a shared savings approach.

Our main hospital partner in Knoxville is Covenant Health. And we’re trying to form a really tight clinical integration with them. And if you’re talking about any organization that doesn’t already have a multispecialty model, like Cleveland Clinic, that’s a paradigm shift. And the guys in San Antonio have done a pretty good job of that.

Are your doctors on board with the strategic and operational aspects of this?

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